How Much of Customers’ SAP Customer Code is Used?

Executive Summary

  • SAP constantly tells customers to get rid o their custom code and to use SAP standard functionality. This old point has been brought up again with S/4HANA.
  • How much of customers’ custom code is actually used by customers?

Introduction

SAP proposes that very few custom coded objects for SAP systems are actually used. SAP has proposed that for companies that plan to implement S/4HANA, that the custom code is evaluated for removal. This has been a long-term strategy by SAP to get customers to use standard functionality, the problem being, SAP is always sold with the amount of functionality that will meet the customers being overstated, which we covered in the article How to Understand the Overamapping of ERP to Functionality.This leads to the question of how much custom code in SAP systems is relied upon by customers.

SAP Nation 2.0 on the Percentage

The book from SAP Nation 2.0 provides an explanation of how much custom code is used.

“According to Panaya, a tool vendor, “Our data shows approximately 50 percent of customers use 60 percent or less of their custom code. Being able to easily identify which parts of that code can be safety cleaned from the system can help reduce the future cost of such upgrades.“”

That is no the level of code used by customers communicated by SAP, which attempts to make the percentage utilized seem far less.

Conclusion

The fact is, that SAP customers do not think the latest versions of ECC are worth the time and expense to upgrade. Furthermore, many customers that do upgrade, would not have if they had fully accounted for the costs. One cannot listen to either SAP or to SAP consulting companies for objective advice as to whether to upgrade, as both entities make money from the upgrade process.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

*https://www.amazon.com/SAP-Nation-2-0-empire-disarray-ebook/dp/B013F5BKJQ

Enterprise Software Risk Book

Software RiskRethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Rethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Better Managing Software Risk

The software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’t

In this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation.

Chapters

Chapter 1: Introduction
Chapter 2: Enterprise Software Risk Management
Chapter 3: The Basics of Enterprise Software Risk Management
Chapter 4: Understanding the Enterprise Software Market
Chapter 5: Software Sell-ability versus Implementability
Chapter 6: Selecting the Right IT Consultant
Chapter 7: How to Use the Reports of Analysts Like Gartner
Chapter 8: How to Interpret Vendor-Provided Information to Reduce Project Risk
Chapter 9: Evaluating Implementation Preparedness
Chapter 10: Using TCO for Decision Making
Chapter 11: The Software Decisions’ Risk Component Model

How Long Until SAP Customers Adopt ERP Upgrades?

Executive Summary

  • SAP likes customers to upgrade their ERP software as soon as possible as this maximizes SAP and their consulting partner’s revenues.
  • The actual update lag is quite surprising.

Introduction

In SAP upgrades are major expense items for a company. This is explained by Rimini Street in the following graphic.

This cost to upgrade is nearly always dramatically underestimated by IT departments. This is because the costs are hidden in the ERP budget.

The Cost and Effort of Upgrades

Cost is one reason that SAP ERP customers upgrade far less than is generally understood, and wait far longer to upgrade. Another reason is the overall disruption to IT, and to sometimes the business. The book SAP Nation 2.0 provides the following explanation for the lag in adoption of the latest version.

“Not all customers adopt every new SAP version. Even the most adopted EHP 4 research a peak adoption rate of approximately 35 percent, and three years after becoming generally available (GA). The time it takes a new version to reach peak adoption is approximately 18-24 months after GA. In addition, we can see that EHP 7 (the latest version, and the required version to support Business Suite on HANA as well as Fiori), has a steeper adoption rate and has the potential to become the most adopted version. Unlike Android or mobile applications, the expected upswing in ERP adoption is measured in years, not months.”

Conclusion

The fact is, that SAP customers do not think the latest versions of ECC are worth the time and expense to upgrade. Furthermore, many customers that do upgrade, would not have if they had fully accounted for the costs. One cannot listen to either SAP or to SAP consulting companies for objective advice as to whether to upgrade, as both entities make money from the upgrade process.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

*https://www.amazon.com/SAP-Nation-2-0-empire-disarray-ebook/dp/B013F5BKJQ

Enterprise Software Risk Book

Software RiskRethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Rethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Better Managing Software Risk

The software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’t

In this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation.

Chapters

Chapter 1: Introduction
Chapter 2: Enterprise Software Risk Management
Chapter 3: The Basics of Enterprise Software Risk Management
Chapter 4: Understanding the Enterprise Software Market
Chapter 5: Software Sell-ability versus Implementability
Chapter 6: Selecting the Right IT Consultant
Chapter 7: How to Use the Reports of Analysts Like Gartner
Chapter 8: How to Interpret Vendor-Provided Information to Reduce Project Risk
Chapter 9: Evaluating Implementation Preparedness
Chapter 10: Using TCO for Decision Making
Chapter 11: The Software Decisions’ Risk Component Model

How to Understand the Scope of SAP’s Sprawl

Executive Summary

  • SAP was initially sold on reducing sprawl, however, SAP now has enormous sprawl in every dimension.
  • This topic is rarely discussed among SAP resources.
  • The impact of this sprawl is a very high cost and lack of sustainability.

Introduction to SAP’s Sprawl

SAP began as a company that offered an ERP system, but its financial success led it to sprawl into an unmanagable company. In this article, we will cover the issues with SAP’s sprawl.

SAP to Replace Sprawl

One of the arguments used to sell SAP ERP was that it would eliminate the sprawl of mostly homegrown systems within companies. SAP sales reps often told customers that if they purchased SAP, it would be the only system they would ever need. This type of thinking is illuminated in the following quote from the book SAP Nation 2.0.

“SAP’s runaway success in the 90s came about because its R/3 product dramatically reduced enterprise sprawl. As Paul Melchiorre one of its most successful salespeople had noted in SAP Nation: “It was a truly transformation time for the technology industry. We replaced thousands of departmental and mainframe systems. We put MSA, M&D, and others out of business. We didn’t really have much competition. In deals it would be SAP v. SAP v. SAP — that is, SAP/Accenture, v. SAP/KPMG v. SAP/PwC.””

This quote came from a salesperson (so should be viewed with skepticism), but looking at SAP’s product list what does one see but sprawl? Seen this way it is apparent that SAP had no interest in reducing sprawl, but wanted to replace their customer’s “legacy” sprawl with SAP product sprawl.

But did SAP, in fact, reduce sprawl?

“According to Panaya, a tool vendor,”More than 50% of SAP shops have 40+ satellite applications. Of these less than 10 are SAP applications.“”

It certainly does not appear so.

SAP’s Current Sprawl

This sprawl is further explained by the following quotation also from SAP Nation 2.0.

