And all that's before considering the war it has with itself in the shape of Business ByDesign. This is what Jon Reed sent me in notes:
I view this event as a challenge SAP had laid down on itself. If this is the most important product announcement in two decades, SAP now has to back that up. Given that SAP already has a multi-tenant cloud product (the much-maligned but very much still alive Business ByDesign), it will be interesting to hear more from SAP on why S4HANA is needed rather than an expansion of the ByDesign offering.
But what of others who either attended in person or virtually? We ran a CrowdChat which included important questions. We also ran a Storify session as a curated extract from the Tweetstream. In background, we ran a private Skype session that included Jon Reed, Brian Sommer, Frank Scavo, Holger Mueller, Dick Hirsch and John Appleby. Jon Reed was on the ground and we note that both ASUG (initial reactions) and DSAG (response to the launch) weighed in with contributions. Then there was John Appleby's FAQ. Taken together, it provides a strong sense of how different parts of an enterprise software's community view such an event.
SAP released partner reaction in a separate press release. In a long forward talking about its platform for innovation, Accenture are quoted as saying:
For companies ready to embark on their digital transformation journey, SAP S/4HANA is a powerful platform that works with our high velocity enterprise framework to extend the value of SAP HANA. Mark Willford, senior managing director, Technology Ecosystem & Platforms, Accenture
Deloitte, EY, Capgemini and PwC all have their take which run in similar vein which you can summarize as: 'Come to us, we get it, it's part of what we already do.' However, most notable? IBM was not on the list of those chosen to provide supporting quotes. What happened there?
Well, IBM has been scaling back a lot of things in recent time, one of which is its SAP practice. Also, HANA is a direct competitor to IBM database and so I can imagine the relationship right now between IBM and SAP is not what you would call BFF. It is also clear that in choosing the Big Five as quotable partners, SAP is firmly aiming S/4HANA as a solution for its global 400 customers for the time being.
Then there is the subtext to all the partner quotes. They know that if SAP meets its goal of technical simplification then their days of parking hundreds of consultants on a client doorstep are over. Hence the larding of comments with reminders of their capabilities.
Appleby's FAQ is a must read since it attempts to answer many of the more obvious customer questions. I will get to that later.
SAP did well in bringing customers on stage and in testimonial videos for a solution that is very much in development. Once again see a clear direction. BASF, the largest chemical company in the world for example, has been an SAP customer since forever. It isn't going to defect to a competitor anytime soon. And neither will many others among that top 400 group.
They are too entrenched with a system they deeply understand and for which they are happy to work alongside SAP. They will likely see huge benefits, but only after they have simplified code and processes. This will not be a walk in the park. Even so, there will be cases where the customer might consider staying on other databases and simplifying from there. That's risk SAP must factor in as it force marches to HANA.
ASUG seems bullish on the news but I wonder whether that is more to do with managing the SAP relationship on behalf of customers than a heartfelt endorsement of S4/HANA. Geoff Scott, ASUG CEO wrote:
What SAP is promising with S/4HANA is a new suite of applications, a new user experience and a new offering of deployment models, all the things that we, as SAP customers, have been clamoring for so long...
...Now, you might be thinking: Geoff, maybe you’ve drank too much of the Kool-Aid. Trust me, I am asking myself that exact same question. But I challenge you, as I have challenged myself, to step back. To think about the broad technical challenges that we face in this world that is moving faster and faster, generating more and more data at a dizzying pace, and expecting better and more insightful conclusions. Given all this, I see today’s announcement from SAP as a critical next step to keep us relevant and engaged in the future technology landscape.
DSAG is much more pointed in its response (selected quotes):
Marco Lenck, Chairman of the German-speaking SAP User Group e.V. (DSAG):
“SAP S/4HANA represents the next stage in the evolution of the SAP Business Suite. It’s ideal for visionary companies and pioneers who gain a major competitive edge from innovative business processes. However, for the majority of companies, it is rather a future idea than reality. So for these companies, traditional projects that revolve around their ERP system are a higher priority.”
Gerhard Göttert, Board Member with special responsibility for Application Portfolio at the German-speaking SAP User Group e.V. (DSAG):
“We expect SAP S/4HANA to have the same range of functions for all operating models. However if there are limitations, including in comparison to the previous SAP Business Suite, SAP must clearly communicate them.”
“We are very interested to see what further developments are in store for SAP S/4HANA. In terms of specific requirements, we want SAP to maintain a real freedom of choice for customers when it comes to databases, among other things. Alternatives to SAP’s HANA database must remain possible with no restrictions on functionality or performance.”
Andreas Oczko, Board Member with special responsibility for Operations/Service & Support at the German-speaking SAP User Group e.V. (DSAG):
“At DSAG, we strongly believe that, beyond the database, customers should be able to access SAP S/4HANA with no additional license fees. Companies will take a close look at developments in this area and assess whether the product delivers enough added value.”
