How to Best Understand the Pitfalls of Partnerships with SAP

Executive Summary

  • The reality of the SAP Partnership Program is far different than what is normally presented.
  • The SAP Consulting partners act as arms of SAP, rig software selections, and help with SAP account control.

Introduction to the SAP Partnership Program

SAP has the largest vendor partnership program of any software vendor in the world. This program attempts to present the following characteristics to SAP customers and the outside world.

  • A Collaborative Affair? : SAP presents this partner network to customers as a highly collaborative affair.
  • A Vibrant Vendor Ecosystem?: The partnership program is used as evidence that SAP has a vendor ecosystem and that it allows other software vendors to participate in this ecosystem to mutual benefit.
  • How Many Partners? : SAP often talks up how many vendor partners it has, without revealing much about how the vendor partner program actually works.
  • Partner’s Freedom of Expression?: Not a single word is uttered regarding what happens to the rights of expression in the partner vendors.
  • A Pro-Competitive Tool? : Appearances to the contrary, SAP actually uses the vendor partner program as an anticompetitive tool, something for which it is close to impossible to find published material.
  • One Big Happy Family? : Vendor partners talk up the SAP vendor program to prospects and do not critique it publicly or to customers or prospects. In private, they often bitterly condemn SAP as a partner.

In this article, we will cover some of the little-published issues regarding SAP’s vendor partnership program.

 How the SAP Consulting Model Works

SAP has a unique business model. Since the beginnings of enterprise software, most software vendors implemented their software with own consulting. SAP does it the opposite. Since they began to become a popular software vendor in the 1980s, SAP outsourced their consulting to other consulting firms.

SAP did not do this (which is giving away revenue) because they thought that these consulting companies could do a better job in implementation, or because they thought that the consulting companies could implement faster (they can’t) or because they thought it was better for their customers (it isn’t). It is because SAP knew that if they gave consulting companies their consulting revenue and “socked it to their pockets,” then SAP would recommend their software.It is because SAP knew that if they gave consulting companies their consulting revenue and “socked it to their pockets,” then SAP would recommend their software...as often as humanly possible. Some features of this relationship are the following:

  • Profit Based Recommendations
  • Rigged Software Selections
  • Serving as Message Repeaters
  • Excusing Overspending and SAP Implementation Failures

Profit Based Recommendations

SAP’s consulting partners recommend SAP regardless of the fit between the SAP application is evaluated and the capabilities of the competitive applications. Consulting companies never point out that their recommendation of SAP applications is entirely based on their quotas. Consulting companies can only meet their quotas by recommending SAP (as they have an SAP practice) or Oracle (as they have an Oracle practice). As soon as they recommend some other software, they would not be able to staff the project.

Rigged Software Selections

As explained in the book Rethinking Enterprise Software Risk, SAP consulting partners go through the motions of looking into other software vendors (which they also bill the client for), but always tilt the playing field in favor of SAP or Oracle. Therefore SAP consulting companies lie to their clients when they propose that the software selection will be open and fair.

Serving as Message Repeaters

SAP’s consulting partners repeat whatever SAP marketing states without questioning whether or not it is true. Whether it be SAP’s Run Simple Program, or SAP’s Netweaver program – which never actually existed or SAP HANA, consulting companies have demonstrated a history of repeating things that SAP marketing say, that end up being wrong.

Excusing Overspending and SAP Implementation Failures

SAP’s consulting partners excuse problems with SAP software and help SAP to place any blame for failed implementations onto the buyer or customer. SAP has a specific method for blaming the client for project failures as is covered in The Art of Blaming the Client for Implementation Failures. These articles excusing failure are published in media entities that take money from SAP.

For example, SAP constantly lies to customers about what its software can do, how quickly it implements, how mature its software is, how many places it is running. You can see my article on SAP’s brazen exaggerations of customers numbers for S/4HANA on that particular topic.

And their consulting partners, which are essentially consulting arms of SAP, both do not contradict SAP, but most frequently add on their lies on top of SAP’s lies. Many members of IT organizations owe their allegiance to SAP over the companies they work for. Their current employer only being their temporary employer. This leads to the question of whether IT decision makers should sign a fiduciary agreement that they will put their employer’s interests above the interests of their favored vendor.