“Broadly, Rogow is pointing out that we do not have many independent thinkers in IT, especially considering how complex IT has become. The challenge is particularly acute in the SAP Universe with its fragmentation and sprawl. Many consulting and customer staff have spent their entire careers on SAP projects — in particular on older SAP products. They to the same SAP events year after year and repeat what SAP shows them.”

“At SAPPHIRE NOW, in May 2015, SAP Digital announced a new set of products including a CRM solution at $29 per user per month. SAP Claims to now have 17 million Jam users and 2,000 HANA start ups. The executives responsible for such SAP initiatives proudly brag about them, even though they contribute merely 1 to 2 percent of SAP revenues and they keep adding to the sprawl.”

Conclusion

The only people who say that SAP reduced sprawl are those that either work in sales or SAP project management. Right after SAP sold their ERP system on the basis of reducing sprawl, it was found that SAP’s claims regarding sprawl reduction were false, and SAP began aggressively increasingly sprawl, as it desired to sell ever more products into companies. This undermined the entire argument of the initial ERP sale, that the ERP system was the only system that any customer would ever need.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

*https://www.amazon.com/SAP-Nation-2-0-empire-disarray-ebook/dp/B013F5BKJQ

The Real Story on ERP

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion

SAP Nation 2.0 on the Overall SAP Ecosystem Annual Spend

Executive Summary

  • In the book SAP Nation 2.0 Vinnie Mirchandani estimated the total annual spend in the overall SAP ecosystem.
  • Who supported Vinnie in his quest to perform this estimation?

Introduction

In our TCO calculators which are available for free online, SAP routinely ranks as the highest TCO software. SAP also has the largest consulting partner network with roughly 12,500 consulting firms that focus on SAP. The reason? Because SAP consulting is the most lucrative type of consulting. None of these consulting firms select to focus on SAP for any other reason than it provides the highest profitability. This profitability is good for SAP consulting firms, but bad for customers. However, what is the overall global picture of spending on SAP?

In this article, we will review the global estimate of the SAP spend by SAP customers.

The Estimate from SAP Nation 2.0

In the book SAP Nation 2.0, Vinnie Mirchandani created the only estimate I am aware of as to the total yearly spend on SAP. I have reformatted the table from SAP Nation 2.0 with changes in formatting to make it more readable and added a percentage per cost category. The cost categories are the following.

The total comes to over $309 billion, and the book was published in 2016, which means as of this article’s publication (in 2018) the spend is of course higher. 

How High is this Global Spend?

Numbers this high are difficult to interpret without some frame of reference. In SAP Nation 2.0, Vinnie compares this GDP to that of Ireland. And we include several other countries in the following graphic with similar GDPs.

Ireland’s GDP supports around 5 million people. Norway’s 370 billion USD support around 5 million people.

SAP’s Small Percentage of the Overall Spend

What is illuminating is that SAP’s revenues are only roughly 8% of the total SAP spend. This is quite low, but it also highlights the fact that the cost of purchasing software licenses and support from the vendor is always a small fraction of the overall spend or TCO of any application. SAP’s overall spend it particularly exaggerated because SAP projects are nearly always implemented by SAP partners, and SAP projects are the most expensive in the industry.

Who Supported Vinnie in His Quest?

For his book, Vinnie reached out to the top analyst firms to get their views on the size of the spend. Curiously, these analysts did not seem very interested in supporting Vinnie’s efforts in estimation.

“Firms like Forrester, Gartner and IDC often 10-40 analysts who cover different aspects of a large technology vendor like SAP, but they do not often employ integrative models. I had to reach out to several analysts to help validate small segments of my model of the SAP economy. Other market analysts were more defensive. One question why I was even modeling the SAP economy when I am “not a full time analyst.” Another declined saying it is a “sensitive topic.” Customers should expect analysts to take more of the customer perspective as they cover SAP and the ERP marketplace and to better weaver the research their silos.”

All of these analyst firms receive large amounts of money from SAP. Therefore, as SAP is their client, any analysis which investigates the spend of their client, which may open up the ecosystem to criticism is declared a “sensitive topic.” That is sensitive to their bottom line! This is in line with what we covered in depth in the book Gartner and the Magic Quadrant, that Gartner is not a true research entity but rather a faux research entity that sells faux research to companies that don’t know what research is.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

*https://www.amazon.com/SAP-Nation-2-0-empire-disarray-ebook/dp/B013F5BKJQ

TCO Book

TCO3

Enterprise Software TCO: Calculating and Using Total Cost of Ownership for Decision Making

Getting to the Detail of TCO

One aspect of making a software purchasing decision is to compare the Total Cost of Ownership, or TCO, of the applications under consideration: what will the software cost you over its lifespan? But most companies don’t understand what dollar amounts to include in the TCO analysis or where to source these figures, or, if using TCO studies produced by consulting and IT analyst firms, how the TCO amounts were calculated and how to compare TCO across applications.

The Mechanics of TCO

Not only will this book help you appreciate the mechanics of TCO, but you will also gain insight as to the importance of TCO and understand how to strip away the biases and outside influences to make a real TCO comparison between applications.
By reading this book you will:
  • Understand why you need to look at TCO and not just ROI when making your purchasing decision.
  • Discover how an application, which at first glance may seem inexpensive when compared to its competition, could end up being more costly in the long run.
  • Gain an in-depth understanding of the cost, categories to include in an accurate and complete TCO analysis.
  • Learn why ERP systems are not a significant investment, based on their TCO.
  • Find out how to recognize and avoid superficial, incomplete or incorrect TCO analyses that could negatively impact your software purchase decision.
  • Appreciate the importance and cost-effectiveness of a TCO audit.
  • Learn how SCM Focus can provide you with unbiased and well-researched TCO analyses to assist you in your software selection.
Chapters
  • Chapter 1:  Introduction
  • Chapter 2:  The Basics of TCO
  • Chapter 3:  The State of Enterprise TCO
  • Chapter 4:  ERP: The Multi-Billion Dollar TCO Analysis Failure
  • Chapter 5:  The TCO Method Used by Software Decisions
  • Chapter 6:  Using TCO for Better Decision Making

How SAP and Oracle’s Stripped the Value from 22% Support

Executive Summary

  • SAP and Oracle have engaged in a concerted effort to strip out value from the base support level.
  • This means that the actual support cost for SAP and Oracle have dramatically increased.