These are points that strike at the heart of analyst questions, the answers to which will not please DSAG - or for that matter - many others who represent the bulk of SAP customers by volume if not value. From Appleby's FAQ for example:
For various reasons, SAP S/4HANA is a new product SKU, which means that it does have to be purchased by customers. It’s not expected that existing customers will get SAP S/4HANA licenses included in the maintenance of their SAP Business Suite.
SAP has also been clear that they are looking to take a larger portion of customer spend in the cloud – the average revenue per customer over 5 years is higher than for on-premise software.
That said, SAP will be looking to ensure that moving away from SAP technology is not an option, so they will no doubt offer incentive and options for customers to get onto the SAP S/4HANA platform, on a subscription basis, either on-premise or in the cloud.
My firm prediction is that this alone will become a major battleground for SAP. The SKU argument is based upon alleged regulatory/anti-competitive issues. I call BS on that, arguing there is more competition now than there has been in many years. However, as we have seen in the past, what's said today doesn't have to hold for the future once the salespeople return from the field battered and bruised by customer rejection.
What's more, and a greater risk, is that this opens the door for many competitors to offer alternatives in piece parts but not limited to CRM and HR. Then there is another scenario. SAP HANA on its own and with the Business Suite only provides a limited amount of performance improvement. Note that SAP is talking about code refactoring. That's where the big gains are possible, as Luka Mucic pointed out to me last week. But what if you could optimize without shifting database, simply (sic) by revisiting processes and redundant tables?
The analyst view
The Skype back channel was its expected lively, snarky self but that aside, some were genuinely concerned that what was launched is nothing especially new. That's true when weighed against the bevy of recent briefings both private and at events. Brian Sommer summed it up when he said:
...no new app announcements - no real explanation how things get simpler other than the configurator - no clarity on pricing - lots of speeds/feeds chitchat -
That may seem harsh but is it totally unreasonable? At FKOM, SAP did say there is no new product and they are right to do so for this launch. How many times can you re-invent debit, credit and core financials? You can't - it's done.
But Sommer is right to allude to the fact that there have been no substantive product releases from SAP for a number of years. That has to change. What's more and contrary to Bill McDermott's implied assertions, SAP has lost pretty much all its vertical market subject matter expertise. That makes it hard for SAP to respond when functional change is needed. This is one reason why Plex, albeit a minnow by comparison, is winning its share and more of deals in manufacturing. It has kept that knowledge.
And what about the timetable? Here, SAP has gone back to its old ways of announcing early but with little to show. In conversation with SAP's Sven Denecken, Reed learned that:
First public SaaS offering of S4HANA will be comprised of three aspects, SFIN, project delivery, and sales (cloud for customer, Hybris)
And this from Appleby's FAQ:
...SAP will rewrite the existing modules for HANA over a 3-5 year period, based on popularity.
My only conclusion from this is that:
- SAP believes it has a 3-5 year window in which to refactor 400 million lines of code or
- It doesn't know where to start other than core financials as a moat to protect existing maintenance revenue.
More worrying is that SAP customers now have the specter of hefting multiple codelines. This is the antithesis of what SAP has spent 40 years building and goes directly against the idea that everything you get from SAP can and will be integrated into a seamless whole. That was always something of a pipe dream but was more real than apparent when implemented correctly. Denecken says that doesn't matter because all of the changes occur at the database level and not the application layer. OK - but there we go again with those pesky database tables that will need to be refactored. Hardly a trivial task and likely very difficult in large scale operations.
The fact that S4/HANA is backwardly compatible per Appleby doesn't negate the fact that customers have a shedload of code they developed that will need work in some shape or form. So while they may end up with simpler landscapes, it is difficult to imagine how this happens without the disruption that former board member Vishal Sikka was so passionate about ensuring.
I leave the final word to Jon Reed:
ASUG CEO Geoff Scott and Board Member Anthony Bosco of Yoh Co.were on site for the proceeding. Scott’s instant reaction? “SAP laid out a vision of ERP re-imagined. Not every question was answered - for example I’m not sure how an existing SAP ERP customer can move to S4HANA, but the vision makes sense. To be able to conduct real-time inquiries on top of your enterprise system - that’s not just a CIO imperative anymore. The CMO needs it, the CFO needs it. That’s what SAP is pursuing.”
I asked Bosco if he thought the message was repetitive from Sapphire, but he heard a newfound decisiveness in today’s announcements. Bosco heard SAP saying they were “all in” to their approach to the enterprise, with a more realistic view of hybrid deployments and less cloud hype than in the past.
If that's enough to keep SAP customers on board then fine. But they are treading a very fine line with customers who are just as divided in their opinions as the codelines are splitting.
Disclosure: SAP, Salesforce, Oracle and Workday are premier partners at time of writing