Software-as-a-Service is reality for 34 percent of the member companies...
...But the majority employ it for subsidiary processes such as staff development or supplier management. And when it comes to entire ERP systems, the survey paints a different picture. Just five percent of respondents consider moving their ERP system to the cloud in the next five years as a realistic option. However, 18 percent of CIOs surveyed are contemplating hybrid models...
...Around five percent of those surveyed are currently making or have already completed the transition to Business Suite on HANA. A further 11 percent are planning to deploy it. However, more than 80 percent admit that they are not considering it. And the DSAG survey also revealed why – as Marco Lenck explains: “It’s not necessarily the costs or technical knowledge. The basic problem is that, for many customers, there is no obvious business case. They simply don’t see the innovation potential for their business processes at this time.”
When ASUG released results of a major survey among its users, the report concluded:
Three-quarters of the customers who said they have not yet purchased any SAP HANA products say they can’t identify a business case that justifies the cost.
Hasso Plattner, co-founder and chairman of SAP's supervisory board took to the SAP HANA blog to declare:
It is amazing to me how little the benefits of the Suite on HANA are understood or even known in general and by the members of the Americas' SAP Users' Group specifically.
Plattner then went on to detail 20 areas where he feels SAP HANA benefits customers. Among other things, he suggested:
- earlier period closing
- better forecasting
- simulation of results or organizational changes,
- better insights into customer behaviour,
- real time sales and costs analysis in any fashion,
- flexibility to simulate organizational structures within the system,
- better service level in the customer facing applications
Those are real if unquantified benefits. That was August 29th. Now it seems, DSAG is reflecting similar thinking to that of ASUG and, I suspect, other SAP User Groups around the world.
Pros and cons
DSAG went further, reviewing pros and cons for cloud:
When it comes to moving ERP systems to the cloud, all those surveyed identify benefits such as lower total cost of ownership. They also expect a positive impact in terms of internationalization and faster access to new functions. On the other hand, they see potential problems with regard to in-house developments, the necessary interfaces, and increased dependence on service providers. The protection of a firm’s in-house expertise must also be clarified in the case of large cloud deployments. Survey respondents expect either little or no impact on user friendliness, modelling new processes, or on testing and training for updates. Overall, the following questions must be cleared up before a business is ready to move its ERP to the cloud: How does SAP handle modifications and in-house developments, and what does it offer for interface integration? More generally, there must also be protection for a company’s information and intellectual property. Marco Lenck summarizes the expectations of users: “When moving business-critical processes to the cloud, the parameters have to be right. As long as the risks outweigh the opportunities, SAP customers will only transfer individual, non-critical processes.”
This passage is highly revealing and informative for SAP.
Let's get this one out of the way. SAP Business Suite on HANA is NOT the same thing as SAP Business Suite on HANA Cloud. However, when you read the results of the DSAG survey it would be very easy to confuse the two.
Right off the top, it must be incredibly frustrating for SAP to hear that DSAG members do not anticipate improved user friendliness when SAP has worked hard to tackle that problem. But then when you try charge for a UI then maybe you bring it upon yourself.
The benefits Plattner outlines for Business Suite on HANA are clear and obvious. We have seen these put out many times by many other vendors. What SAP has yet to publicly articulate is HOW those benefits are quantified and WHAT the impact of moving to HANA means. In addition, SAP needs to do a better job of articulating the separately identified cloud benefits.
Compare and contrast
Compare this to what Salesforce was demonstrating at Dreamforce this week. It didn't talk about benefits in the same way. Instead, it talked about attacking real life problems like closing deals faster. In the Mindtouch ISV example, they went one step further:
We’ve been able to build kind of lightweight dashboards that help identify what content customers are looking at and when. Combine that with what sales people already know about where a person is in the sales cycle and you can quickly see whether the sales person needs to deliver more content. That’s one example. But what about those sales that didn’t close? You can now look to see where content delivery didn’t work and take corrective action. That has huge value.
When I met MindTouch CEO Aaron Roe Fulkerson at the show, he told me that stand visitors totally get it from the get go. I am not surprised. Instant value is what wins the game and you get that from these demos. When I met FinancialForce business solution architects, they reckon that Salesforce Wave templates will only be limited by a customer's imagination. Again, clear value.
