It would be easy to be pessimistic about SAP when you read Dennis Howlett’s recent blog “It’s a hot mess and everyone, whether that is SAP, customers, partners or User Group people want it to go away. The issue comes in finding a solution.” The “mess” is what used to be irritation at individual SAP customers about Indirect Access audits. It is now a full blown crisis. Dennis writes “I was shocked. I have never heard customers so angry at a vendor as I did at this event”. I have heard the anger in my consulting for years now. Customers thought IA was very unfair, but some would grudgingly agree the greed was not confined to SAP. Other enterprise vendors had their own sneaky practices. But to a person they would “punish” SAP by not inviting them to future business for a couple of years. I am convinced for every dollar SAP collected in IA, it was precluded from bidding for 5x in new business. But it was isolated to those customers who went through the ordeal. Now, I hear it from every SAP customer and if all of them decide to punish SAP, it is like I said a crisis.
It is one of several “unforced errors” I have seen SAP make as I continue my research for SAP Nation 3.0. CEO Bill McDermott acknowledged the problem in his keynote at SapphireNow in May. All of SAP should have rallied around his promise of a solution. 6 months later there has only been dribbles of information about it. SAP needs to treat it like a crisis.
The other unforced error SAP has been making is exaggerating S/4HANA success. It claims 6,500 customers but still cannot show detailed product road maps prospects can believe or show adequate reference early adopters.
Not sure why it feels the need to exaggerate progress on S/4. In SAP Nation 2.0 I profiled progress of several next-gen products and I wrote “As we have seen earlier with Oracle, Microsoft and JD Edwards, a next-gen product takes years of development and maturation. Migrating a legacy customer base takes even longer. Those are just the laws of physics. SAP may be able to bend them slightly with S/4, but will likely not be able to break them.”
Worse, SAP partners are trying to get customers to repeat the sins of the last wave of R/3 and ECC implementations. They are telling customers to implement the (relatively more mature) financial modules of S/4. That is the mistake so many SAP customers made in the last go-around. They would start with financials, run out of funds and never get to the operational areas. And when they did they found the functionality much weaker than they had expected.
Between IA issues and S/4 claims, SAP has a credibility problem in the market. As an analyst told me “I wish Hasso Plattner was in every conversation with SAP. You would get a truthful answer pretty quickly”. That is a huge tribute to Hasso, but also an indicator of how little faith people have in what they hear from the rest of SAP.
But……don’t write off SAP just yet.
While I see just about every SAP customer adopting one of the “coping strategies” I had written about in SAP Nation – ring fencing with clouds, third party maintenance, two tier ERP with lighter alternatives etc, the core of SAP is still reasonably solid. They are still the book of record for utility billing, retail merchandising, oil and gas accounting and countless other vertical applications.
None of the competitors – Oracle, Workday, Salesforce, Infor, others – has made a major dent in the vertical areas. They could have gone for the kill but have been content to focus on horizontal areas like HCM and CRM.
And there with its cloud acquisitions especially hybris, SuccessFactors, Concur and Ariba, SAP has managed to stay competitive in many horizontal areas.
Another trend is also helping SAP. I see a number of customers keeping their legacy, on-premise applications in place and adopting a series of “intelligent apps” around them which leverage sensors, machine learning and other contemporary technology and data sources. SAP’s Leonardo toolkit is a gateway to that world.
So, I continue my research for SAP Nation 3.0 with that guarded optimism. I hope SAP gets the “spirit of Hasso” back into the field. It needs to become more of the product company it used to be, less the sales machine it has become.
(Cross-posted @ Deal Architect)