Introduction

When SAP and Oracle sell their software, they sell the software with base support. This base support has increased throughout the years to now rest at 22% of the cost of the license. This 22% is due on a yearly basis, and it is proposed that this support means that these vendors provide support for the application. However, as time has passed SAP and Oracle have stripped the investment from their support pushing their support to the 90% range in profit margin. In this article, we will evaluate the implications of this strategy for SAP and Oracle Customers.

The Scam of SAP and Oracle Support

In sales presentations, SAP and Oracle talk about how fantastic their support is, but the reality of their base support offering is considered by those that use the support to be quite poor. We use SAP support and it is mostly a waste of time, with SAP support representatives normally deflecting issues when they turn out to be broken functionality in SAP. Therefore, it is now very common to receive false answers from SAP on issues that would make it plain that SAP sales had misled customers. SAP and Oracle maintain ticketing systems, but the value of these is declining as well. English is normally a second language for those that work in SAP and Oracle support (due to gutting the support employment in the countries where most of SAP and Oracle’s customers are) so miscommunications and inefficient communication is extremely common.

So while customers get less and less from SAP and Oracle support, support is more and more used to push customers into doing things that these vendors want their customers to do.

This is explained by Ahmed Azmi..

“Oracle EBS 11 hit GA in 2004. Oracle pulled its premier support just six years later in 2010, then dropped extended support in 2013. That left customers, who had yet to upgrade, on what Oracle calls “sustaining support.” At each tier, the level of service declines but the price does not.

The capital cycle for ERP is 15-25 years. NOBODY immediately upgrades to a new release. It takes time to get a business ready for a significant implementation or upgrade, and some companies like to wait until the riskiest bugs are worked out. Other companies don’t see the ROI in the massive costs associated with these upgrades.

ERP vendors reduce or eliminate support coverage on prior releases to force upgrades and customers pay the same 22% for less and less support. Just like taking candy from a baby!

Support Conundrum and Support as a Surcharge

If the support is nearly all margin, with less and less offered in the 22% support cost, then it can be instead merely called a “license premium” or simply a surcharge. If it is merely a yearly license premium, now SAP and Oracle’s TCO substantially increases. This is explained in a quotation from the book SAP Nation 2.0.

“Another customer (of Rimini Street) is TT Electronics, a $1 billion UK-based electronics manufacturer, whose CIO Ed Hefferman has been quotes as saying SAP Maintenance is effectively an added tax that I have to pay for no value in return. TT blends Rimini support while using savings to continue to buy a new SAP license for its ECC 6.0 environment.”

When we created online TCO calculators for SAP and Oracle, we did not consider this reality. When I was asked why IT departments have a hard time calculating TCO, first, they tend to lack the staffing, but second, the assumptions are complex. In this example, the TCO for SAP and Oracle are not higher than there were 10 years ago. Furthermore, I cannot ever recall the topic coming up that the base support is nothing more than a yearly surcharge. This means the customer has to expend more money/effort to get actual support and to fix issues.

The Rapidly Increasing Demand for Free Support

Because we publish so much material on SAP technical areas, one place that some SAP customers have reached out to is us. However, interestingly, after having spent so much money on non-existent support, we often get customers who don’t have any budget, but are looking for “help.” After we rejected a one month project where we would have been expected to fix all of their issues and provide training, they started sending us questions and asking us to guide them for free, as they lacked budget (they said). This customer is scrambling and using business resources to research the problems online. There is a lot of need for SAP help out there, but far less of a budget to fix these support problems. This is one reason why SAP projects are becoming less sustainable. And while we don’t get Oracle requests, given the similar disinvestment in base support, we think its highly likely that Oracle customers are seeing the same thing.

A New Marketing Program for 3rd Party Support Providers?

Given this reality, it seems that a likely future marketing logic for 3rd party support providers is the following:

“As SAP and Oracle’s support is now just a surcharge/tax (which means you should not expect anything more than continued upgrades), continue paying the tax, but hire 3rd party support to provide the actual support. This means that the yearly support cost is now 33% per year (22% for SAP an Oracle, and 11% for 3rd party support.) But this is the reality of SAP and Oracle support.”

Conclusion

The complaints about the declining quality of SAP and Oracle support can be found on message boards, but as nearly all the information about SAP and Oracle is provided by either SAP and Oracle or biased entities (consulting partners or media entities that are paid by SAP and Oracle) these topics are rarely the subject of articles. This allows SAP and Oracle to continue to pull resources out of their standard support and make the actual support far higher.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

*https://www.amazon.com/SAP-Nation-2-0-empire-disarray-ebook/dp/B013F5BKJQ

Enterprise Software Risk Book

Software RiskRethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Rethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Better Managing Software Risk

The software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’t

In this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation.

Chapters

Chapter 1: Introduction
Chapter 2: Enterprise Software Risk Management
Chapter 3: The Basics of Enterprise Software Risk Management
Chapter 4: Understanding the Enterprise Software Market
Chapter 5: Software Sell-ability versus Implementability
Chapter 6: Selecting the Right IT Consultant
Chapter 7: How to Use the Reports of Analysts Like Gartner
Chapter 8: How to Interpret Vendor-Provided Information to Reduce Project Risk
Chapter 9: Evaluating Implementation Preparedness
Chapter 10: Using TCO for Decision Making
Chapter 11: The Software Decisions’ Risk Component Model

Who Will Tell the Truth on SAP Support?

Executive Summary

  • So few entities that offer SAP support tell the truth about SAP problems.
  • Important factors to know about SAP consulting partners and how they keep secrets about SAP support.

Introduction

Companies that offer SAP support frequently leave out one of the most important features of providing effective support. That feature is whether the entity can tell customers the truth about SAP and SAP problems.

In this article, we will explain why this is a critical feature of obtaining quality SAP support.

Why So Few Entities that Offer SAP Support Can Tell the Truth about SAP

There are two primary companies or types of businesses that provide SAP support. The first is SAP, and the second is an SAP consulting partner.

Can You Expect SAP Come to Clean?

When interacting with SAP support on tickets, as we have many times, it is clear that SAP support has been trained never to admit a shortcoming on the part of SAP software. This is true even for items that been known as long-time SAP problems. When intractable problems are the subject of a support exchange, the exercise often becomes necessary. In these cases, the SAP support resource typically will attempt to put the fault back on the customer.

How About the SAP Consulting Partner

As we cover in our introductory article on SAP support, SAP consulting partners don’t so much provide support as they serve as an intermediary between the customer and the actual support provided by SAP. In our experience, the SAP consulting partner tends to be a bit more realistic about an issue or SAP problem that SAP cannot resolve, but at the end of the day, SAP consulting partners are reticent to tell the customer the truth about an SAP shortcoming, as they are concerned about maintaining that relationship with SAP. Therefore, the SAP partner will toe the SAP line whether it is true or not.