The Reality of the SAP Partnership Program

To the outside world and SAP customers, the SAP vendor partnership program seems like something legitimate and even beneficial to SAP customers.

After many years of discussing the partnership program with many software vendors, a very different picture appears of SAP vendor partnership program. In many cases, the SAP vendor partnership program may be viewed not a partnership program at all, but as yet another anti-competitive tool that is used by SAP to restrict competition in the marketplace.

This is the type of certification graphic that graces many SAP partner websites, as well as presentations. It is non-sensical because NetWeaver never actually existed

One reason that this graphic is so valuable is that SAP is known as such a complicated system to integrate to.

  • Through difficulty in integration, SAP keeps and anti-competitive advantage against other vendors. This is because SAP has the core system or the ERP system at virtually all of their customers.
  • Every other system must connect to the ERP system. No other software vendor uses difficulty in integration to such an advantage as does SAP. 

How SAP Abuses its Control Over the ERP System

Customers that first purchased SAP never had any idea that they were giving this power over to SAP. Something no one predicted when ERP systems first began to be sold in the 1980s is how some software vendors would use the sale of the ERP system as a form of account control, directly purchases into often low value “accessory applications.” And no one drives their customers to purchase more of its own applications based upon the control of the ERP system than SAP.

Interestingly, almost all of the arguments initially used to sell ERP systems ended up not being true. The misleading information about ERP systems provided by SAP, Gartner and SAP’s consulting partners in the book The Real Story Behind ERP: Separating Fiction from Reality.

Background into The Relationship Between SAP and the Major Consulting Companies

The major consulting companies have a very binary way of dealing with software vendors. If the company is colossal like SAP or Oracle, the company does pretty much what they want. If the vendor proposes something, the major consulting company repeats the marketing message uncritically. Many people talk about SAP software or imply that the software is why SAP is so lucky. However, SAP’s ability to gain market share in areas where has no useful product (BW, PP/DS, XI/PI, SPP, etc..) demonstrates that like Microsoft, it’s not the actual product that has put SAP where it is today. One of the most important and probably the one most responsible for its success has been its relationship with the major consulting companies. SAP does not attempt to implement its software, but merely has some specialist consultants that work on SAP projects in very few numbers.

This maximizes the income for the major consulting companies, and this means that the major consulting companies tell clients that SAP is the best software for their needs. Actually, SAP is the best software for the major consulting company’s needs. The answer is clear; there is no vendor who can make as much money for a consulting company as SAP or Oracle. Therefore, they get the consulting company’s recommendation. SAP developed this strategy decades ago, and it has been remarkably successful at getting them recommended in accounts. This strategy is so critical to SAP that if SAP were to reverse this strategy and begin to implement their software, they would no longer be recommended by the major consulting firms. More on how SAP corrupted the advisory function of the major consulting companies can be read about at this article.

Does SAP Rein in its Bad Implementation Partners?

SAP has given awards to consulting companies like WiPro that are known to be horrible for customers. This problem is covered in the following quotation from the book SAP Nation 2.0.

“SAP has a tendency to write code and then hand it over to its partners. It fails to think enough about customer deployment issues. Worse, it lets customers fend for themselves in dealing with its partners. Many SAP customers have not done well negotiating with or monitoring hardware vendors, hosting firms, telco carriers, offshore application management vendors etc. In fact, it has been suggested that unlike Ford, for SAP, “Partners are Job #1.” Partner interests, it would appear, trump those of its customers. The sum total of partners’ inefficiencies explain much of the excess in the SAP economy.”

Faux SAP Vendor Certifications

SAP emphasizes vendor certification and SAP customers like seeing them. In many cases, they will exclude vendors that don’t have a certification from the selection process.

  • Vendor certification logos are prominently displayed on many vendor websites.
  • They ostensibly serve as a signal to customers that the solution works with SAP. In fact, SAP puts minimal effort into the certification process.
  • In many cases, we have observed different software vendors have become certified by simply passing a single field from sap to their system and back.
  • SAP has shockingly little quality control on the vendors that it certifies.

