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The state of SAP - DSAG explains its position on hybrid cloud and S/4HANA feature parity

Jon Reed Profile picture for user jreed April 13, 2023
Summary:
It's a pivotal time for SAP customers, and DSAG, the German-speaking SAP user group, has a lot to say. Has DSAG's position on cloud changed? And why is on-premise feature parity their hottest topic? Grab a beverage and let's hash out my latest DSAG interview.

Jens Hungershausen, via DSAG.de
(Jens Hungershausen, via DSAG.de)

DSAG is absolutely not your typical user group. Most enterprise user groups quietly go about their educational mission. DSAG, on the other hand, has an undeniable knack for media attention. They know how to get their views heard.

But when you look at any dialogue between customers and SAP that requires customer advocacy, DSAG is right in the middle of that too. In particular, when it comes to the needs of its 3,800 German-speaking member companies, you can expect DSAG to advocate with SAP. It's a special type of relationship; I think that's fair to say.

I always look forward to my sessions with DSAG leadership. While I don't necessarily agree with all their positions, it's fascinating to see how their views evolve - and to contrast those with US customers (see: Keeping up with SAP Users: How ASUG, DSAG, and JSUG See the Changing World of Business and SAP - ASUG).You can't summarize DSAG's current outlook in a sound bite, but if I had to pick one, it would be: don't leave on-premise customers behind on new innovation.

DSAG on GROW with SAP - "Cloud yes - cloud-only - no."

So how did DSAG view SAP's announcement of GROW with SAP, a RISE-like program for SAP's S/4HANA Cloud, public edition offering? Soon after GROW with SAP was announced, DSAG released their position, via an article and DSAG board interview. Thomas Henzler, DSAG Board Member for Licenses, Service & Support says:

Regardless of commercial packages like RISE and GROW, however, it must not happen that on-premise or private cloud solutions are penalized in favor of public cloud solutions in delivering innovation. This fits seamlessly with the well-known attitude of DSAG: cloud yes, cloud-only no.

That is DSAG's consistent position. But has DSAG itself changed since I shared their views in July 2021, in the heart of the pandemic? DSAG's take on cloud has shifted - but not in the way you might expect. DSAG's stance with on-premise innovation goes back to hybrid cloud - another DSAG point of emphasis. This led to SAP sharing its own views on hybrid at DSAG Technology Days, in the fall of 2022. During my video interview with Jens Hungershausen, Chairman, Board of Directors, DSAG, he told me how that came about:

This came up with our joint survey with ASUG. The feedback we got there from the members -  and from the customers  - is that they embrace cloud. So cloud is even taking a foothold in Europe, as you stated in the beginning of our talk today. Cloud is being used by our customers. But it's not cloud-only.

Customers want to have a hybrid deployment. They will have stable ERP processes, maybe on-premise in their own data centers - or maybe they just rent a data center - and they want to use agile cloud solutions, and then combine them with it.

DSAG pressed the issue with SAP. Hungershausen continues:

So here we go, to a hybrid deployment of a different set of solutions across the process chain. We were very happy that Thomas Saueressig [Member of the Executive Board of SAP SE for SAP Product Engineering] took that note up in his keynote at our conference last year, to say, 'The future is going to be hybrid. And we are leaving no customers behind who want to have their on-premise landscapes as well.'

One thing is certain: DSAG is not going to let this topic rest - see their March 2023 post, Consider reality in strategy: "Binding commitments to innovations and further developments are also needed in S/4HANA private cloud and on-premise editions."

In that March 2023 post, DSAG called for a customer-first approach - at a time when so many SAP customers are facing big decisions, with a 2027 end of mainstream maintenance deadline for SAP Business Suite 7 looming. As Hungershausen conceded to me, pushing that end of "mainstream maintenance" deadline back (again) is one thing that is not on the table (I can confirm, based on recent talks with SAP, that this deadline will not move back again, for very specific reasons, including the ramifications of technologies that SAP ECC must support).

This is such an important topic, I'll share this part verbatim:

Jon Reed: Are you under the impression that most of your members that have not moved to S/4HANA are going to make that move? Or do you think there is a percentage that is really taking that opportunity to say, 'Hey, we're going to re-evaluate, and we're not sure'?

Jens Hungershausen: I don't have the impression that they are going to re-evaluate going to another ERP system. Right, now, I have the impression that they're in a kind of waiting state. Maybe they are hoping SAP will extend mainstream maintenance over to 2030 - but that's not going to happen. So we encourage everybody to just go ahead with these transformation projects.

DSAG 2022 in review - key issues

But with all the big issues DSAG takes on, sometimes it's the smaller wins that really make a difference. The issues DSAG pursues involve regulatory frameworks, cloud pricing/licensing, and regional guidelines for cloud data privacy - a fast-moving topic in Europe. DSAG summarized a few of these smaller wins in its 2022 annual review:

  • SAP has agreed to operate cloud locations exclusively for public administration in the future. An important and correct step for the benefit of the users, because: The use of human resources cloud solutions in the public sector is subject to special conditions - in particular with regard to data protection, security and functionality. A great success for DSAG.
  • With regard to the Supply Chain Due Diligence Act (LkSG), we wanted SAP to make it easier for our member companies to implement the regulations. We have reached a compromise. While the solution will not be made available free of charge to all customers as part of maintenance, it will be made available to those using the Ariba Supplier Risk solution. In addition, DSAG has negotiated a basic solution for medium-sized companies.

