Editor’s note: SAP is leveraging its advantages in the Internet of Things space under the brand SAP Leonardo. Technology Business Research Analyst Ezra Gottheil takes an in-depth look.

HAMPTON, N.H. – In March TBR spoke with several SAP (NYSE: SAP) Internet of Things (IoT) managers about the company’s IoT strategy. In companies running SAP, there’s a natural affinity between IoT systems and SAP systems. IoT systems embody at least part of a company’s physical systems, and SAP systems embody financial, supply chain, sales or HR systems. To get the most value out of IoT systems, IoT-generated data is integrated with other company data, often data in SAP applications. SAP has been building out software and messaging about IoT for about two years, but has disseminated a clear IoT message only in the last six months, rolling out its IoT offerings under the brand SAP Leonardo.

TBR believes SAP enjoys several advantages in vying for IoT spending and will be successful in growing its IoT practice. SAP’s advantages include the company’s longstanding incumbency in enterprises and smaller businesses worldwide, and the business data and business process models stored in SAP systems. SAP’s Leonardo offering and the surrounding messaging are also strengths.

  • VIDEO: Watch an overview of IOT and Leonardo at https://www.youtube.com/watch?v=eXSoojJOLLs

However, SAP must overcome obstacles to fully exploit the potential of IoT for the company. The company has not been as aggressive as some of its competitors, and some of its customers have chosen other vendors to lead their IoT programs. Operational technology companies such as GE (NYSE: GE) and Bosch have made inroads in the operations departments of prospective customers, but often partner with SAP to integrate their systems. The conversion of customers to SAP Business Suite 4 SAP HANA (S/4HANA) may result in customer hesitancy to manage two transitions at the same time.

It is not just the data; it is the model too

IoT data is integrated with business data to fully leverage IoT. The opportunity for integration extends beyond the data to the models. Models all serve the same purpose: They give structure to data so that systems can generate useful implications and insights. SAP systems often contain valuable and leverageable business models that reflect how data are related in the real world.

Think of models as maps. Maps contain representations of relationships among things. SAP systems contain maps or models of money, raw material and products, the sales process, company assets, or personnel. IoT models, often called digital twins, are maps of the physical systems generating IoT data, embodying the relationships among the sensors and the devices that contain them.

Models represent the logical relationship among the data being mapped. For example, if a critical raw material is not available, the logical implications are the product will not be produced, revenues will decrease, other raw materials will not be consumed, delivery services will not be needed, and more. In an IoT model, if a bearing fails, a pump will shut down, and the critical fluid will not be available. At the same time, reserve supply tanks will fill. SAP representatives argued IoT models need to be integrated with business models, and SAP systems contain more business models than those from any other vendor. Once integrated, these models highlight logical business implications. For example, how best to react to a change in the physical plant, such as a bearing failure, is determined not only by physical implications but also by business implications.

TBR concurs with this analysis.

The argument for SAP Leonardo is a strong one, but also somewhat subtle and difficult to communicate. SAP’s messaging around Leonardo is strong, but the message about integrating business logic already housed in SAP systems is one the company can develop over time, aiming at top management.

Learn more about SAP Leonardo at: