Last weekend was supposed to be a holiday weekend in the UK but this Tweet from yours truly lit up my feed like the proverbial Christmas tree with close to 750 interactions.
So what's the problem and what happened?
The problem starts with the survey results which SAP parsed as saying:
Across a multitude of industries, IDC found that 73 percent of the surveyed businesses were planning to deploy and 18 percent are currently deploying SAP S/4HANA. In the study, nine percent of the companies stated they already have SAP S/4HANA in production. Customers were also asked about the planned timeline for their transition to our leading ERP system. According to the survey, 54 percent of SAP customers say they will make the switch within three years.
Unless I am mistaken, that suggests that of the 300 surveyed, 100% plan to move to S/4 at some stage in the near future. The trouble is that I cannot find any other data to support that contention. The closest I can come up with is what iTelligence found in their recent survey where they said:
Let's be clear - that 50% are somewhere on that journey and across seven iTelligence defined buckets...I think SAP helped itself significantly with clarity around indirect access for new customers but for those who contracted with SAP many years ago, there is some way to travel before they are as comfortable but it is getting there. We're doing our level best to help customers understand what they need to be thinking about.
The iTelligence numbers are a clear improvement on 2018 when the number was more like 15-20%. In his recently published book SAP Nation 3.0, Vinnie Mirchandani draws broader strokes but says that:
I identified a large group of what I called Bystanders in the SAP customer base. They have not taken advantage of its growing portfolio of new products - S/4, C/4, cloud properties, SCP, SAC, Qualtrics etc. They continue to stay with ECC, BOBJ, B1 and other 20-25 year old products. I did not call them laggards or anything else pejorative for reasons that will become clear as you read further. I estimated 60% of SAP's 400+K customers are in that group, especially those in Europe.
Even the most optimistic people I speak with say the notion that 100% of customers will make the switch is implausible, especially given that SAP has set 2025 as the deadline for previous versions of SAP's core system support.
I spoke with one SAP customer group leader who described the IDC findings as 'unhelpful' in part because those findings play to the deadline fear factor that is already problematic in the SAP customer community.
To make matters worse, the IDC findings are wrapped around an undisguised PR play. Does SAP think its customers will trust that approach? One person I spoke with suggested that might be the case given IDC's position in the market as a checkpoint in many IT decisions.
Then there is the question of how SAP customers find the budget for an S/4 project. Again, and I heard this on multiple occasions, S/4 is largely viewed as a technical upgrade rather than bringing new capabilities that drive demonstrable value. That would be fine if S/4 implementations were priced reasonably. But in several projects of which I am aware, the projected implementation costs of $20 million are not uncommon, most of which is going to SIs who are selling methodologies that date back 20-30 years. C-level technology leaders struggle to get that past their boards.
The problem many customers face is that they have already outsourced much of their IT to the big SIs so in reality they are caught between a rock and a hard place. Even then, and as we know from Gartner studies, the volume of expertise available for S/4 projects is not yet extensive enough to support the existing project volume, let alone a rapid ramp-up of the kind IDC suggests. Last month we noted Gartner saying:
...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.
Beyond that, some people worry that S/4 is not yet at functional parity with ECC which in itself makes the business case even harder to sell.
But then this discussion would not be complete without some attention being paid to what is happening inside SAP landscapes. Plenty of people say that an as yet unknown number of customers will find an S/4 upgrade much more difficult than SAP has suggested because they have many years of technical debt that needs to be cleaned up. No one knows for certain but the amount of custom code alone is often cited as a barrier. In other cases, custom code and processes are seen as so critical that firms cannot envisage re-engineering those same processes anytime soon.
The Tweet I referenced at the beginning of this story exposed a list of issues that is far longer than the high point synopsis I provide here. With just under 750 interactions, I have to wonder whether SAP has got its messaging around S/4 right. S/4 messaging has been an ongoing problem, principally around the business case but now extending into cost and the ability to provide a vision into which customers can confidently buy. This is a set of problems that goes back to 2015 and which Jon Reed exposed in detail at the time. Has nothing, or lttle changed in the interim?
On this evidence, and an extensive backchannel of discussions among a variety of interested parties, the answer has to be 'no.' That is deeply concerning because it hampers the efforts of every part of the SAP ecosystem. Long term, that hurts SAP itself. That's a self-inflicted wound.