With so many S/4HANA migrations projects on the horizon, Hungershausen calls on SAP to make those conversions easier. In his view, that means more automation of the migration chores, including a longstanding DSAG talking point - better integration. He would also like to see SAP provide insights to customers on process optimization:

SAP has some tools available you can use. But I think there's more possible for them to do here. [Author's note: I had a chance to talk to SAP's Juergen Mueller about this topic in New York City. He is aware of this concern, and has a longer response to automating S/4HANA migrations I hope to publish down the road.]

My take

As a public cloud ERP advocate, DSAG's resolute positions about putting on-premise customers on equal footing are a good challenge to my views. But DSAG is absolutely right to push this issue before another wave of major S/4HANA projects get underway. I'll be honest: I can't completely reconcile DSAG's views and mine, but where I do agree with DSAG is: customers that have invested so much in SAP over the years should have their choice in how they move to S/4HANA. And, in many ways, I am just as concerned about a move to the S/4HANA private cloud as I am with on-premise functionality.

My concerns are not SAP-specific. Maintaining overly-customized ERP systems results in unwieldy technical debt, private cloud or on-prem. But that issue can be addressed in multiple ways, not just public cloud ERP - as long as the customer (and a well-chosen SI partner) are determined to address the problem. DSAG is helping members to understand what a shift to BTP for means for app development and extensions, rather than on-prem code customizations - while also addressing BTP adoption and usability with SAP.

SAP may find a challenge in living up to DSAG's expectations here. I have documented, across numerous cloud ERP vendors, why there are advantages to public cloud ERP that can't be translated to on-prem (examples: frequency of functionality updates, layering in third party AI tooling, and plugging into online banking services). But DSAG's job is to advocate for its customers, and for them, that means feature parity. They may not win every discussion with SAP on this point, but as Hungershausen said to me, an important goal is roadmap clarity - and you can't argue with that.

But the most striking change in DSAG's positions is not on cloud, but on transformation. In my 2021 piece, I was surprised by Otto Schell's comments that downplayed the importance of transformation for DSAG members. However: companies need to reclaim the transformation buzzword from vendors, and do it on their own terms - with their own software choices. Almost all enterprise software vendors, SAP included, can do a much better job of engaging customers in conversations about transformation that are not product pitches for S/4HANA, RISE with SAP or anything else.

So, I asked Hungershausen  - has DSAG's stance on transformation changed? Have DSAG members moved closer to this topic?

Yes, for sure. That was the reason why we created a board area called 'Transformation.' Our board member there, she's trying to get more information to make education for the customers on the issue of transformation. It's not just technical information; it's a mindset change you have to employ there.

And does Hungershausen think SAP can realistically be a partner in these transformations? Are they in line with DSAG enough to be able to support that?

They are trying to support that, and I think they also see the need to support their customers. SAP does have some internal organizations that are supporting customers and doing the transformation. You spoke of the SI partners - I think here, there must be a lot of concern, because the SI partners have to embrace this transformation as well. They have to embrace the capabilities of transforming into cloud business, and leveraging cloud solutions. It's not just an SAP job.

As we head towards the end of maintenance deadline, there is a related issue: an ERP upgrade does not necessarily equate to transformation. I asked Hungershausen: is he concerned about this issue? Yes. He's had personal experience with it:

In my company, in, 2018, we just did the technical migration to S/4HANA. The risk of doing it that way is: we had the clear goal of doing the real transformation afterwards, and we didn't do it until now. Because we just got sidelined; we had other projects we had to do. So that's a real risk.

If you want to do a real transformation of your company, you should do it with transformation to S/4HANA. But since the time's running up, I believe that a lot of customers don't have the chance of doing a real transformation. So they just have to do a technical migration, just for maintenance reasons.

I'm out of time to get into DSAG's latest view on RISE. The short version? Hungershausen doesn't see "RISE for every customer" as the way forward, though he does see appropriate RISE use cases. For DSAG, it's about helping members make a clear evaluation:

You have to have a good look at the whole package you get. You don't want it to be like having vendor lock-in. You're giving up all your on-premise licenses, and moving to a subscription based-model. So that's one issue there.

Some media outlets misunderstand the DSAG - SAP relationship. These outlets seem to assume that because DSAG issues scorching headlines, that SAP is falling apart or that DSAG customers are going to rip out their SAP systems. It is precisely because most DSAG members will eventually move to S/4HANA that they expect a great deal in return. Of course, that does create a different level of accountability for SAP. But I believe that's healthy - and more vendors could benefit from such vocal calls to action. Hungershausen sums it up:

As in any good partnership, there were controversial discussions with SAP this year that will continue into the new year.

This looks to be an interesting year indeed. SAP Sapphire/ASUG Annual Conference is right around the corner. I expect to hear plenty from SAP customers, as well as ASUG members and leadership. Stay tuned.

Updated, 9:30am UK time Friday March 14, with additional resources links and a few small tweaks for reading clarity.

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