Who Will Tell the Complete Truth About SAP?

First of all, for any company to tell the complete truth about SAP, they must be independent of SAP. This means that no company that is an SAP partner would qualify.

SAP can and does threaten its partners that do not do what SAP wants with having their partnership revoked. Therefore, any statement made by an SAP partner should be seen as being approved by SAP. 

Keeping Secrets on SAP Support

The only support companies that will tell their customers the truth about SAP are companies that provide third-party support and that do not have any partnerships with SAP.

None of the well known 3rd party SAP support providers publish their issue or SAP problem database for others to read.

Instead, this information is kept it private.

Brightwork’s History of SAP Problem Publication

We have a 10-year history of not only telling the truth on SAP but publishing detailed explanations as to the issues or SAP problems we have faced getting SAP systems to work.

Examples Include

The Problems with the SNP Optimizer and Flow Control

Replacing the Optimizer in SNP and PP/DS 

Getting Best Fit to Work in SAP DP

Because we have been one of the only entities willing to do this, we have the advantage in both documenting SAP problems and in supporting SAP issues.

Conclusion

If you currently get your support from SAP or any other entity that refuses to tell you the truth about SAP, then you missing out.

  1. Do you want to interact with an entity on SAP support that has a history and will tell you completed truth on SAP?
  2. Do you want your SAP support information from a serious research entity that approaches the question of SAP support from multiple dimensions?

Reach out to us at [email protected] to begin a discussion.

How to Understand The Real Story with SAP Support

Executive Summary

  • The topic of SAP support is rarely discussed, but the reality of SAP support is far different than what is promised by SAP and their consulting partners.
  • What are the massive hidden costs imposed by using SAP support?

Paying 22%+ for SAP support and do you still have employees feeling like this?

Introduction

  • We are the world’s most accurate source of information on SAP.
  • This is something that we ask that you verify for yourself by reviewing the comparison of SAP versus Brightwork.

Our work in SAP support comes from our overall research foundation in SAP. This leads us to the inescapable conclusion that for the vast majority of customers, moving to third-party SAP support is the most cost-effective as well as the highest quality option. However, the story that has been explained thus far by third-party SAP support providers is only a partial explanation of the benefits of this type of SAP support.

In this article, we will explain the full benefits.

The Importance of Focusing on SAP Support

SAP support is one of those areas that tend to get much less emphasis than it deserves. Brightwork TCO estimations have maintenance absorbing an average of a little more than 60% of the total TCO of an application (this number varies per application).

In fact, our research shows the following average allocation per TCO category.

This research is based upon the evaluation of 53 applications and is available online in with our TCO Calculators.

The easier the application is to implement and maintain the higher the software and hardware components become as a percentage of the overall TCO. Obviously, in every case, the total must be 100%.

As license purchase, hardware costs implementation costs average roughly 40%, it makes sense to place more than 50% of the effort on the maintenance side of the equation.

The Different SAP Support Types

There are three different types of SAP support available.

  1. Third Party Also Known as 100% Outsourced Support
  2. 100% SAP Support
  3. Combined Consulting Firm + SAP Support

It should be observed that the third party support is a small percentage of the delivery of overall SAP support and that this type of support is a relatively recent option.

Third Party Also Known as 100% Outsourced SAP Support

Here SAP receives no money for the support.

This means that the support entity and the customer do not have access to SAP’s upgrades or patches. The software versions is frozen at the point that the SAP support expires. SAP uses this as a point to scare their customers. And at first blush, this seems like a significant disadvantage. But Brightwork’s research has demonstrated that for many SAP customers it makes far more sense to simply keep what they have and not to move to SAP’s new products. That is by either upgrading existing products or not buying new SAP applications.

SAP attempts to present constantly keeping SAP upgraded as a good thing. However, the research actually goes in the opposite direction. Constant SAP upgrades not only lead to higher costs, they are disruptive to the customer. They also sap both energy and funding from investing in applications outside of SAP ERP that have a higher ROI. 

At this time we still recommend against buying or implementing S/4HANA or HANA. Companies that purchase either of these products will in the vast majority of cases end up with a negative ROI.

Important Findings of SAP Support

Rimini Street has made important contributions to the understanding of third party support by explaining that most customers don’t use the upgraded functionality in new SAP releases and that upgrades are a massive hidden cost for IT departments. These observations are true, and of course not popularized widely because they are contrary to the interests of both SAP and the SAP consulting partners, that both make high margins on SAP support.

If only SAP upgrades were like an Android upgrade. The term “upgrades” sound perfunctory, responsible even. However, the costs of what is supposed to straightforward end up being mind-boggling expensive.

Poor Reasons for SAP Upgrades

  1. It is Necessary Housekeeping!: SAP IT departments often perform upgrades without having a plan for how to use the upgraded software. That is it is approved as a “housekeeping measure.”
  2. Based On Fear?: Many upgrades are driven by fear of being out of date, fears that SAP often overplays to drive the upgrade. Long story short, SAP uses upgrades as a form of control where in most cases the customer sees very little benefit. The term that is used is a “forced upgrade” Another term we might offer is a “vendor oriented upgrade.”
  3. Just Wait For the Next Version!: Companies will often upgrade to obtain new SAP functionality only to find out after the fact that the functionality is still not ready — but might be in the future version!
  4. All Issues Answered in New Version?: There is an unwarranted optimism that the next version of SAP software will solve a previous issue, often a previous promise from SAP that turned out not to be true. In this way, upgrades can be a way for assuaging dissatisfaction in their business that the newer version of SAP will “fix all of that.”

Coverage for Custom Code?

Third party support has a major advantage over the options to be listed next. This is something that is never mentioned during the sales process by SAP or by an SAP consulting partner, but no custom code is included in support of these entities.

The problem with this is that the majority of support is actually in this custom code area, and 92% of SAP projects have either a moderate or extreme level of custom code. In fact, this percentage would be even higher, but for some companies in highly regulated industries (such as pharmaceutical) that do not customize for legal reasons. 

SAP and their proponents will frequently to gaslight customers by stating that the customer should eliminate this code.

  • This custom code exists because SAP cannot meet the business requirements of the customer without the code.
  • SAP sales frequently misrepresent its software functionality, meaning customizations are often unplanned from when the software was first purchased.
  • A large part of this custom code was never anticipated when the software was initially sold. SAP will normally push the envelope and state that nearly all customer requirements can be met with standard functionality.
  • This issue with unanticipated customizations is a major reason why SAP projects will virtually always go significantly over budget.