These bullet points demonstrate how little substance there is to SAP’s certification process and how little it uses the overall partnership system for anything beyond perception management and controlling competing software vendors with their faux partnership.

Does SAP Care if its Partners Improve Integration with SAP?

In our view, the answer is no. This is because it is the customer’s problem. Regardless of how effective or ineffective the integration adapter that the partner vendors creates, behind closed doors, SAP will always tell the customer that integration is a major problem and a reason to steer clear of non-SAP applications. All non-SAP applications are presented to customers as “a risk.” While SAP applications are presented to customers as a “sure thing.” This greatly over-simplifies all implementation risk down to a single factor, which is the risk of integration complications.

SAP wants the partnership with the software vendors so they can begin controlling them and making them less able to compete with SAP. For this reason, there is almost no vendor SAP won’t allow into the partnership program. For the same reason bear trappers

… let just about any bear into their traps, SAP is not too particular who it lets into the SAP partnership program. 

The integration adapters provided by software vendors are always far beyond whatever SAP tests.

Secondly, any application can be made to work with SAP, and the fact that SAP does not put work into testing interfaces means that the integration certification has no true meaning. And in most cases, there is some customization required in the interface, so few integrations are “out of the box” as is often stated during the sales stage.

SAP’s partnership contracts hold out the carrot of more business, but they come with very great limitations and control given to SAP, particularly over the partner’s control over their messaging vis a vis SAP. 

The Dreaded SAP Partnership Contract

When a software vendor engages in an SAP partnership signs a partnership contract which is highly tilted in SAP’s favor. The software vendor does not have the option of adjusting the contract. The software vendor must sign the contract that SAP provides or not be part of the sap partnership ecosystem.

One of the very important concessions that a software vendor gives to SAP is in its messaging and its marketing. As part of the partnership agreement software vendors may not message or otherwise market their software in a way that is competitive against SAP. This is a rather astounding concession. What other areas of business where this would be acceptable?

This is true regardless of how the software vendors application stacks up against SAP.

In various articles, we have explained how SAP controls its software partners through its partnership program. In this article, we will delve into the partnership documents to explain the documented evidence for this. The document we will rely upon is the following:

  1. SAP PartnerEdge, General Terms, and Conditions for Distribution (Distribution GTSC)

Important Areas Related to SAP’s Ability to Control its Partner

This first clause appears to be bi-lateral but is, in reality, a way for SAP to control its software partner.

“Neither Party will use the name of the other Party in publicity, advertising, or similar activity, without the prior written consent of the other Party.”

Seems straightforward right?

Well, watch what happens as the clause continues. The “SAP Group” is just SAP. Every single one of the following sentences lay out SAP’s rights versus the partner.

“However, any member of the SAP Group may use Distributor’s name in customer and partner listings (including, without limitation, showing Distributor’s name, address, contact details, partner engagements, areas of expertise and/or offerings on SAP’s websites or online marketplaces) or, at times mutually agreeable to the Parties, as part of the SAP Group’s marketing efforts (including without limitation reference calls and stories, press testimonials, site visits, SAPPHIRE participation). The SAP Group will make reasonable efforts to avoid having the reference activities unreasonably interfere with Distributor’s business. Distributor agrees that SAP may share information on Distributor with any other member of the SAP Group for marketing and other business purposes and that Distributor has secured permission from its employees to allow SAP to share business contact information with any other member of the SAP Group.”

The use of the term SAP Group is misleading. The SAP Group is “SAP’s parent or any of its associated companies. So SAP.

The distributor is the partner to SAP.

The Basic Inequality of the Partnership Agreement

Notice how unequal the status of SAP versus its partner is. The partner is forbidden from mentioning SAP in any marketing material without SAP’s approval. Here the use of the term “SAP Group, has more powers than SAP. However, the SAP Group is just SAP. The latter part of the clause essentially contradicts the implied equality of the first sentence of the clause.

With this single clause, I would immediately call into question the ethics of the company that would set forth such a clause.

We have repeatedly been told that SAP must approval all mentions of SAP by the partner. The partner is provided with strong negative reinforcement when they market in any way that positions their product as competitive to SAP’s products. And this is done to even the largest software vendors.

