How To Best Understand SAP as Legacy for Software Companies

What This Article Covers

  • The Construct of SAP as Legacy
  • The Flaw in the Current Interpretation of SAP
  • How Other Vendors React
  • Effectively Following the Wedge
  • The MCA Solutions Story
  • How the SAP Partner Program Censors Partners and Reduced Competition
  • The Software Company’s Understanding of SAP
  • How Much do You Know About SAP’s Practices?
  • Notes on the SAP xApps Program

Introduction

In a previous article titled SAP is Now Strip Mining its Customers, I laid out why I think that SAP has reached an inflection point in its history and should now be treated by companies as selling legacy systems. In short form, the most accurate way of thinking is that SAP is legacy. There is a lot of background that is necessary to cover to understand why I have come to this conclusion, so I won’t retrace the evidence in this article, but please go back to the original article link above if you have not read it.

The Flaw in the Current Interpretation of SAP

For decades now SAP has been seen as a software vendor with a broad suite of applications which are at least somewhat competitive. The concept was that SAP would bring out improvements in functionality that was important to its customers.

This way of viewing SAP, which has become increasingly out of sync with the reality of SAP, drove everything from SAP software purchases to companies paying what is now a minimum 23% in support. Yet, under the construct of SAP as legacy, the question other software vendors have asked me is how they can take advantage of SAP’s new phase. This article is for them.

How Other Software Companies React

For other vendors, you now face a crack in the facade or an opening. Brightwork Research & Analysis is early in this analysis. My article on SAP is Now is Strip Mining its Customers is the first article that presented SAP as legacy, or even associates SAP with being a legacy system or a set of legacy systems.

Almost all the media entities that cover SAP take money from SAP, Therefore, they cannot bring up this point even if they wanted to.

Software Vendors Effectively Following the Wedge

If you are a software vendor reading this, this reality of SAP as legacy does present considerable opportunities.

Yet does your company have the knowledge of SAP to widen that crack?

Let us review two areas to see how software companies that compete with SAP can follow the wedge.

  1. The Software Company’s Understanding of SAP
  2. The SAP Partner Program

The Software Company’s Understanding of SAP

I have spoken to many vendors that compete in my time, and in my view, only a small minority understand how to compete against SAP. Most software vendors are very good at focusing on and presenting their value proposition. But they do so often without any consideration to how the chessboard has already been set by SAP before you get to make your case. SAP sets the chessboard that the other software vendors work on in the following ways:

  • Through Conferences
  • Through SAP Partners
  • Through SAP Marketing Literature
  • Through the Incentives of the IT departments

All of these things are present before these vendors even begin to present their value proposition.

It should be noted that much of the information presented through the mechanisms listed above are false. Yet, they are still effective in shaping the views of the buyers. I can come up with example after example of how SAP stopped competitors by pitting immature products against established and effective applications through promising future growth in what the application could do.

One example of this is in the service parts planning space.

The MCA Solutions Story

Back in 2006 a vendor called MCA Solutions had one of the highest rated applications I had ever tested called SPO. SPO focused on the most difficult problem in supply planning called service parts planning. SPO performed services parts planning using two sets of advanced mathematics called inventory optimization and multi-echelon planning.

  • *I have an article here which provides an overview of this category of software.
  • *See my book on this topic if you have the interest.

SAP developed a partnership with MCA Solutions, and developed an xApp that worked with MCA Solutions. But they eventually dropped MCA as a partner. SAP took a significant amount of knowledge about service parts from MCA and launching their SPP product which was a stand alone application. (For more detail on the xApp program, see the note at the end of this article.)

For years SAP customers were lulled into going with SPP over MCA SPO because it had the SAP name, would integrate better, etc..

So where are we close to 10 years later?