Stating the code should be eliminated is a pivot the conversation away from why SAP charges so much. SAP won’t support the code that was necessary to get the SAP system to work in the first place.

Third-party support entities normally do support this custom code. This is a major distinction between support through SAP and 3rd party SAP support.

This unbalanced comparison between 100% SAP support and 3rd party SAP support is why a simple comparison of the direct cost savings does not make any sense. For example, if a 3rd party SAP support offers to cut the customer’s support bill by 50%, this is meaningless to the overall cost difference between overall maintenance costs between the 3rd party SAP support company and using SAP for support.

But this is only one of the reasons that comparison is wrong. We will get into the other reasons further on in the article.

The Massive Hidden Costs Imposed by Using SAP Support

Hiding costs is a big part of SAP’s and SAP’s consulting partner’s business model. And because both SAP, SAP consulting partners make money off of these hidden costs (that is they are the hidden costs) and SAP spreads so much money to the IT media there are extremely few entities in IT that have any interest in discussing these hidden costs. For this reason, it was surprising to find this article by CIO (which also receives money from SAP)

“A majority of surveyed SAP users find no compelling need to migrate to S/4 HANA. At the same time, almost half expressed dissatisfaction with the value of SAP support (emphasis added).

That unease is only likely to increase as businesses try to run and maintain their existing ERP systems while SAP shifts investments to build a new, as yet unproven platform. Over time, support and maintenance fees will become even more painful as perceived value decreases.

That’s a strong indication that enterprises are tiring of the rising costs for support of a relatively stable product, with only marginal improvements in the software. These systems for the most part have been built out over many years, are stable, and provide a central nervous system that businesses would just as soon not disrupt with new upgrades.

In the case of SAP, a survey of more than 200 SAP licensees conducted earlier this year found that only 8% believe the fees they paid for SAP support were “well worth the value they receive,” while 47% expressed dissatisfaction and said they were “paying too much” and/or “support costs are way out of control.”

Research repeatedly shows that SAP maintenance consumes a very high percentage of IT budgets. The common statistics quotes are somewhere between 70 and 80% of the overall IT budget simply goes to “keeping the lights on” for existing applications.

SAP’s total costs are hidden with the direct cost of using SAP support dramatically underestimating the cost of using SAP. This is also a primary reason why neither SAP nor SAP consulting companies want their customers knowing or calculating the actual TCO of SAP.

Upgrade costs are so high because they are implementation projects. This means paying external consultants. And the using SAP support often means accepting these costly upgrades.

  • The Total SAP Support Costs: The real total cost of SAP support is constantly underestimated.
  • Unincluded Portions of SAP Support: The current rate of 100% SAP Support is 22%+. We add the “+” because there is all manner of types of SAP support that are not covered by 22%. For instance, the SNP Optimizer is not covered by this 22%. Also, it was not always this high but has been increasing over time.
    And, as stated earlier, this minimum of 22%+ is exclusive of customizations.

22%+ can be seen as just the starting point. With the steadily rising SAP maintenance costs which use the money paid to SAP as just the foundation. Much like a mountain peak that is only partially exposed, using SAP support necessarily means a number of follow-on costs. The intent of SAP and its consulting partners is simple. To consume as much of the IT budget as possible, all beginning from getting into the account with the software sale. 

  • This means that using either SAP or a combination of SAP and an SAP consulting partner for support means taking on a number of associated costs that the customer cannot avoid.
  • This distinction is mostly lost as most of the comparisons only focus on the direct cost of support.

How third-party support will support custom code on SAP implementations is explained very well by this quote from Dan Woods an analyst with CITO Research. The quote is about Oracle but applies equally to SAP.

“These folks (at 3rd party support entities) understand the intricacies of Oracle and related customizations because they have hands-on experience implementing, supporting, upgrading, and customizing these products. In short, they’ve already done what enterprises are trying to do. They don’t just serve as tech support but as problem-solving ninjas. And because these products are so complex, usually the solution is not a bug that needs to be fixed, but a mistake in configuration, customizations or in the way the product is being used. This can be solved without any needed participation of the software vendor.”

100% SAP Support

This is where SAP provides all of the support for the customer. This is the most common choice for SAP customers. It is not necessarily the best choice, but just the most common. Understanding the market share of 100% SAP support is a bit like the earlier phase of Microsoft Windows.

In the early phase of the Internet, Microsoft Internet Explorer had a massive market share. However, this was more due to being the only browser first installed (and impossible to uninstall) than due to Internet Explorer’s inherent value of the product versus available options. As soon as people became aware, often through word of mouth of better alternatives, Internet Explorer lost market share, and its early market share is now reversed with Google Chrome.

As with SAP, Microsoft took advantage of a lack of exposure of consumers to better alternatives to impose a lower quality product on them.

SAP wants its customers to know the least about its support options so that it can keep the highest possible margins for SAP support. 

An SAP Focused on Application Sales or Support Revenues and Indirect Access Revenues?

SAP is increasingly reliant and things like support and indirect access (which imposes made up rules to restrict who can connect to SAP systems so SAP can charge customers for the “privilege” of integrating to SAP) for their revenue.

SAP’s major revenue streams are not actually selling software. SAP has had a very poor record in innovation and new product development for decades. This means that in order to meet its revenue targets, it needs to get more revenues from other areas. This is referred to as harvesting the existing customer base. 

SAP Support Versus Automobile Service Parts and Dealer Service

  • Automotive Service Parts: SAP treats support much like automobile manufacturers treat service parts. When the customer is in the market for buying a car, they can buy that car from any supplier. But once they choose the car, the service parts tend to come from that supplier. That is why service parts have traditionally had a higher margin than the finished good (the car).
  • Car Dealerships: Car dealerships operate the same way. Despite scoring lower in customer satisfaction versus independent service shops (according to Consumer Reports). Car dealers try and are often successful in converting what is an initial purchase (the sale of the car). Although not as successful as SAP. Only around 30% of US car buyers take their car to the dealer while the cars are still under warranty. This is much lower than the percentage of customers that use SAP for support.

This is true even though the premium of going with SAP is normally always a minimum of 2x using third-party support on just the explicit costs. This provides an indicator of the opportunity present in using third-party SAP support.

Saving money on SAP maintenance is easy as pie. But it starts with moving away from SAP or SAP consulting partner support. In fact, reducing SAP maintenance is extremely difficult if one stays with SAP or SAP consulting partner support. 

How Does SAP Maintain a 90% Margin on SAP Support?

SAP has a 90%+ margin on its support.

