Trust and relevance – the twin challenges SAP faces as it meets with SAP UK & Ireland User Group

SUMMARY:

SAP UK & Ireland User Group meet this week. SAP will face some testing questions. Here is my pre-event assessment around the top of mind topics.

Buckle up. A long read follows.

By the time readers see this, I’ll be traveling to Birmingham, UK attending the 2017 SAP UK & Ireland User Group Connect conference. It promises to be tense. Right now, SAP is in the final push to hit its 2017 numbers. SAP messaging from the CEO’s office suggests 2017 is in the books but even so, everyone likes a cherry on top of the cake – right?

While this event is not viewed as a flogathon in the tradition of SAPPHIRE Now, SAP executives will be endeavoring to soothe concerns among users across issues of trust and relevance. I’ll deal with each in turn.

Trust

SAP has a 45-year-old bank of customer trust upon which it can draw. Regardless of individual customer relationship issues, customers are not going to up sticks and walk away anytime soon.

Customers have built (mostly) smooth running processes using SAP technology over many years. When you get into the weeds of what’s been achieved, success may have been hard won and at significant cost, but globally, SAP customers successfully often operate highly complex systems that pay the bills, move the goods, make things on the plant floor, administrate workforces, and manage supply chains across 25 major industries.

But…as SAP transitions to cloud-only offerings, customers have been faced with multiple issues that erode that hard-won trust. Not least among problems customers face are:

  1. Lack of a solid business case for upgrading to S/4 HANA.
  2. Lack of adequately qualified/certified implementers on SuccessFactors’ projects.
  3. Inadequately addressed concerns over indirect access.
  4. Ongoing lack of control over SIs and continuing ‘lights on’ costs for existing systems.

We and others have talked about all these issues for a very long time but only see glacial progress.

SAP touts high levels of interest and sales in S/4HANA for example, yet it is still difficult to find many customers who have well-developed roadmaps that talk to the kind of scale we expect to see among lighthouse customers. This issue begs the question – how much of S/4 is shelfware negotiated to avoid some other licensing issue?

Today, SuccessFactors is in much better technical shape than it was just a couple of years ago but grumblings about a lack of certified consultants portend project failures. What’s more, soundings suggest that SAP still hasn’t got its head around what cloud means for operations and pricing.

Indirect access (IA) is top of mind. We have talked about this at some length and met with SAP executives who have endeavored to set the record straight. The fact remains that customers, partners, and analysts are far from happy. At least on back channels. Some are coming out of the woodwork. Only today, I read this from Sam Bayer, CTO, and co-founder, Corevist Inc:

I love SAP.

Always have, always will.

I love how SAP simplifies business, especially for midmarket firms. Where would we be without it?

I love the SAP community, and I love the people who make the B2B market tick. I love intellectual property laws. They protect the spirit of innovation that built our economy–the same spirit that undergirds the entire tech industry.

But I don’t like illegal monopolies.

I don’t like illegal bundling of goods and services that stifles competition.

I don’t like the 800lb gorilla pushing people around, isolating them, making them feel powerless.

I don’t like Mafia-style sales techniques that force unnecessary products on customers who are scared to buy an alternative.

I don’t like illegal activities that stifle innovation within the SAP community.

I don’t like antitrust law violations, especially when they hurt my friends in the SAP community.

I don’t like SAP’s indirect access policy. Not one bit.

Corevist is an SAP partner. Imagine what’s said behind the scenes? Try this. I mentioned to one analyst that I’m looking forward to the licensing conversation at this year’s event. The reply:

You would not be looking forward to it if you were an SAP customer. Bloody extortion.

Those are harsh words but reflect the anger among customers. But there is more. Corevist has started to survey customers on the IA topic. These are the results so far:

  • 56% of the respondents claimed that if they went with an SAP product, SAP told them that they wouldn’t have to pay Indirect Access license fees.
  • When asked how bullied they felt in their SAP indirect access negotiations; respondents averaged 8.5 on a self-reported scale of 1-10.
  • 68% of the respondents said that if they could magically get off SAP completely tomorrow, with no impact to their career, they would do so.

I am not surprised by these results because they broadly reflect what we see in the marketplace. In one recent case, I was discussing a Workday/Salesforce situation with a customer who mentioned they also have SAP in the mix. I asked if the company was aware of the IA topic. They were not.

To its credit, SAP is fielding Hala Zeine who has responsibility for formulating and articulating SAP’s IA policy to speak at this event. She’s up against Ray ‘R’ Wang, CEO Constellation Research. I suspect Ms. Zaine will endeavor to kick the can down the road while Wang will tell customers to consult on this before signing any paperwork. He is right to do so, but in truth, I want to see customers walking away delighted – not afraid.

The recent uptick in PR around SUGEN is another indication of the extent to which this problem is felt. This from the UK user group announcing that Philip Adams, a long time member, volunteer and former chairman has joined the SUGEN Core Leadership team:

“Philip has been very active in SUGEN activities in the last couple of years. His contribution to the SUGEN Licensing and Auditing Charter has been really valuable when dealing with tough topics such as indirect access. As Philip joins the CLT, I know that his impulse will be to sustain our progress in strategically influencing SAP and helping to drive SUGEN forward,” said Gianmaria Perancin, chairman of SUGEN

My emphasis added. The last time we heard from SUGEN was when SAP maintenance pricing was in turmoil.