  • MCA Solutions was eventually purchased by Servigistics, which subordinated SPO to their own services parts planning application, and they were in turn, themselves acquired by PTC. I believe SPO has been all but erased from the marketplace.
  • SPP has bombed at every account it has been implemented, wasting enormous amounts of resources. I published on SPP’s implementation problems back in 2010 as you can see in this article. I paid to attend both the one week SPP classes at the SAP in 2008. Yet, when I tested SPP back in 2008 I found numerous areas of the application that simply did not work. The application had a weak design and even if its functionality had worked, it still would have not been a competitive application with MCA SPO. Millions and millions of dollars spent and virtually no improvement to the planning of service parts. More money has been spent to keep SPP applications on life support so that the company can cover up the fact that the application does not work and to protect themselves from the political consquences of being seen as responsible for the error.
  • I currently categorize SPP as one of SAP’s dead applications. At a recent client, SPP was introduced as a potential solution by a member of the client’s IT department with extremely low standards of evidence. He showed me a PPT with around 10 customer “references.” I was able to recognize at least 5 of the 10 references that had already failed with SPP. I was able to find out the real story on 2 of the others on the list, and it turned out they had implemented SPP, but few people were using it. I was not able to verify the other three.

The end result is that one of the best applications I have ever tested in MCA lost market share to one of the worst I have ever tested in SPP. And here is an important point for vendors that compete with SAP to consider.

SAP never demonstrated any competence with SPP.

They future sold gullible clients who decided to not do the basic research into the application that I did do.

For competing vendors, you cannot rely upon prospects to do their research on SAP’s products or on the overall usage of the SAP products in the marketplace. I have already listed SAP’s dead or problematic applications in the strip mining article. But as a software vendor, you have to raise the issue of the overall success (or lack of success) of the SAP application. This is because most SAP customers tend to assume that other customers are having success with the application, and they just did not have success because of an implementation failing, poorly trained users, etc.. I am amazed how often I go to clients and they tell me they would like me to fix an issue that is actually a well-known software bug, but which SAP support has hidden from them. There are SAP customers that are repeatedly attempting to bring functionality online that I have already tested and have determined should not be activated and it is not useful.

  • Dynamic Safety Stock (called Enhanced Safety Stock by SAP): SAP’s dynamic safety stock is one example of this.
  • Deployment Optimizer: Companies are still trying to use SAP’s deployment optimizer in SNP (it is a procedure that moves inventory through the supply network) and paying SAP above the standard 23% support to try to get benefit out of it. I have already tested and published on being unable to produce logical and useful output under any circumstances.
  • Best Fit Procedure in SAP DP: The best fit procedure, where a forecast system selects the appropriate statistical forecasting model is not reliable enough in SAP DP to use in a production environment. Yet consulting companies continue to bill clients for using and tuning problematic functionality that can be accessed far more robustly outside of SAP, with the results ported back to SAP DP.

This is how bad the information sharing is on issues is in the SAP space.

How the SAP Partner Program Censors Partners and Reduced Competition

A major part of SAP’s success, probably the most important part in fact, is its partner network. There are over 10,000 SAP partners. SAP will partner with just about anyone.

Software vendors that are part of the SAP partner program are themselves guilty of promoting partnerships with SAP as being far more significant than it is in terms of how it benefits customers. Here are the most important characteristics of the SAP partnership program.

  • The SAP partner program is a primary way that SAP reduces the competition that it faces in the marketplace. The SAP partnership program is never mentioned in the same sentence as competition limiting, but the way that SAP uses it, it certainly qualifies. There are too many dimensions to discuss to fit in this article, as SAP’s partnership program is really its own detailed subject. But a lot of underhanded things happen in the SAP partnership program. The partnership program also changes for small market countries, and it differs based upon the size of the software vendor, and along many other dimensions.
  • The SAP partner program is how SAP controls the marketing output of companies that compete against it. Software vendors start off thinking that they will benefit from the agreement, and before they know it, they are being played like a piano by SAP.

SAP has considerable leverage over SAP partners, as the partners often need or believe they need their certification or partnership credentials to sell into SAP accounts.

  • In most cases, the actual certifications are falsified. It is common for a single field to be sent across to SAP and for that to essentially certify the software company.
  • SAP puts extremely little effort into testing the technical validity of a certification, say of an adapter.
  • Simply put, SAP certification is much more about marketing hoopla than engineering.

There are a variety of SAP certification logos that companies that have “become certified” can place on their websites.

This certification can be found on the websites of many software vendors. The SAP Partner program for software vendors is more of a marketing construct. Every software vendor likes to state that they are a certified partner. 