Some people have debated us in that a company should be able to charge whatever they like. But those arguments weaken when it is apparent that the only way to receive 90% margins is if you somehow have enormous leverage over the account. All the other areas that one can find where 90%+ margins exist, one invariably find abusive practices on the part of the supplier. Also, as a customer are you really interested in paying a 90% margin to any of your suppliers?

So while it might be something that sounds nice to some people to charge (although even then we have to question this), its certainly not something that is desirable to pay. The same people who would brag about charging 90%+ margins, might very well complain quite loudly about having to pay a 90%+ margin.

It is important to consider what a 90%+ margin actually means. If we take the value 92% (as it is 90%+) if a company pays $100,000 per year in support, SAP moves $92,000 to profits. And only $8,000 is used to pay for support and other allocation areas. 

How SAP Minimizes its Support Investments and Undermines its Capabilities

Something that is left out is how SAP attains a 90%+ margin. Obviously, they charge a lot for support, but on the other side, they invest as little as possible into support. It also means that the 90%+ margin is not allocated even to product maintenance or new features.

SAP’s support has been in a decline for roughly 15 years, with constant disinvestment. Support personnel are obviously inexperienced, frequently have deficient English writing skills, etc.. The overall orientation of SAP’s support is to put more of the support burden on SAP’s customers, all while finding ways to charge more for support. 

SAP Support Margin as a Form of Charity for Undercompensated SAP Executives

Companies that pay for SAP support will not find those monies being used to pay for support personnel or systems, but instead simply used for executive compensation or for profits. You may believe Hasso Plattner (net worth of $20+ billion) or Bill McDermott (annual compensation of $50 million). have been under-compensated in life.

If that is, in fact, true, continuing to purchase SAP support from SAP is a good way to help them to finally get a fair shake in life.

SAP Likes Competition?

The reason SAP and Oracle’s support margins exist is due to the lack of competition in support. As monopoly theory would dictate the companies with this enviable position eventually abuse that position.

Companies talk a good game about competition. Yet, the evidence from an uncountable number of case studies demonstrates clearly what they actually seek is monopoly positioning. This allows them to make the most possible money for the least possible work.

SAP and Oracle have both put themselves in positions where they have achieved this goal.

  • This has naturally lead to higher prices and lower quality/customer satisfaction with SAP support.
  • Oracle, for instance, has attempted to maintain the monopoly over its support but has lost those legal challenges.

Combined Consulting Firm + SAP Support

The SAP consulting company, normally that does the implementation, gets the support contract. They are in the account, and sometimes they take the support contract rather than SAP taking the support.

The consulting company takes 1st level support, and SAP is 2nd level. The only real difference here from SAP support is that the consulting company collects the money and has some support people who follow up, act as facilitators, etc.. The consulting company is prime, but there is a payment from the consulting company to SAP.

This type of support is a head-scratcher because according to research by Nucleus Research SAP consulting companies as a group have a lower score in SAP support than SAP.

“SAP gets a B for support. Their partner gets D. There’s no support. It seems like they get the account and then shove you under the rug.”

And that is reinforced in our experiences with SAP consulting companies and support. In fact, the quotation is not similar to what happened with SAP consulting companies that received the contract but is exactly what happened.

Providing SAP Support or Coordinating SAP Support?

Our observation is that the consulting company acts more as a facilitator rather than providing actual support. We have seen consulting companies take service contracts for which they lack the skills and for which they refuse to hire the skills. One company we are familiar with employed no one with any SAP software experience but instead chose to employ a coordinator who managed the emails between the customer and SAP.

This consulting company billed $500,000 yearly for this service from one customer and paid back 2/3rds of it to SAP.

Consulting Companies as a Low to No Value Support Intermediary?

We question as to whether they really take 1st level support or if that is more of a sales pitch. A few of the SAP consulting companies that refused to invest in the right skills still had their salespeople go into the account and talk about how they were going to “fall on their sword” to support the account. The salesperson had no control over the support organization and so what they say has no bearing on the support that is actually received. This salesperson would complain about support failures as it limited his ability to sell more software into the account.

This brings up another problem. SAP consulting company are normally not that interested in support. Instead, they want to keep the support contract only to sell more software and implementation services to support customers.

Do consulting companies take SAP support for the sake of support, or do they take support as a Trojan Horse, to get higher margin business?

Interactions with many SAP consulting companies, as well as understanding their financial incentives tells us it is the latter.

Therefore, we label this type of support the “Frankenstein’s Monster” of SAP support and combines the worse features of SAP support (that is high expense) with less margin going to SAP and with more people in between the customer and the individuals actually doing the support.

Conclusion

SAP and their partners have played an interesting trick on their customers.

  1. The 22%+ support that SAP or a combination of SAP and a consulting partner charges is just a starter kit, that ties a customer into far greater costs.
  2. SAP does not provide support for customizations, treating them as an “aberration” on the project.
  3. SAP have their customers spending a great deal of money on SAP in continual upgrades and fixes and recoveries of problematic SAP applications. This is considered normal and “the right thing to do.” SAP and their consulting partners “advise” customers this is the right thing to do.
  4. This means that there is little budget left over for other projects.
  5. SAP hides these costs within IT budgets.
  6. This keeps the customers continually dependent upon SAP.
  7. This keeps SAP customers from broadening their horizons and putting their IT dollars to (far?) more effective uses.

The vast majority of advice on SAP support does not come from a research foundation, but rather from entities that have access to SAP customers offering biased advice that is profit maximizing to that entity. 

Brightwork Research Observation on SAP

  1. Our observations of many SAP projects is that continual investment into SAP does not lead to good outcomes.
  2. The companies that get the most out of SAP have learned how to limit their investment into SAP.
  3. For support, the best way to limit this investment is by using third-party support.
  4. However, the direct costs savings on the support are a small percentage of the overall cost savings. (see the mountain graphic above)
  5. The benefits of third party support extend beyond cost reductions, into reducing the control of SAP over the customer.

Next Steps

Want to get to know your best path forward on SAP support from a serious research entity that approaches the question of SAP support from multiple dimensions?

