SAP Nation 2.0 - fueling the debate about S4/HANA and the SAP economy

Profile picture for user gonzodaddy By Den Howlett August 4, 2015
SAP Nation 2.0, a follow up to Vinnie Mirchandani's expose about the size and cost of the SAP economy, the author provides a costing update and a fresh perspective on what's happening around S/4 HANA.

SAP Nation 2.0 cover1
SAP Nation was an attempt to codify and cost the current SAP economy while offering some pointers to coping strategies. Like all books of its kind, SAP Nation was not perfect but it did serve as something of a canary in the coal mine that is the SAP ecosystem of partners and customers.

Shortly after SAP Nation came out, author Vinnie Mirchandani sounded me out about a follow-up book. I thought it was a bad idea, but it quickly became apparent that a new tome that takes more of view on S/4 HANA would make a good addition to the body of conversations on this topic. Why? SAP Nation 2.0 (I have a media release copy) explains that in the weeks following publication:

Firstly, SAP announced its next-gen S/4HANA (S/4) product in February 2015. As a result, several readers and consulting clients wanted feedback on what that meant for their strategies. Secondly, seemingly out of the woodwork, in reaction to the many customers profiled in SAP Nation, I started hearing from/about other SAP users. The common thread was, “I wish you had talked to us when you wrote the book—here is what we [or so-and-so customer] are doing to optimize our SAP environment.” Thirdly, I got abundant feedback about the book’s model of the SAP economy—many thought that I had under-estimated the already scary, annual $200 billion in customer spending.

SAP Nation 2.0, which carries the provocative subtitle: an empire in disarray, provides updates and nuance on each of these themes. The first book has several weaknesses, one of which was:

The lack of a path forward might well represent consulting opportunities, but they leave the reader at a loose end.

The new book addresses this topic, along with plenty of customer color on where things still have to come into focus or where certainty is lacking. Much of this has been hashed out in the public domain and Mirchandani does a very good job marshaling a variety of arguments, backed up with customer anecdotes.

Prior to receiving the media copy, Mirchandani and I had a very long conversation about the book and innovation generally. We also had some back and forth on topical SAP issues surfaced in the new book. At the end of that conversation, and as you can discover in the new book, we were both left with a burning question. Will S/4 HANA be the road to a promised land of technology renewal that finally delivers on the decades-old promise of enterprise software? Or, will S/4 HANA be ground out over time in much the same way NetWeaver evolved? We don't know the answer to that question.

Mirchandani does a good job reiterating and expanding on the coping strategies that many companies have followed as they do more for less. He points out how the fundamentals of the ERP landscape to which SAP is so inextricably linked are becoming less and less important in the overall digitization efforts of forward thinking companies that, presumably, will be followed by others in years to come. The following illustration serves well:

customer strategies - SAP Nation

At the end of the book, Mirchandani spares no-one in politely yet firmly arguing for much better advocacy among user groups, analysts, and media. He is right to do so. Here's why. I remember a recent conversation with a very well known analyst at Gartner, who sought my opinion about a piece of SAP technology I know intimately. The person concerned wasn't sure whether to take a positive position. His reasoning?

"I know you've done a lot around this and believe in it, and I'd like to hold a similar position. But what if I'm wrong? It will have a bad effect on my reputation."

My jaw dropped. Did I hear correctly? Was this person saying that they are more concerned about personal reputation than in providing an honest assessment? That's how it seemed to me. I get variations on that in other contexts.

In multiple recent conversations following the HCP pricing release 'issue' with people I consider SAP insiders, there are two common refrains:

  1. I wish I could say what I know in public but it is more than my life is worth.
  2. Thanks for doing what we cannot do.

As someone who has followed the SAP space on and off for 22 years, it would be foolish to pretend that today's S4/HANA success is much more than sales success. That could well change but if Mirchandani is correct, then we will be waiting multiple years before the fruit of those investments becomes apparent in the customer base.

One fact stands out and which will bedevil SAP as it attempts to both persuade customers of its cloud credentials while preserving those customers who wish to stay in some form of the on-premises world. That is S/4 HANA support for one database, HANA. The message from those customers Mirchandani references is clear. There is too much comparative immaturity in testing and automation (to name but two topics) for large customers to take the risk that S/4 HANA represents today.

Companies that cite decades experience will not easily give up on their database investments in the on-premises world. I cannot for example see the CIO of GE, who took to the stage at Infosys customer conference, making that bet. He talked about being in a near constant state of implementation because GE is always buying and selling entities.

He references Panaya, an Infosys acquisition, that should have gone to SAP in my opinion. He said the GE team can spin up working versions of SAP and Oracle in anywhere from 30 to 90 days in pretty much any part of the world. That is shockingly quick, but it speaks to the careful honing of a methodology that GE had to learn over the years and for which there is precious little help from vendors or consultants.

In developing the book, Mirchandani comes up with a fresh model for the cost of the SAP economy. He now pegs it at $309 billion instead of the $204 billion in the previous book. It is easy to poke holes in those numbers and as Mirchandani freely admits, if external advisors are correct, he may well be low balling the figures.

That does not jibe with claims, reiterated many times, that S/4 HANA will provide a much lower TCO. Cloud versions might mitigate those costs if the infrastructure costs are subsumed into subscription pricing models. But as we both know, SAP is and has been horribly conflicted on this topic.

As a final observation, the book winds back to the way in which S/4 HANA was launched and the aftermath of near constant questions raised both here and elsewhere. Mirchandani offers an interesting idea that SAP might like:

At the beginning of the book, we asked several questions like:

Will SAP Nation have a smooth transition with its recently announced S/4 or will it be chaotic, with people sighing in relief as they exit its airspace?


Will [CEO Bill] McDermott’s “underdogs” deliver a stunning turnaround?

This book provided some perspectives on how those and other questions may be answered. Much better answers will come over the next few years as a result of the circle that SAP re-draws around S/4 and the thousands of circles its customers are drawing.

There’s nothing wrong in re-thinking and re-launching a product. Brian Chesky, co-founder of the wildly successful hospitality exchange Airbnb, recently tweeted:

“If you launch and no one notices, launch again. We launched 3 times.”

I look forward to cataloging the S/4 evolution and other SAP and customer driven shifts in the economy in SAP Nation 3.0.

Endnote: the author was unable to provide a definite publication date but says it is slated for the end of August.

Disclosure: SAP and Infosys are premier partners at time of writing. Other than occasional fact checking, we had no input to the book although a number of our public articles are cited.