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UKISUG urges clarity from SAP over access to S/4HANA innovation for on-premise and hosted customers

Derek du Preez Profile picture for user ddpreez November 29, 2023
Summary:
Outgoing UKISUG Chair Paul Cooper says that SAP needs to balance the demands of customers with the demands of investors, where clarity over what’s coming is essential.

An image of Paul Cooper, Chair of UKISUG
(Image sourced via UKISUG)

The UK & Ireland SAP User Group annual conference kicked off earlier this week in Birmingham with an impassioned keynote from outgoing Chair, Paul Cooper, who used his final address to member organizations, and SAP, to focus on how the vendor can better communicate what users should expect from its S/4HANA roadmap - particularly as to how it relates to on-premise and hosted customers. 

Cooper also spoke with diginomica about how SAP buyers should be thinking carefully about the S/4HANA plans, particularly in the context of RISE with SAP and the exclusive access to future AI tools that the vendor may have planned for cloud customers. 

My colleague Jon Reed did a pre-event Zoom call with Cooper, which you can read here, that dived into the complex variety of choices facing buyers today and also considers the ‘mindset change’ required amongst the SAP user base if it wants to pursue a ‘clean core’ S/4HANA deployment. The interview is well worth a read. 

But Cooper’s main focus at the UKISUG event this week was on SAP’s recent suggestion that only cloud-based S/4HANA users will get access to the latest innovation, leaving those that have focused on on-premise implementations confused and concerned. Jon has covered the topic of AI innovations potentially only being accessible to RISE and GROW customers too, highlighting the problems with that approach. 

Cooper highlighted that UKISUG’s latest survey shows that 79% of members that have already moved to S/4HANA have an on-premise or hosted deployment, and of those planning to move to S/4HANA, 70% plan on either on-premise or hosted. Whether these figures are surprising or not is besides the point, Cooper’s point is that these customers could potentially lose access to innovation that they think they should be getting. During his keynote, he said: 

Back in 2020, SAP executive board member Thomas Saueressig talked about giving customers choice between cloud and on-premise deployments. We were told that SAP believed in a hybrid future. Yet, Mr Saueressig didn’t once say that cloud deployments came with full innovation, while other flavors of S/4HANA didn’t. 

We were also told that S/4HANA would be supported until 2040. There were no caveats that major innovation would only be delivered to public and private cloud customers using RISE or GROW. 

Why did SAP not tell us that new innovation was only going to be available to cloud customers? Did they not think it was important in our decision-making process? These are the questions our members are asking. 

I’ve heard the more cynical amongst us suggest that SAP didn’t disclose this strategy before, because customers choosing to stay on-premise might not have made the move to S/4HANA at all. 

I also know of members that SAP itself told to stay on-premise. Why, because the size, complexity and criticality of their SAP implementations were deemed too difficult and risky to move to the cloud. Will they be exempt from future SAP innovations? If so, surely they should have been told when they were initially investing in the move to S/4HANA?

It’s clear that this is an area of contention between UKISUG members and SAP. Whether or not on-premise users should *expect* the same level of innovation as cloud-based users, given that a key motive to move to cloud has always been consistent access to the latest innovation that perhaps isn’t always available on-premise, is a point I raised with Cooper in our interview - but more on that later. 

Cooper said during his keynote that on-premise and hosted S/4HANA buyers feel “misled” and that this view represents a significant percentage of UKISUG’s membership. What Cooper and UKISUG are calling for is clearer communication from the vendor. He added:

If SAP refuses to communicate more on this matter, there is a real risk that many of those planning to migrate to S/4HANA may change their plans. And for those who have already migrated to an innovation-less future – well I’d be surprised if any of those customers choose to invest in other SAP platforms.

I’ve already heard on-premise and hosted customers suggest they expect to see large scale reductions in support and maintenance costs, as they are running an inferior version of S/4HANA. I can see their point – surely a less feature rich product costs less to support and maintain? 

For those of you at SAP listening today – I urge you to engage and work towards a solution that rebuilds trust and addresses the concerns of our membership, the majority of whom have on-premise or hosted deployments. Work with us to build bridges and enable on-premise customers to access innovation. 

Cooper added that SAP executives have told individual on-premise members in private that there is no technical reason why they couldn’t access the majority of cloud-based S/4HANA innovations through BTP - which, if true, UKISUG is asking that SAP communicates this effectively. He said: 

As customers, what we want is an open and transparent relationship with vendors such as SAP, where we feel valued, and we feel we can trust SAP. 

Testing the water

The day after Cooper’s keynote, I got the chance to sit down with him to discuss some of what he said and also take a look at some other issues that could be around the corner for UKISUG members. And despite the firmness of Cooper’s comments, he doesn’t yet think the on-premise vs cloud S/4HANA issue is as serious as the indirect access tensions that SAP faced a few years ago between itself and buyers. What members want, according to Cooper, is clarity. He said: 

I don't think we're in a scenario at the moment where it was like indirect access, where that's on everyone's list. I think we're at one of those points where people are talking about what they're going to do with S/4 or how they're going to get to S/4. Clearly, the piece about access to innovation is worrying some of the earlier adopters of S/4 and those that were pre-RISE. They’re wondering if they’ll suddenly have to go back to their board and say ‘remember we did this, well actually we now need to tweak it to do that’. 