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

6 out of 10 Customers Would Not Buy SAP Again, Nucleus Research, June 2016.

https://www.consumerreports.org/cro/car-repair-shops/buying-guide/index.htm

https://www.forbes.com/sites/danwoods/2016/04/18/why-third-party-software-support-is-possible-and-a-good-idea/#4f72a4026c77

https://www.riministreet.com/press-releases/06232010

http://liberate2innovate.com/overcoming-the-outdated-enterprise-support-model/sap-support-whats-behind-painful-perceptions/

http://cio.sia-partners.com/overview-third-party-maintenance-alternative

*http://www.nytimes.com/2011/02/26/your-money/26shortcuts.html

https://www.computereconomics.com/article.cfm?id=2150

How Accurate Was CIO on SAP Support Needing to Go Down

What This Article Covers

  • Explanations for Increases in SAP’s Support Prices
  • The False Explanations Begin
  • Our Analysis

Introduction

In the article Why SAP’s ERP Maintenance Prices Should Be Going Down — Not Up in CIO, some interesting points were brought up about what the cost of SAP’s support should be.

In this article, we will review the accuracy of this CIO article.

Explanations for Increases in SAP’s Support Prices

Nobody likes to pay more for something that they’ve been already getting, for roughly the same price, for a decade.

So when SAP announced this past July that all of its customers (new and old) would be moving from tiered pricing for SAP’s maintenance and support plans to a single and more expensive price come Jan. 1, 2009, there was some uproar in the “ecosystem,” as SAP likes to call its software universe.

Most of that initial outrage over the maintenance fee increase—which goes up from 17 percent (formerly known as Basic Support) to 22 percent, for the new and enhanced Enterprise Support—has been subsiding in the few months since the announcement. But it shouldn’t.

Two well-known industry experts, Forrester Research’s Ray Wang and former Gartner analyst Vinnie Mirchandani, are doing their part to fan the flames of SAP customer feelings of injustice. (Mirchandani is known as Vinnie “Maintenance,” and his distaste for high price and low value in enterprise software maintenance costs is legendary.)

First, Wang: In early October, Wang delivered a Forrester report on how companies are coping with SAP’s pricey maintenance hike and offered customers suggestions on how to deal with the unwanted costs. One of the important points Wang raises has to do with the lack of value that SAP customers felt they were receiving: “While the new [Enterprise Support] model does offer some new benefits like upgrade support and end-to-end operations support,” he writes, “many of the customers with whom Forrester has spoken already question the value of their existing Basic Support contracts at 17 percent.”

Everything so far stated up to this point is quite true.

In fact, of the 203 customers Forrester interviewed, a whopping 85 percent expressed minimal utilization of the existing Basic Support offerings.

This is supported by exposure to support accounts. Rimini Street also proposes that most SAP customers only open a small number of tickets.

In addition, SAP customers told Forrester that they just weren’t seeing the innovation in product offerings from SAP that should have resulted from the collective billions they’ve been paying in maintenance dollars over the years. “There are a plethora of examples where key functionality requested two to four years ago by multiple customers in the same or different industries were not delivered,” Wang notes.

This is entirely accurate, yet shocking to find in CIO magazine, which is owned by IDG and receives funding from SAP.

Mirchandani is also stirring up customer dissatisfaction. He points out in a recent blog post on SAP’s “empty calories” that SAP has yet to deliver important details with metrics on the new value SAP customers will receive from Enterprise Support. He also echoes Wang in that SAP “keeps dancing around” the key question of whether 17 percent maintenance was delivering enough value to customers in the first place.

This phrasing is strange. if Vinnie Mirchandani said something positive about SAP, CIO would not have stated that “Vinnie is promoting SAP.”

SAP, says Mirchandani, should have actually been able to lower maintenance costs—not increase them. “They have offshored some of the support. There is more automation—more customers get self-service support answers through knowledge bases. Their community is handling many routine support questions (and customers are funding that community, not SAP),” he writes. “In the spirit of rollbacks, SAP support costs should have been declining for the last several years.” (For more on SAP’s future, see “Five Things About SAP’s Strategy That You Need to Know.”)

This is all true. It is reinforced by the fact that SAP has a 90%+ margin on support.

The False Explanations Begin

Two things should be noted that this point. One: SAP has claimed that the price increase is justified due to the complexity of its customers’ IT environments and that its customers want more comprehensive support offerings, according to Wang. In announcing Enterprise Support, SAP stated that “the ongoing growth of SAP’s robust product offerings, the pervasiveness of business networks and mass adoption of service-oriented architecture (SOA) have challenged traditional support models.”

This is untrue. First, SAP is supposed to be simplifying IT environments, not making them more complex. Secondly, if this were true, why are SAP’s support margins so stratospheric?

SAP never embraced SOA and is basically died. This entire paragraph is false.

In other words, SAP had to change to meet the vast and complicated needs of its customers, and Enterprise Support is the manifestation of that.

Completely false. Needs did not suddenly become more complex.

And second, SAP’s chief competitor, Oracle, has been charging 22 percent for a long time now, though, as Wang notes, Oracle has been known for offering more “generous discounts” on initial software deals—”a practice SAP has not historically embraced,” he adds.

Now we are getting to the heart of the matter. SAP believes it is owned whatever Oracle charges.

So that’s where we stand: The economy is in the tank, companies are scrutinizing every in-house IT expense (including SAP), and SAP is raising prices on an IT cost that 85 percent of surveyed companies didn’t see much value in and used minimally. Those “empty calories” are going to be pretty tough to swallow come Jan. 1, 2009.

True

Conclusion

Vinnie Mirchandani comes across as the most accurate sources in this article. The arguments presented by SAP are fallacious and as CIO receives funding from SAP, they did nothing to challenge these arguments.

CIO receives a 5 out of 10 for accuracy in this article. This is one of the highest scores we have ever given an IDG publication.

References

https://www.cio.com/article/2373746/enterprise-software/why-sap-s-erp-maintenance-prices-should-be-going-down—-not-up.html

The Art if the SAP Support Flip Flop

What This Article Covers

  • Outlining the Strategy For Moving Customers Along the Desired Pathway
  • SAP HCM Support Flip Flop
  • Illumination of A Major Technique Used to SAP to Control Customers
  • How SAP is Able to Frame its Flip Flops as Being “Customer Centric”

Introduction

In this article, we will expose one of the primary ways that SAP pushes its customers to move to new products.

Outlining the Strategy For Moving Customers Along the Desired Pathway

It has two parts.

  1. The first part is the deadline, and..
  2. the second is the flip-flop on that deadline.

Notice the following case study on the flip flop on support for the SAP HCM application

SAP HCM Support Flip Flop

First the announcement under the unassuming title of: Product Note: SAP HCM On-Premise Option for SAP S/4HANA. Basically, this boils down to a choice for customers. Remain on premises for HCM provided they switch over to S/4HANA and, in doing so, get extended support through 2030 or go the SuccessFactors cloud route. Support for other HCM ERP versions ends in 2025. – Diginomica

SAP made the following statement.