The financials hub
The most telling observation at Dreamforce came from Narinder Singh, CEO Topcoders and an SAP alum. This was a good half day before I saw the DSAG survey results but it puts the whole problem in perspective:
Why is financials the most expensive part of the business applications stack? It makes no sense to me. Surely by now this should have been commoditized but even some cloud players insist on getting a relatively high price for that piece. Why?
My theory for explaining the problem goes like this:
ERP sales have always been dominated by financials. Even when PeopleSoft was the HR apps provider du jour and long before being acquired by Oracle, more than 55% of its business came from financials, not HR apps.
Financial processes as part of the overall back office applications landscape were the first to go down the automation road, largely on the back of 'business process re-engineering' but also following the much hyped Y2K problem. Yet even now, we routinely see paper or manual processes that absolutely should be automated. Now think Apple Appstore. Does anyone seriously think there are accounting wonks busy writing up books for $0.99 transactions? Of course not.
Despite the fact the basic underpinnings of financials are predicated on a near 500 year old system of book-keeping, many customers (and here I am going back to the mid-1970s) thought that their way of doing books related tasks was unique and provided business differentiation. While that may have been true in years past it is no longer true at all. Capabilities that would have represented custom development back in the day have, in many cases, since been baked into modern solutions.
If, as I suspect, SAP customers equate 'core business processes' with financials and everything that surrounds them then they are looking at the problem in the wrong way. To that extent, Plattner is right to be frustrated.
Instead of differentiating between near static 'systems of record' that keep the lights on and more dynamic 'systems of engagement' that generate demonstrable value, customers appear unable to visualize how a refactoring of financials could dramatically change how the business is run. This is where the nascent sFIN (Simple Financials) should fit in yet we see no mention of this in DSAGs survey results.
The confusion over SAP HANA and SAP HANA Cloud continues. We have seen a near non-stop stream of stories and opinion on this topic over the last two years. Now is the time for SAP to grab this by the scruff of its neck and deal with the issue once and for all.
A simplified SAP landscape including financials delivered in the cloud should be a no-brainer. SAP should not overly concern itself with endless arguments over delivery methods but instead should focus on the spoken and unspoken pain points that customers experience. We need more examples from the likes of Timo Elliott who reports:
But then reality gets in the way. Our current business processes and information infrastructures are so complex and brittle that we don’t see a way to act on our business innovation dreams without wrenching change.
The answer is to first radically simplify existing processes and technology, leaving more time and resources for new ways of working. The presentation looked at companies around the world who have done just that. They are using new technology to get closer to their customers, inspiring and empowering their employees, making better use of resources in real time, and joining the network economy.
Over arching all these issues is a sense that SAP has to make up for some lost years. Since 2010, it has given the impression that technical engineering takes precedence over applications development. It is therefore not surprising to see frustration among users who question the value of SAP innovation. Solving that problem through clearly defined commitments will help change perceptions. Bill McDermott, CEO SAP's 'simple' mantra is a great start but it has to be real for customers and right now I'm not sure customers as represented by the SUGs are getting that.
Finally - an SAP refresh inside companies will impact the careers of many long time SAP developers and consultants. Entire IT organizations are devoted to SAP as are swathes of Big Four consultants. That's not right. CIOs who are faced with that scenario need to critically assess the value those groups bring to the total IT cost center.The Big Four, big ticket consultants need to take an honest look at themselves. Instead of seeing the latest from SAP as yet another opportunity to suck many millions of dollars/euros out of their customers, they should be thinking about value.
Next week sees SAP's annual developer conference. This represents SAP's best chance of offering its customers a fresh perspective on value but without the SAP speak larding every conversation. The extent to which it succeeds will color its ability to change perceptions.
Customers need to reset their thinking around SAP. My sense is that many are locked in the past.
Can we please please have SAP make clear - once and for all - the differentiated benefits of Business Suite on HANA and Business Suite on HANA cloud!
Disclosure: SAP, Salesforce and FinancialForce are premier partners at time of writing.