Do SIs have what it takes to deliver SAP S/4HANA implementations?

(via SAP)

Last week, Jarret Pazahanick, a constant thorn in SAP's side, railed against a Gartner report entitled: Magic Quadrant for SAP S/4HANA Application Services, Worldwide. Pazahanicks' beef is that Gartner hasn't done enough fact-checking to justify the claimed number of trained consultants employed by the 18 firms in the review sample, proclaiming that the Wild West of SAP implementations is alive and well. So far, so typical of Pazahanick's rants.

And he is at least partially correct. Feroz Buksh of Deloitte NZ said in comments:

Not sure where you got that number for Deloitte. Our website clearly says “Our global network of more than 23,000 practitioners dedicated to SAP solutions”. It doesn’t say dedicated to S/4 HANA. There is no ambiguity there. https://www2.deloitte.com/global/en/pages/technology/articles/sap-s4hana-deloitte.html

Many commenters were in agreement with Pazahanick, with some more scathing and calling out report numbers as 'lies.' That's pretty strong stuff.

The problem seems to come down to how you define 'trained.' As one commenter noted, you can't expect an SAP certification to provide a real means of understanding the in-field capabilities of a consultant. This is a topic we have rehearsed a number of times and most recently this month in my story entitled: Time for professionally qualified developers.

Inconsistent feedback - a feature

But when you dig into the detail of Gartners' (very) long report, there are genuine red flags which should be cause for concern. These are more pertinent to a buyer than drawing attention at the firms' claimed consultant numbers. Take these examples from the cautions Gartner expressed:

Accenture: High cost and inconsistent quality of development resources
Atos: Inconsistent client feedback
BearingPoint: Inconsistency in subcontractor resource quality
Cap Gemini: Inconsistent client feedback
Cognizant: Inconsistent client feedback
delaware: Inconsistent client feedback

Do you see a pattern developing here? The report goes on with EY, IBM, NTT Data, PWC, SAP, TechMahindra, and Wipro all cited as having some kind of inconsistency or resource issue. And as if to emphasize the point, Gartner says:

Satisfaction levels by reference customers are high (mean of 4.35 out of 5), but there are areas where there is room for improvement. The areas where reference customers are least satisfied are organizational change management, innovation proposed, innovation realized, proactiveness in bringing ideas and quality of technical S/4HANA skills.

In addition, while Gartner scores Accenture highly for its myConcerto platform for S/4HANA implementations, it cautions that:

Accenture states that it is not the best service provider for clients seeking staff augmentation with a focus on cost, where there is no opportunity for innovation, continuous improvement or digital transformation services.

There is an almost identical caution for Deloitte, and a similar tale regarding IBM:

IBM indicates that it is not the best fit for clients looking at staff augmentation engagements or commodity-based transactions without a transformational component. Organizations with programs just supported by IT and not by the business are not its preferred clients.

If this sounds like boiling the ocean then you're probably right but then business-led transformation has to be the order of the day. It is worth noting that Accenture, Deloitte, and IBM are all rated well out in front of the pack in this MQ.

Putting more color on this, Vinnie Mirchandani, in an analysis of cloud migration said this:

A number of customers have tested the waters and many have been shocked by the proposals they have seen from SIs. Many SIs are behaving like it's 1999. Just because the S/4 or Workday software is relatively new, it does not justify a premium in consultant rates. The functionality is not dramatically different. Also, SI delivery models have not evolved much. Just not enough automation in data conversion, testing and other phases of projects they do over and over at clients. Finally, there is their age old FUD of "oh, there is so much change management". And yes, they still cannot show predictable outcomes. The muscle memory of the overruns and failures of the last wave of ERP and CRM remains with too many customers for them to sign up. I was actually pleased to catalog many case studies of ECC to S/4 migrations in my book which minimized the organizational change and the SI role - they stuck with SAP GUI, stayed on-prem etc. They are postponing innovations, but frankly reducing exposure to the "change management" and other SI premiums.

Perhaps most worrying of all is that there is only one mention of ROI in the whole report and that relates to Gartner's assessment of BearingPoint where it says of the firm's strengths:

Investments in intellectual property (IP) assets and enablers: To support clients in using S/4HANA to achieve their business goals, BearingPoint has invested in proprietary IP assets and enablers for its core industries. Its global business template toolkit includes a business transformation framework, defined rules and key performance indicators (KPIs) to measure optimization of business processes, and ROI business cases.

None of this bodes well for SAP in its efforts to get more customers onto S/4HANA. But then the report, which was published in May 2019 refers to data that is at least a year out of date. Given the momentum SAP claims for S/4HANA sales in its quarterly financial updates - the latest of which says that 11,500 customers have bought S/4 - we have to assume there has been some level of improvement since the time data was collected by Gartner. The only problem is that we see precious few case studies to support that contention.

What can be done?

SAP's CEO Run Simple message seems a long way in the past. If this report signifies anything, it is that the bad SI behavior that's dogged SAP in the past remains an issue.

We have long held the belief that if SAP wants to carry all its customers into the future then there needs to be a cultural transformation, not just a technical shift. It could, for example, differentiate by taking responsibility for SI practice standards. It could move the well-worn multiple-choice certification program to something more meaningful, and where reputation is earned from proven field experience at the consultant level.

But then if SAP is to be successful, it must lead from the front. Taking all the tongue in cheek comments about the veracity of Gartner's MQs generally, it concerns me that SAP is not considered a leader but a challenger. This caution is a standout:

Although some SAP reference clients are extremely satisfied, some others have reported challenges in finding the right experienced resources to solve specific issues, gaps in business know-how and internal SAP teams working in silos (multiple divisions not acting as one). These clients would like to see more customer focus when encountering critical issues, more business knowledge and improved cooperation among the different SAP teams.

How does that happen when SAP is the software author and claims S/4HANA presence in 24 out of 27 tracked industries? I suspect this goes back to the problem SAP has known about for many years - the erosion of subject matter expertise among its own ranks. I'm aware that SAP is endeavoring to fix this but reputationally, this report does not provide great optics.

My take

Ever since SAP acquired Qualtrics, the messaging from the company has become fractured. On the one hand, SAP is pushing the XM message hard - and with good reason. It firmly believes that category is the one it can own in much the same way it has largely owned the back office for the last 30 years.

But in order to get there, SAP says customers have to move on to S/4. Unless the needle has moved substantially in the last year, then at least some implementations (and here Gartner does not quantify the percentage) are overly costly, over budget and over time. There is precious little evidence of fast track time to value, something that customers now expect.

Put another way and as Phil Wainewright pointed out in a recent assessment:

My perception of software development in a SaaS and cloud environment is that it's already strongly engaged with users throughout the process, and the vendors are already carefully gathering and listening to customer feedback. If SAP needs Qualtrics to introduce that dimension, it's a warning that it's not yet got the right culture in place. And that is a stumbling block many of its customers will face too, one that I suspect SAP's newly formed experience management engineering team will be unable to help them overcome.

It's hard to disagree in the overall context of moving a massive customer base to modern systems. But SAP could help itself considerably by providing definitive numbers of live S/4HANA customers - something that has been open to all sorts of speculation in the last year.

Updated for commentary from Vinnie Mirchandani