SAP also continues to support our customers using SAP ERP HCM, our on-premise HCM solution. While an increasing number of them are migrating to SAP SuccessFactors solutions to accelerate their digital HR journeys, we also recognize that every customer journey is unique and must be undertaken at each customer’s own pace. For some SAP customers this includes a desire to deploy their HCM solution in an on-premise environment for the foreseeable future.

The reason for all of this?

The bottom line is SAP has really struggled to convince their ~12,500 SAP HCM customers to move to #SuccessFactors as the last provided info had ~600 out of the 2,000 SuccessFactors Employee Central customers coming from SAP HCM. Many of these customers understandably want some assurances that SAP will continue to support SAP HCM further out than 2025 which could have easily been provided by getting agreement to move the entire Business Suite out to 2030. Instead, SAP has decided to introduce a new licensed offering called SAP HCM On-Premise for SAP S/4 HANA that will be built by 2023 and will be based on SAP HCM so they are counting on customers trusting SAP will deliver something five years from now, being willing to do an upgrade (always painful in SAP), signing up for a new license and all of this to get virtually the exact same functionality they have today and an extension of support until 2030.

Therefore, very practically speaking, SAP HCM customers are not migrating to SuccessFactors. Let us do the math. So 600/12,500 is roughly 5%. Five percent of SAP HCM moved to Employee Central. This is nearly six years after the acquisition (SuccessFactors was acquired in Feb of 2012).

Therefore, the migration of HCM customers to SuccessFactors can rightly be called a failure. This brings up another question which is was the outcome of the SuccessFactors primarily PR related and to make an impression on Wall Street by having Bill McDermott repeatedly say “SuccessFactors” for six years.

But getting back to the support implication. SAP had to extend support for SAP HCM as nowhere near enough customers were moving.

This is a pattern of SAP.

Illumination of A Major Technique Used to SAP to Control Customers

This is a staple of SAP at this point. In the comments to the press, everything is about SuccessFactors and how everyone will migrate to SuccessFactors. But then, the reality of projects is that many customers will not migrate to SuccessFactors from SAP HCM. How many customers have been migrated to SuccessFactors versus SuccessFactors just keeping the customers it already had before the acquisition? The same question could be asked of the Ariba acquisition.

At some point, reality intervenes. And changes are made more in the background, with SAP hoping that no one notices.

This is why it does not make sense to listen to what SAP says. SAP views its customer base as rats to be pushed down a maze. Many if not most of SAP’s statements are to facilitate this progress through that maze. Instead, it makes more sense to evaluate likely outcomes without worrying about what SAP says. If SAP has a large number of customers on HCM, then yes support will be extended.

SAP is brilliant at this.

  1. First, they set some unattainable timeline…
  2. Then they change direction 180 degrees, but they frame it as if they “listened to customers.”

They somehow turn a flip-flop on a policy that was just a “rat through maze” statement as being customer focused. 

Conclusion

SAP’s marketing department is the New England Patriots of enterprise software. Other vendors run around scratching their head wondering how they got away with it.

SAP’s statements about when support should be taken with a grain of salt. Ultimately it is how many customers have moved away from the previously supported item that will determine when support expires. SAP has a 90%+ margin in its support business. SAP has plenty of resources to support applications for many years, but it chooses to limit support as a mechanism, (or in many cases pretending to limit support) to coerce customers into moving to new products.

  • The best way to understand SAP is that they will never be happy with their customers just staying where they are. They must motivate them to continually spend more money on SAP upgrades, consulting through partners, etc..
  • One way of keeping away from these types of threats and manipulation by SAP is to move to third-party support.

References

https://diginomica.com/2018/01/09/sap-extends-hcm-premise-support-2030-smart-move-massive-error/

KPS Continues to Keep Promote HANA for Retail for Lidl After Failure

Executive Summary

  • KPS published a page about how great it was that Lidl selected HANA for Retail.
  • After Lidl terminated this implementation, KPS still has the web page up about what a good idea the selection was.

Introduction to Continual Lying at KPS

We have frequently covered how inaccurate the information is on SAP consulting company websites. And this is a perfect example of how consulting companies live on a fantasy island.

KPS and HANA for Retail

Here is a direct quotation from the Lidl project.

Lidl Went Live??

“Lidl went live with a new electronic merchandise management and information system based on SAP for Retail powered by SAP HANA at its Austrian stores in May 2015.” 

“This new platform is making us fit for the future,” explains Lidl’s Alexander Sonnenmoser, Divisional Board Member for Business Technology, who is responsible for the company’s entire IT.”

Interestingly, several years after this, Lidl terminated the project. Interestingly, this web page describing the “success” of going live has not been replaced by a web page describing the failure. In fact, it has not even been removed. The great decision to use SAP for Retail powered by SAP HANA is still on KPS’s website at this link.

There are more amusing quotations.

Problematic Legacy Systems?

“The company’s legacy merchandise management system, which had been developed in-house, was coming up against the limits of its capacity for innovation and enhancement. It was hampered by process breaks, redundant master data storage, integration gaps and functional restrictions. Moreover, a combination of myriad interfaces and modules and a decentral server structure was making the task of running and maintaining the system increasingly complex.”

Interestingly this problematic system was less problematic and apparently a better value than SAP Retail for HANA, as they are now going back to it.

Opting for the Latest Technology?

“We were looking to map integrated process chains right through from the vendor to the customer ‒ rather than individual functions,” explains Sonnenmoser. “That’s why we opted for the very latest technology,” adds René Sandführ, Executive Vice President IT ERP Systems

Hmmmm…sounds like they should have used something more proven.

Cutting Edge SAP Implementation Methodology?

“Lidl’s new system was implemented in a joint project with partner KPS, which took a highly agile approach based on its Rapid Transformation Method.”

Perhaps this methodology should be questioned because, after 7 years and 500 million Euro, the system implemented by KPS is not going to be used.

A Foundation for the Future?

“The new platform SAP for Retail powered by SAP HANA is the foundation needed to continue implementing processes efficiently in IT systems at Lidl. It is time to reduce complexity and focus on providing simplicity for the customers and employees through forward-thinking concepts.”

It may be time, but it is not going to happen. Lidl’s investment in this solution has been washed away.

Promoting an Implementation that Failed

The success of this solution will be proposed by KPS after it has failed. And of course, the completeness and quality of Retail powered by SAP HANA before any evidence existed for it. This is lying both before the fact and after the fact. The information provided by so many of the SAP consulting companies has nothing to do with what is true. It has to do with what allows companies to sell.

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References

https://www.kps.com/en.html/article-0208-lidl-setzt-auf-sap

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