The following are important characteristics of the partner program.

  • Who Are Partners?: Most vendors that complete with SAP are partners with SAP.
  • SAP Censorship: They are limited in what they can say by their partner agreements.
  • No Referrals: SAP only very rarely refers business to their partners.
  • Second Banana: Most SAP software partners feel they are mistreated by SAP. SAP regularly stabs their partners in the back to push sales over to their own applications, even when the fit between the requirement of their customers and the SAP application is either terrible or if the SAP application is not even ready to be implemented.
  • Lowering Competition: SAP has partnered with any software vendors (almost) that competed with them, and then uses controls gained from the partner agreement to reduce that vendor’s ability to compete with them. The software vendor becomes normalized to presenting their solution as complementary to SAP rather than competitive with SAP so as not to ruffle any SAP feathers.

There is in fact, no real partnership. It is a false construct. It is a marketing construct that exists primarily in the minds of buyers. The SAP partnership, with its effect on competition is an interesting curiosity because it is not willingly entered into by software vendors. It is enthusiastically entered into by these software vendors.

I can’t tell you how many software vendors became partners in part because they thought SAP would bring them deals.

The Importance of Software Vendors Knowing The Limits of Their Knowledge

If you are in senior management at a software vendor, who believed this, you then you did not have enough exposure to or information about SAP to compete against them. And its good to know this, so that you can address the issue, because addressing the issue has good potential to lead to higher sales.

SAP is a complex beast and cannot be understood with light or occasional exposure. It often surprises me that SAP marketing works not only on customers, but works almost as well on competing software vendors. They will often come to assume that many of the fanciful items presented by SAP marketing are in fact true.

Conclusion

SAP has passed into a new phase of its existence. SAP’s marketing machine is intense. The term reality distortion field seems appropriate.

The fact remains that outside of SAP ERP, the returns from SAP’s other applications have been extremely weak (something I have covered in my previous articles). Of all software companies, SAP has the most implementations of applications that add little value to their customers. This makes sense as for decades SAP has had all of the major SIs mindlessly shilling for them. Therefore the SAP “garden” is overgrown with “weeds” and various applications with serious problems. The IT departments in these customers often try to defend these bad applications by pointing out the stupidity of the users, or denying the problems.

This information comes from two decades of evaluating SAP installations at many accounts. However, you don’t hear this information because the people that know have a financial incentive not to publish this. This is the real story, not the paid off story offered by SAP consulting companies. These SAP applications are vulnerable, particularly after it can be explained that each of them have little in the way of a future. You can only promise the future for so long until it eventually arrives. Well the future is now here.

Brightwork Research & Analysis published the first article to call out SAP applications as legacy. Although if you read SAP Nation by Vinnie Mirchandani he says essentially the same thing, but without using the terminology of “SAP as legacy.” Realistically, there is no likelihood of SAP bringing out future products that do anything special. SAP still has its ERP system. But outside of that, there is not much to be concerned about, in real, rather than perceptual terms.

But now the question turns to what software vendors can do to take advantage of this opportunity.

Note on the SAP xApps Program

Back in 2010, I called for the SAP xApp program to be terminated as it was resulting in a large amount of intellectual property being extracted from software vendors and transferred to SAP. And that companies that were engaging in the xApp partnership were naive to how SAP operated. In my article, I stated it is a program that should have been reviewed by the US Federal Trade Commission. Larger software companies are not supposed to have a program where they promise improved sales that largely never materialize in order to Hoover up their IP.

I also covered how SAP used a partnership with i2 Technologies to extract intellectual property from them in the 1990s to use as the basis of SAP APO, and covered this story in the early drafts of my book on Discover SAP SCM. This material was censored from the book by the publisher SAP Press, and so it never appeared in the published version. My experience with SAP Press promoted me to not publish books through traditional publishers.

There are no publishers in the SAP space who will publish 100% truthful information on SAP. But unfortunately for me, that is the only information I was or am interested in writing or publishing. SCM Focus Press is my publishing company, where all the books are uncensored.

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

 

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  • Appendix a: How to Use Independent Consultants for Software Selection

Who is the Most Accurate Source on SAP?

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

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