All these topics play to the trust issue at a time when SAP CMO Alicia Tillman is trying to recast SAP’s image. In a recent interview with The Drum, Ms. Tilman said:

It’s very much a part of our role now, to focus on embedding the science of marketing into all channels by promoting and rewarding a customer-focused, open, and insight-driven culture.

How does that square with ongoing issues of the kind outlined above and more? On the topic of brand safety and transparency, The Drum reported Ms. Tillman saying that:

CMOs have a responsibility to take all the necessary steps to protect and safeguard their brands.

Tillman also believes that measures such as reducing spend in certain digital channels until better controls are developed, being compliant with the placement of ads, and assuring the integrity and relevancy of brands’ content and audiences will go a long way in combating these issues.

All these areas are top of mind for SAP, she asserts, as the German company takes brand safety, viewability and transparency very seriously.

My emphasis added. I hear this but have trouble squaring it with reality. The SAP price book is possibly the most opaque piece of sales literature ever devised. SAP has long talked about integrity, but that didn’t stop the company from having corruption issues in South Africa and, more recently, compliance problems related to Iran.

Relevance

I have to admit I found SAP TechEd 2017 disappointing. Part of that is my fault for not allowing enough time to see the cool stuff SAP developers put on the show floor. It runs deeper than that.

SAP Leonardo, SAP’s kitbag of tools, technology and consulting aimed at expansion from the SAP core ERP as a pathway to digital transformation is tepid. Why do I say that? Well, if you’re going to invoke the image of a world-class genius then you’d better have something world-class and mind-blowing on offer. SAP doesn’t or rather, if it does, then I can’t see it.

In my view, SAP is trapped inside the buzzword bingo sinkhole of the blockchain, artificial intelligence, machine learning, internet of things and the like. My first question to one of SAP’s IoT speakers was: ‘Give me your top 10 live projects, not POC.’ The response? Silence. Yet SAP is touting Leonardo as the pathway to IoT nirvana. How does that fit? Contract compliance along with track and trace are prime examples where the blockchain makes an exciting fit. But then what happens to your SAP license if the customer is faced with IA questions? No-one has a good answer – unless it is to use SAP technology and IA magically goes away.

Reading through the conversation between Bjorn Goerke, Jon Reed, and Dick Hirsch, this from Hirsch smacked me between the eyes:

“I feel like you guys are ashamed of your ERP heritage… In terms of the technology, blockchain, AI – [lots of vendors have it]. What you guys have, which is unique, it’s not the ERP system itself, because with APIs, anyone can integrate with it. It’s the process knowledge, and that’s what you have to focus on, because that’s what makes you guys unique.”

Goerke responded: SAP talked about two modes at Sapphire Now as a way of balancing ERP talk with Leonardo plans. But he feels the two modes framework isn’t the best way to frame things: it’s really one push.

“Mode one/mode two works to some extent, to make clear we’re more than ERP, but it’s also a dangerous story in the sense of separating innovation out from the core ERP.

There was clear customer feedback and in the end, [combining the two] is also what we strive for. Of course we want to have machine learning within the core applications.”

Hirsch’s comment on process knowledge is bang on the money but at odds with where SAP’s capabilities can go from here. Right now, businesses desperately need industry-specific expertise so that new technologies are understood in context. Once upon a time, SAP had that expertise in spades. Today? Not so much.

Of greater concern is SAP’s commitment to openness. SAP is making a big deal out of its relationship with Google but how does that parse with SAP’s DNA?

Most recently, SAP said that it is a contributor to Hyperledger.org. My immediate reaction was ‘Wow! Right at the heart of business blockchain.’ But then almost immediately my mood soured. Why? Search for a contribution to Hyperledger on Github from SAP’s Palo Alto, Walldorf or Philadelphia developer centers.

To steal the words of one colleague:

SAP’s commitment to open source is like the Chinese; lurk but don’t commit.

Where does this take us?

Consider these topics:

  1. At SAP TechEd, I met up with a colleague I’d not seen for three years. He’s gone grey during that time. As I looked around, I saw a lot of grey-haired colleagues. I struggled to find any PYT’s – that’s Pimply Young Thing to you.
  2. SAP has made plenty of cloud-related acquisitions yet can’t keep hold of those same companies’ leadership. They’ve all gone.
  3. At one time, your years of service at SAP were proudly worn as evidence you know what you’re doing. Rightly so. Today, those years look more like a boat anchor. You see that in the palpable relief that ABAP skills are back in fashion among SAPpers yet it is Python that’s most in demand among the current generation of developers.
  4. When you look at the landscape of new companies that are supporting the latest technologies or consider acquisitions made by large automotive, financial services and retail industries you never hear about SAP. Some may never have heard about SAP.

Does that sound like a vendor that is at the heart of what matters?

