How To Best Understand SAP as Legacy for SAP Customers

What This Article  Covers

  • How SAP Will Deal With its Customers that do Not Comply
  • Inappropriate Constructs in IT Decision Making for Companies Using SAP
  • How Much do You Know About SAP’s Practices?

Introduction

In a previous article, I laid out why I think that SAP has reached an inflection point in its history and show now be treated by companies as selling legacy systems. For decades now SAP has been seen as a software vendor with a broad suite of applications which are competitive, and that SAP would bring out improvements in functionality that was important to its customers.

This way of viewing SAP, which became increasingly out of sync with the reality of SAP drove everything from SAP software purchases to companies paying what is now 23% in support. Yet, under the construct of SAP as legacy, the question becomes how other software vendors can take advantage of the new phase that SAP is now in.

How SAP Will Deal With its Customers that do Not Comply

If you do not show interest in buying SAP, you will be most likely subject to an audit.

This is described by Ray Wang.

  1. “Open up dormant accounts. After pleasant introductions, new sales reps will use this technique to further deals.  Former sales reps agree this is a shake-down for cash technique.
  2. Drive sales through fear of audits. Audits are used to start the discussion.  Unsuspecting customers who no longer have context about the original contract may fear breach of contract.
  3. Scare customers into making additional purchases. Threats are used to set expectations.  The vendors often waives the issue if the customer buys additional licenses as a “compromise”
  4. Force compliance into new licensing policies. Vendors use this as a way to drive conformity to new license models.  The move from concurrent usage to named users was one example.
  5. Meet territory sales goals. Unscrupulous sales managers suggest this technique to meet their numbers.  Sales reps are told they are defending the vendors license rights.” – Ray Wang, Constellation Research

Inappropriate Constructs in IT Decision Making for Companies Using SAP

Every SAP shop in the world is now following a faulty construct. It is a construct somewhat based upon the past, but which was always exaggerated, and it goes something like this.

SAP is a leading software vendor. We rely upon SAP’s new products to improve our IT capability. SAP’s applications are not always the best, but they connect back to the “mothership,” the ERP system. Therefore, whenever possible we will buy SAP.

This construct has been leading to bad IT software decisions at companies using SAP for over twenty years. The downsides of relying upon this construct are about to get worse. Here is why: 

  1. Post-ERP Applications: SAP’s non-ERP applications have not been value added to companies that implemented them. And we have several decades of data points on this fact.
  2. S/4HANA and HANA: SAPs new ERP system S4 is not compelling and its new database, HANA is not differentiated from the competition.
  3. SAP Support Decline: SAP support has dramatically declined in the past ten years and is now mostly outsourced to the lowest cost countries, pushing the maintenance burden to SAP customers. SAP now expects a 90% margin on the 23% basic support that it charges customers.
  4. Indirect Access and Other Trickery: Lacking the ability to meet Wall Street growth demands, existing SAP investments are increasingly a liability. This is because SAP intends to use its power, size and legal muscle to use indirect access to either receive monies for ERP licenses or arm twist purchases of uncompetitive applications.

This construct that is reinforced by companies using SAP by both the IT department within the company. And the consulting company without. In fact, as the best decision becomes to migrate or diversify away from SAP, the IT department and the IT consulting companies push in the opposite direction from this.

Many IT departments place SAP above the interests of the business of the company they work for. This observation has come from many years of interacting with IT departments at companies using SAP. I have presented to numerous IT organizations over the years the problems with various SAP applications that they purchased, and I am invariably told that.

“The thing is Shaun, we are an SAP shop.”

Therefore, SAP customers should be on notice that your IT department will in most cases lack sufficient independence from SAP to represent the interest of the company they work for, and by the way, that pays their salary. How this was accomplished, at least the full story, is still a mystery to me.

  • The IT Department: The IT department and IT consulting companies had somewhat of a role, will now increasingly serve as a barrier as the reduction in investment from SAP begins.
  • Large IT Consultancies: As for the large IT consulting companies. They have hundreds of thousands of SAP consultants and investments in SAP and revenues from SAP. For a large IT consulting company the only advice they provide is to invest more in SAP implementation. The large IT consultancies have a business model to protect, and it will be protected. These companies are a major liability. Given this environment, what is the value of that advice exactly?

How Much do You Know About SAP’s Practices?

SAP History Quiz

This quiz will test your knowledge of SAP's history as a software vendor.

Our Work With the New SAP Construct

We are one of the few entities that focus on SAP but also tells the truth about SAP. If you want to be provided biased information on SAP there are many choices in the market. We can recommend Deloitte, Accenture, KPMG, E&Y, Infosys, IBM and Gartner among others. However, for unbiased information on SAP, the options narrow considerably.

If you are interested in our advice on how to deal with SAP, and how to manage to diversify away from SAP, reach out to us. We offer a wide variety of advisement all focused around getting a better value from your SAP investment.

References

https://www.constellationr.com/blog-news/insights/sap-wins-major-court-victory-over-indirect-access-customers-should-pay-attention

http://www.computerweekly.com/news/450413224/High-Court-rules-for-SAP-against-Diageo-in-indirect-licensing-case

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

 

Software Selection Book

SELECTION

Enterprise Software Selection: How to Pinpoint the Perfect Software Solution Using Multiple Information Sources

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Software selection is a form of forecasting, just as any another purchase decision is a forecast of how successfully the purchased item will meet expectations. Forecasting is necessary because it is not feasible to implement each application under consideration before it is purchased to see how it works in the business.

The Importance of Software Selection

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Essential reading for success in your next software selection and implementation. Software selection is the most important tasks in a software implementation project, as it is your best (if not only) opportunity to make sure that the right software the software that matches the business requirements is being implemented. Choosing the software that is the best fit clears the way for a successful implementation, yet software selection is often fraught with issues, and many companies do not end up with the best software for their needs. However, the process can be greatly simplified by addressing the information sources that influence software selection.

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Chapters

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Who is the Most Accurate Source on SAP?

Want to find out? See... A Study into The Accuracy of SAP

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