I think because an ERP system is so fundamental to your business, there's a little bit more emotion attached to it and more cost attached to it. So when you're pitching projects, these are all board level sign-off type pieces. And so I think it's magnified for people like SAP…that emotional response

Cooper highlighted how during some recent trust workshops in the UK with senior people from UKISUG’s members organizations and executives from SAP, there was a lot of learning around why customers respond in particular ways and why their decision making process isn’t necessarily aligned with what SAP is hoping it will be. He said: 

I think there's definitely a little bit more needed from them, in terms of ‘walking in the shoes of the customer’, to think through how they communicate what they're going to say, when they make these ‘set-piece’ announcements. 

It’s almost like when the government lobs an idea out to see what the Daily Mail and The Telegraph say, and then say ‘no we weren’t ever thinking about doing that’. You almost feel that SAP needs to kind of test the waters somehow, not just necessarily with their ‘favorite’ customers, but their customers in general. 

They need to think about how they communicate, how they test the water. 

AI and data

Listening to customers speak at the UKISUG event, it was noticeable how those embarking on their S/4HANA implementations were doing so with an additional intention of sorting out their enterprise data - with an understanding that this would be necessary to fully take advantage of any AI opportunities down the line. 

Cooper said that UKISUG didn’t survey its members on AI and their thoughts on SAP’s approach, as he feels it's too early in the game. He said: 

AI exploded this year on the back of the consumerization of AI and because of ChatGPT. We will do something next year, but there's a danger that if we survey too soon on some of these things that we end up with the classic ‘95% of our members have never heard of this’. And then the data is not particularly valuable to use. 

Once it's settled and people have a better understanding, it will become something that's much more measurable. 

Cooper also noted that member organizations may be thinking through what they classify as ‘AI’ versus ‘automation’ in the SAP sphere - where the focus may actually be on the latter, versus the PR-hype of generative AI. He said: 

We'll need to understand how people are using AI, because it may well be in the accounts payable-type automation. Are they thinking it's AI or are they just thinking it's a solution that's helping with automating three-way matching? 

I've had a few people talk about AI with me [this week] and they’re trying to understand what the generative AI bit is, which SAP is talking about for next year and the year after. 

But I think the audience we've got, they’ll be people looking for how to get to that next step of automating accounts payable, accounts receivable, that type of stuff. Whether they're consciously seeing that as AI, or just an automation solution…it's a difficult area.

But I think the maturity will be there by next summer for us to start understanding what people have done and where they see things going. 

However, Cooper does think the data message, particularly within the context of S/4HANA implementations and getting buyers’ enterprise data usable for AI, is already a focus. And he urges users to be thinking about this as a priority, as they progress their S/4HANA strategies. He said: 

I think that data piece is a key one as we start to move into that AI era. We've often pushed the data message. I think data is always important, but as we move into an era where you might be using it for automated decision making, or process generation, I'd be thinking about that. 

From a business perspective, if the data is slightly ropey, then be very careful about the decision making you use from AI. I think there'll be a few people that will start projects, and then very quickly realize that their data is not fit for purpose and they've kind of got to go back and do work there before they can exploit the tools.

My take

UKISUG’s message this year was the most tense in recent memory, with a clear warning to SAP that it needs to communicate better when it comes to S/4HANA. That’s a reasonable request, given that some of these projects are taking a number of years in planning before they even hit the ground running.

Part of me does wonder though whether those buyers that opted for on-premise implementations of S/4 should really expect the same level - or perhaps cadence - of innovation that cloud-based customers are getting - but if that’s something that SAP has communicated to them in the past, then I suppose it should be respected. Cooper said that UKISUG’s members have been told that there’s no reason on-premise or hosted S/4HANA users shouldn’t get the same level of innovation, but I’m sure SAP will be taking note of the concern coming from the user groups and hopefully will be addressing these in the coming weeks and months. 

In terms of advice for members, Cooper made two key points. Firstly, he said that those that haven’t started their S/4HANA journey yet, really need to start thinking about what they’re going to do and how they’re going to do it. He added: 

[You should] be talking to partners that are going to help deliver it, to get on the list of people sitting there waiting, because as we’ve seen…it's not something that you kick off on the 1st of January, go to the board with on the 1st of February and be doing the project by Easter. You need to be really thinking about your roadmap. 

And secondly, Cooper said that those customers that are opting for RISE with SAP for the S/4HANA deployments should keep applying pressure to SAP, focused on what to expect in a few years. He said: 

From talking to people about RISE, you need to push SAP really hard in terms of how they articulate the benefits and the cost model that's there. But also, what does the cost model look like in three years time? Cloud is classically a three year contract, so what's it gonna feel like in three years time? How much flexibility are you going to have on what the cost is going to look like? 

An interesting event. And whilst the issues raised are important, it’s worth noting that I sat in on a number of customer sessions where users were accelerating their S/4HANA deployments - and are excited about the potential they bring for standardized processes and future AI opportunities. There are a number of challenges facing buyers at the moment and SAP faces a delicate balancing act of getting enterprises where they need to be to take advantage of modern digital tools, and remain competitive, whilst not alienating them with inconsistent messaging. More carrot, less stick perhaps. We will see how the vendor responds over the coming months. 

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