SAPPHIRENow 2019 - ASUG board member Ron Gilson on SAP's indirect access news, S/4HANA and more

Profile picture for user jreed By Jon Reed May 7, 2019
After the SAPPHIRENow day one keynote, I got perspective on SAP's licensing news from ASUG Board Member Ron Gilson. He also shared hard-won insights on S/4HANA migrations.

ron gilson asug
Ron Gilson, ASUG Board Member

Day one of SAP's most important SAPPHIRENow in years gave us plenty to consider. Den Howlett posted his review of SAP's customer-loaded keynote in SAPPHIRENow 2019 - SAP commits to integration in a keynote focused on strong customer stories. Den writes:

SAP has (finally) got big brand customers who have made or are making the S4/HANA journey and are achieving demonstrable results. It's worth calling out Royal Dutch Shell with which SAP has a 40-year relationship. Retailer Tapestry hit the 'we're cool' note, while Under Armor flagged up modernity in the CX context.

Though we treaded close to buzzword overdose around Qualtrics-powered experiences and the intelligent enterprise, customer stories brought us back:

SAP was almost upstaged - in a good way - when ASUG (SAP's North American User Group) broke important Indirect Access news. On Monday, which is a key educational day for the co-located ASUG Annual Conference, ASUG CEO Geoff Scott blogged on the newly-announced Digital Access Adoption Program (DAAP). On Tuesday, DSAG, the German-speaking SAP user group which partnered with SAP and ASUG on this, shared their take on the news.

A push to improve pricing and licensing is part of SAP's own transformation story. It's a story that customers like hearing about, and can relate to:

News in context - what is SAP's Digital Adoption Access Program?

My colleague Den Howlett gave his take in SAP finally bows to user pressure on indirect access - sort of, but not quite. What is the Digital Adoption Access Program (DAAP)? In a nutshell, it's a chance for SAP customers to opt into SAP's document pricing model, announced last year, but with a more precise way of measuring the financial impact of digital access. DAAP clarifies, for example, the indirect access implications of EDI.

The goal? Provide more financial predictability to customers considering SAP's new document pricing, while clearing up uncertainties about the cost impact. On day one, I had the chance to discuss these issues and more with ASUG Board Member Ron Gilson. Like all ASUG board members, Gilson volunteers his time outside of his day job, working as VP and CIO of the Wisconsin-based Johnsonville, LLC (of Johnsonville sausage fame).

Gilson and I spoke about a year ago, around the time I published this piece: SAP addresses the questions on its licensing and auditing news - an influencer event analysis. So I asked Gilson: what's changed since then?

Obviously, the announcement back in April 2018 introduced the new digital licensing model. I think it's a great step forward in modernizing licensing, but there were still a lot of questions on customers.

What types of questions? 

Customers were still concerned about: how do I estimate the number of documents I'm going to need? What truly is digital access? A big issue that came out of that was EDI. Right? "I've been doing EDI for 30 years. Why all of a sudden is this a digital access issue?" Those are a lot of questions that came up.

Addressing customers' SAP licensing questions

What's happened since then?

I think we've taken the last year to really push SAP on getting more clarity to some of these issues. We're also really advocating on behalf of the customers that we need to have a reasonable, feasible go forward strategy.

EDI is one example the user groups have been pursuing:

If you think about EDI, we can't just tell customers that have been doing it for 30 years, that assumed they were appropriately licensed, that now they've got a multi-million dollar digital access issue. Look, we realized SAP has got to monetize their IP. They have to be able to make money as a public company, but we need to find a go forward strategy, not a backward looking strategy.

In a subsequent meeting, SAP Executive Board Member Christian Klein emphasized this point. Klein told me that the new DAAP program is not about looking back in time for lost license revenues: "Forget about the past" was his first comment for customers considering a document pricing move. So I asked Gilson, that's a reassuring message, but learning you'll pay for EDI going forward might not be the happiest news. Gilson responded: 

It's more clarity. We may not like it. I think SAP will take the stance that, it's been in contract since the '80s, use is use, and all use must be licensed. Right?

No more debates or confusion on EDI pricing. It's out on the table for customers who choose this model.

Then you can move the conversation to, "Well, let's negotiate a reasonable move forward."

There are pros and cons to this model customers will need to evaluate closely. But Gilson made one more point not every customer may be aware of:

If you actually look into the model, it says I only have to pay for these nine document types when I create them. All that other use that's coming through indirect access is now free - if I move to this new model. If I've got IoT that's updating records, I don't pay for that. It kind of simplifies, and it actually does liberate some of these other opportunities.

Again, each SAP customer will need to verify that scope. Gilson made clear his role is customer education, not endorsement:

From an ASUG board perspective, we are not selling the new program. It is what it is, and we will actively try and educate customers. It may not be perfect or address every customers' situation, but we feel it is a fair and reasonable path forward. I think it's something you have to take a look at.

S/4HANA migrations - Gilson's experience with Johnsonville LLC

I couldn't let Gilson get away without talking about S/4HANA migrations. ASUG recently shared survey data indicating that a major issue with those SAP ERP customers that haven't moved to S/4 yet is the business case (see my breakdown of that here). Gilson has an interesting story here: Johnsonville is live on S/4HANA, but they did it via a technical migration that didn't require a transformational business case. Johnsonville moved to S/4HANA in eight months, and Gilson said it wasn't hard.

But - and this is a big but - Johnsonville has always kept their system clear of SAP code customizations. So they acquired very little of the technical debt of custom ABAP spaghetti that can hinder SAP ERP upgrades. Gilson says that Johnsonville viewed this as a modernization move. They didn't want to add new capabilities to a legacy platform: 

I think ours was really a roadmap conversation. We stepped back four years ago. We took a look at things like EWM and some other capabilities around roadmap, and we just had to make a decision. Are we going to invest on top of an old platform and then upgrade later, or are we simply going to bite the bullet now and then start building all that roadmap stuff on top of the new one? That's the choice we took. We convinced the organization to take an eight month pause as we did that.

Gilson is happy with the move, and said there was virtually no disruption to users. So will Johnsonville LLC's business leaders consider more SAP investments, when it comes to the kinds of transformations SAP is talking about at Sapphire Now, e.g. intelligent enterprise, unifying experience and operations data? Gilson:

Our leaders are focused on business outcomes. They could care less whether it's SAP or anybody else.

Gilson used the hypothetical example of blockchain to enable track and trace. That becomes a roadmap conversation. Yes, it would integrate with the S/4HANA platform, but as far as the next gen tech goes:

That can be an SAP solution. It could be an IBM solution, it doesn't really matter to [our business leadership].

Gilson is only speaking for himself here, but I think that's an instructive story of modernizing SAP but also the challenges SAP has ahead. But, Gilson likes where the SAP upgrades - and avoidance of technical debt - have set him up: "I think we're well positioned."

Lots more to follow up on. Bring on Sapphire Now day two.