My take

These are testing times for both SAP and its customers.

The problems both face have blindingly simple solutions, yet once again, SAP seems too willing to get in its own way rather than deal with root cause issues.

On the question of trust, SAP is no longer the automatic first choice for new technologies, in large measure because customers are afraid of being burned on cost. Perversely, the question of project over-run is no longer a top of mind issue, but the cost of the surrounding ecosystem is in stark contrast to the low-cost providers we see emerging elsewhere. Proactively managing the ecosystem would go a long way towards solving this problem.

For all its hard work, efforts to support universities and financial contribution to open source initiatives, SAP struggles to be the ‘cool kid on the block.’ It needs a DNA transplant.

If you want to follow my Tweets while at the event then check: #UKISUGConnect and/or connect with me @dahowlett

Image credit - via the author and SAPUKIUG

Disclosure - SAP, Workday and Salesforce are premier partners at the time of writing. SAP UK&IUG are covering most of my T&E for attending this event.

    1. says:

      Hey Den,

      The only thing I can say is that I hope you are required reading by every SAP exec…from top to bottom. You’ve captured the state of the decline perfectly! I especially love your “I want to see customers walking away delighted – not afraid.” comment.

      From your lips to Plattner’s and McDermott’s ears!

      Sam

    2. says:

      We are on Early Bird and have direct relationships with key board and extended board members.

    3. greg misiorek says:

      Hi Den,

      don’t know much about UK, but found a couple of interesting points that can also apply to things SAP here in the US. first, i noticed a tilt, if not a move, from Philly to NYC. it may have something to do with the new office which is also hosting HPI or the move towards online SAP education. that again is showing what’s new at SAP or a slight tilt from Walldorf to Potsdam. both tilts are good moves especially if you consider the next generation of SAPpers. i saw plenty of them presenting about blockchain in Las Vegas, and in audience in New York earlier this month.

      we seem to share the similar opinion about that SAP could do more with Hyperledger or become a true contributor to that open source initiative, which i think will come eventually. at the moment, IBM reigns supreme, but they don’t want to be the sole engine if i understand anything about the Linux Foundation.

      i don’t really have an opinion about direct access, so let’s leave it at that.

      and finally, but not in the least by any stretch, is the installed base or S4 market along with SAP community or ecosystem. i find both coming up somewhat short of the expectations and demands of the blockchain driven financial IT economy. S4 is an incremental rearchitecting for HANA whose first priority is to streamline what R3 has spawned into today’s enterprise ERP landscapes.

      the most lacking aspect of today’s SAP ecosystem is the SCN, imho. it has been consolidated into SAP marketing machine and unfortunately abandoned by the early adopters of what at the time could turn into a social media platform for things enterprisey, not just something so SAP-centric. i think that opportunity has been lost with each upgrade and technical improvement. the silver lining is that your platform or diginomica can now serve some of that purpose, especially when more former SCN bloggers show up here, and not only Dick Hirsch with his posts that are great and very relevant, btw.

      wishing you restoring the trust and more SAP relevance at the UKISUG.

      rgds, greg

      1. says:

        Hi Greg – I could talk about the issue of newbies ad nauseum and yes – we see plenty. But, they don’t hang around very long. Jon Reed and I spent 18 months hunting down great innovators in the SAP ecosystem. Not a single one made it past POC. Not one. That’s out of some 85 who got into the pipeline and were initially supported by Palo Alto under Kaustev’s leadership (since long gone himself.)

        And then I have to think about the work Cmehil has done over the years, organizing countless Jams. What has it produced in the long haul? Why haven’t SAP been able to clone Thomas Jung and Rich Heilman at least 5 times over? See what I mean?

        On SCN? That’s been a shitshow the last 5 years and getting worse. You won’t find any of the early SAP Mentors interested in going back, some have left the SAP ecosystem altogether.

        But…what I hear in your tone is the kind of hesitancy that suggests longtime supporters of SAP are no longer sure it is right to be proud of this company. If I’m right then that’s truly sad.

        1. greg misiorek says:

          Den,

          no hesitancy on my part. i’m small enough of an operator to adjust and still seeing SAP as a leader in the ERP space.

          thx, greg

    4. Clearly SAP process knowledge in S3/S4 application code bases is highly valuable. Yet next-gen database is materializing capable of solving the locker problem for robust composition of cloud enabled business applications. Bret Taylor’s promotion to President and CPO at Salesforce on success with Quip cements the impact new DNA is poised to make in enterprise applications.

      Huawei Execs recently drove home the value of process knowledge presenting their cloud strategy for business verticals in Seattle, WA The visionary slide deck mapped out the same technology buzzwords AI, ML blockchain, analytics on a cloud-based applications stack. Concretely driven home by early replacement of “very expensive” ERP for a long term manufacture in Hong Kong/China. Cementing the proposition Huawei has more local offices around the world than China has consulates.

      SAP leaving it’s consultants and partners to do innovation with Leonardo technologies yet tying the hands of it customers with prior era licencing is giving Huawei a foothold. Meanwhile Salesforce is replatforming in plain sight with new DNA.

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