SAP earlier this year named Karl Fahrbach its first chief partner officer. It appears Fahrbach is the first major channel exec to hold the title of chief partner officer.

Fahrbach’s contributions to the channel earned him a place on the Channel Partners Top Gun 51 roster. Late last month, he was at the annual TechEd USA conference in Las Vegas, and just wrapped up a similar trip to the European TechEd in Barcelona. Between stops, Fahrbach spoke to Channel Futures about his new role as chief partner officer and the transformation SAP is undergoing with its partners.

Channel Futures: As far as I can recall, no major IT company in the channel has created a position called “chief partner officer.” How did that come about and what reaction have you seen to this?

SAP’s Karl Fahrbach

Karl Fahrbach: Apparently, I’m one of the first chief channel partner officers of the industry. The feedback is very good from analysts and from other peers in the software industry. They all said it makes a lot of sense. There will be more and more chief partner officers, I’m sure, because companies are really looking into embracing the ecosystem. How this started, I was really part of the of the global partner organization at SAP, where I was the chief operating officer. And I was tasked as well by SAP’s executive board to work on a project to make the partner business even more relevant for SAP, which has very strong ambitions for the next five years.

CF: What are those ambitions?

KF: Actually, if you look at the four priorities, they are customer first, experience management, delivering the Intelligent Enterprise and the ecosystem of partners. The partner business has been elevated into the agenda of SAP. We told the partners we cannot be as successful without them and therefore the company and the executive board decided to elevate the head of the partner business, and we call it the chief partner officer. And it’s basically being the ambassador and the advocate for the SAP partners.

CF: How do some of the responsibilities of a chief partner officer transcend the role of say, a typical channel chief today?

KF: I was actually head of the channel business before becoming chief operating officer of the partner organization. The main difference is that when I was head of the channel business for SAP, I was looking mainly at the indirect business, where I had to come up with ways we can sell more with partners, expand more with partners and get more reach and scale and grow indirect revenue, and to have a better share of the indirect business. This scope has evolved. I continue to be measured on indirect. Now, I don’t look only at the indirect number; I look at the partner economy, which is the overall business that we can do with the partners together. We are looking at partners that can help us not only sell but can help us as well to improve customer satisfaction. Partners can help us renew contracts when we are in the cloud, partners can help us as well to get faster adoption when we sell a project or a cloud solution and beyond. The role of the partner for us at SAP has evolved. We don’t see the partners anymore as only indirect when selling or reselling through partners. We see partners playing a key role across the entire life cycle of the customer. We will measure every interaction and want, as well, to monetize with the partner together. And that’s why it’s an evolution of being responsible for an indirect number, to be responsible for the entire partner economy.

CF: Does this signify sort of a blurring of the lines between direct and indirect models?

KF: Yes, but more than that, it’s basically not looking at …

… the partners from a sales component only. The view and the mindset has changed to looking at what we can do for the partner. And that includes involving them in every part of the sales cycle of the customer so they can generate value. And that’s really growing the economy, so that the partners can make more money, because they’re going to be more involved in the life cycle of the customer. And that is not only selling but playing multiple roles. And the more we involve the partners, the more value the customers get, and then the more businesses we will do. So, I think that’s the collective mindset change that we have been taking with that role.

CF: How has that changed the interaction and the business relationships between the partners, SAP and customers?

KF: In terms of the relationship with the customers, we’re really pushing to make sure customers understand that partners don’t only play a role in the sales cycle — closing contracts and doing the implementation and then disappearing. Now the relationship between the partners and the customers will be even more strategic. And since in many of those cases the contract is direct with SAP because of the cloud, the three of us need to really be playing a key role. And so, it’s becoming a more strategic relationship now between the customer, the partners and SAP.

CF: Besides management changes [spurred by some channel and partner executive departures] that preceded it, what why was this the right time to do this?

KF: First, customers are becoming more informed than ever. Our main metric at SAP is customer success. And because we look at customer success, we decided that to make customers successful we need the partners to play a key role. And since we are now moving very rapidly into the cloud and the customer is becoming the key metric, we wanted that to include the partners as well, in the game of managing the life cycle of the customer. And then the other big reason for doing it now is because if you look at the market and how it has changed with emerging technologies, like the cloud, artificial intelligence, machine learning, you name it, the market of innovation is really completely changing the landscape of the of our industry, and it’s changing very, very rapidly. Then if you compare the speed of the market and innovation, and you compare that to our programs and business models that we had with partners a couple of years ago, to be very honest, they were obsolete. And that’s what we’re doing, by the way, with our initiative called Next-Gen Partnering.

CF: How are you measuring customer success? Besides obviously, revenue growth?

KF: Customer success is measured in many ways. It is definitely growth, but we look at renewals. For example, we look at the adoption and at the size of the deals and the life cycle of the customer. Our biggest deal, when we enter into a relationship with a customer, is not actually the first one. So we don’t go and close a big deal up front, and then that’s it. We have seen that in the clouds, the biggest deal is actually the third one. So we start kind of small, and start showing value, and we prove the value and then the customer is convinced, and they are successful and then they buy more.

CF: In regard to the next-gen partnering, where are you in a continuum of that? What have you implemented so far, and what is sort of next up on the agenda?

KF: So next-gen was launched in May at the global partner summit before Sapphire. It will take a couple of years because it’s a profound transformation that we’re going through. The approach is focused on three main pillars. The first one will be partner innovation. The second one will be partner economics. And then the third one will be partner experience. So, with partner innovation we want to make sure that as we enable our technologies, we enable, as well, our programs for partners to build on top of …

… our technology and on top of our platforms. Partner economics means we want to make sure that we have new offerings in terms of partner programs, and in terms of partner initiatives for the partners to monetize right in this new reality. And for the partner experience, we want to make sure as well that partners can monetize with us, and therefore will make sure they have a beautiful experience.

CF: What have you delivered from that?

KF: In the area of innovation, we launched a new option that basically helps the partners to integrate their technologies and their IP within SAP. Before, we were just telling the partners, “Look, this is our technology; you can build on it.” Right now, we are saying, “If you have good IP, if you have something that you have developed that makes sense for our customers, we want to integrate that.” So, we are becoming more open in the innovation area. Another quick win that we were able to launch in the economics area was to lower the barriers of being a partner. We are lowering the cost of being an SAP partner; for some of the partners it was too high. We took that feedback and the first thing we did is we decided to give free test and demo licenses for the C/4HANA portfolio and the SAP S/4HANA cloud portfolio. After a year, test and demo systems on SAP S/4HANA Cloud will be available to partners at a significantly reduced price. Now partners don’t have to pay for test and demo licenses. That will bring the cost of partnering down. In the experience area, we have launched a number of initiatives in terms of listening more to partners on what can we improve. We actually launched a survey leveraging Qualtrics (the customer experience management platform SAP acquired earlier this year) in order to understand what matters to the partners, how can we improve and so on. And what we’re doing is now following up based on the feedback, and we are establishing feedback loops. But we actually as well are building a framework of partner advisory councils in the market, in the regions and at the global level to make sure that we capture all the feedback and that when we build next-gen partnering it says we’re going to be focused on what partners want to see.

CF: Are there other partner experience improvements in the works?

KF: We’re going to be launching very soon a lot of automation for partners so they can be autonomous when they are dealing with opportunities with SAP. If they want to order an SAP solution for their customers, all of that will be automated. That will represent a big jump in terms of the partner experience. It’s going to be a multiyear journey. And we know that because the change is going to be a very transformative – very big – we want to launch on a quarterly basis, some quick wins to make sure that the partners are feeling that we’re making good progress here.

CF: What are some of the requirements that partners need to think about in terms of adapting to the new next-gen partnering and the other initiatives? What commitments does SAP expect them to make to deliver on the promise of this?

KF: That’s a good question because we always talk about what SAP is doing for the partners, but I think the partners are playing a key role as well as part of this transformation. We can do many, many things but if they don’t change, then they will not be able to capitalize on the opportunity. As much as SAP can do, the partners will have to take on the homework for themselves and go through that journey of transformation.

CF: How would you like to see them do that?

KF: I see two key opportunities for partners. No. 1 is to address …

… the economic model. So if you are coming from a very successful on-premises base, and then you start offering cloud services and cloud solutions to your customers, and keep the same structure and the same ways of marketing with the same sales teams and the presales standards, you will not be successful. Because the cost of selling on premises is much higher than the cost of selling in cloud. You need to have your costs very lean from a sales perspective and a marketing perspective. The second opportunity is the whole area of innovation. Customers are more demanding than ever. They expect to receive value on a constant basis and are expecting that the vendors are really innovating all the time. The only way that the partners can really be super relevant for the end customers is to invest in building IP and delivering value to their customers. In terms of innovation, the more relevant they can be for their customers, and the more value customers get, then the longer the relationship between the customer and the partners will be.

CF: Do you have any predictions on how ecosystems will evolve in the coming years, or will transition or transform?

KF: I see a huge evolution. If I look at where they are today, or even more precisely, yesterday, there were technology companies that were providing technology services to the IT world, and the customer was consuming IT in big chunks. And then it took them sometimes years to digest. Right now, I see an ecosystem that will be much more oriented toward business outcomes. It will be much more specialized, and we will have a lot of niche players. I don’t see one vendor or one system integrator working with one customer on a specific project. I see the customer in the center, as I look at the entire life cycle. And then I see a lot of partners dealing with that end customer across the life cycle of the customer, adding value all the time. I think they will have more players with a very different profile, much more business-oriented, that would be niche players sometimes — super specialized, adding a lot of value, and they will not only be talking to the IT departments, they will be talking as well to the different businesses. So that’s the way I see the ecosystem evolving.

CF: How does partner-to-partner networking fit into that evolving ecosystem?

KF: I look at those smaller niche players and then I look at the success of the customer. For example, here at SAP we want to deliver the “intelligent enterprise,” which is basically running the enterprise intelligently for them end to end. We look at the different processes of the company. And all of that should be within an integrated SAP suite. Let’s imagine a partner who is specialized on Ariba and has a very specific procurement solution that it is offering to the market. The customers will not buy procurement solutions anymore. Customers will not buy a payroll solution anymore. Customers will want to solve end-to-end processes. Let’s look at the human resources hire-to-retire example. This involves many different systems, many different processes. And the partners in many cases will not be able to deliver all of them. So that means that we really see a partner-to-partner collaboration, a key element right to make sure that we deliver value to the customers.

CF: What is the state of tools that are in place to enable that? And how do you see that evolving?

KF: One big element for partner-to-partner collaboration is the SAP App Center, a place that our partners actually can list and publish the IP that they have built. Once they build an application, they go to the App Center, they can publish it, they can upload it, where partners and customers can find it.