Observe, this is the clause that, along with the next, that is used to enforce this control.

SAP Logo and Other Mentions of SAP

The following clause is very similar to the one just reviewed.

“SAP reserves the right to review the use of the SAP Logo in Distributor’s marketing, advertising and other promotional materials.”

This first part is fine. But look how the next sentence takes a left turn. It does not speak to the SAP logo but is as broad as possible. 

“Distributor must make no representations regarding the SAP Products except as consistent with SAP’s Documentation or as SAP may otherwise approve in writing.”

This is the second clause where it changed right after the first sentence. In the first case, SAP introduces an entity called “SAP Group” which changes the meaning of the first sentence. Now here, what begins with a statement about the approval of the SAP Logo, which seems innocuous enough is followed by the broadest possible restriction. SAP’s documentation could be interpreted to mean either technical documentation or marketing documentation. It is completely open-ended.

The issue that while this sounds like SAP is ensuring that the presentation of its products is consistent with its documentation, this clause can be used to enforce any conformity with SAP’s desires.

Termination for Good Cause

SAP has an enormous number of clauses or provisions in its partnership agreement. They cover a seemingly unending number of scenarios. And if any of them are not met, then SAP can terminate the partnership as is described by this clause.

b) Breach of other provisions. A Party does not comply with any provision of any part of this Agreement other than those referred to in this Article 9 no. 1a) (Non-Payment), 2a) (Repeated Non-Payment) and 2b) (Breach of material provisions) unless the non-compliance is capable of remedy and is remedied within thirty days of the other Party giving notice.

There are so many provisions that meeting all of them would impose a significant overhead upon the software vendor. This is something that is very little discussed in any published form.

The Overhead of SAP Partnership

What should be remembered is that vendors frequently only become partners with SAP to gain the marketing/sales benefit. This partnership agreement imposes a significant overhead on the software vendor (the partner) to do this.

Unbalanced Rights and Liabilities

  • Virtually all of the clauses layout the responsibilities and liabilities to the software vendor. SAP seemingly has and responsibilities. Virtually every clause lays out what the partner must do. The rules the partner must follow, not rules that SAP must follow.
  • Therefore, this partnership agreement can be seen as imposing a much higher degree of effort and cost on the partner vendor than it does on SAP.

It is extremely clear from reading the partnership agreement who has the power in the relationship.

How SAP Retaliates Against Vendor Partners that Tell SAP Customers the Truth

Vendors that message that their products are not merely complementary will typically result in SAP will threaten the software vendor with their partnership being revoked. SAP likes for the partner software vendor to present their applications as if they are complementary to SAP this is true even if the software is a direct replacement for SAP’s functionality. The partnership is the first step to adjusting and diluting the competing vendor’s messaging so that the software vendor is subordinated to SAP.

Vendor partnership with SAP is often interpreted as a slam dunk for the competing software vendor. SAP sets about undermining its partner as soon as it has the partner contract signed. SAP slowly encroaches on the software vendor, reducing its ability to go to market as it would normally see fit without SAP’s interference. 

The Two Faces of SAP on Vendor Partnership

SAP is duplicitous in how it manages the partnership program. It presents one face to its partner software vendors and a very different face to its customers.

  • SAP does all that it can to dissuade SAP customers from using non SAP applications.
  • Since its inception, SAP has made its software extremely difficult to integrate two other non SAP applications. Once it captures the ERP system, it uses it to block out other software vendors through the argument that other systems are very difficult to integrate — directing the customer more and more SAP products.
  • SAP along with its partner consulting companies do all that they can to downplay non SAP applications to their customers.

The argument of integration and integrated functionality has been used for decades by SAP and by SAP consulting companies to keep SAP customers away from using applications that are not SAP even when that application is a far better fit for the customer’s requirements and a far more capable application.

SAP does not want any of its vendor partners to succeed. The way SAP thinks about it, money given to a vendor partner is money taken from SAP. SAP thinks this way even if they don’t have a viable product in the space occupied by the vendor partner. As a result, SAP will often announce products that are designed to stall the purchase of partner SAP vendor applications.

Taking Ideas and Ways of Operating from Other Software Vendors through Partnership

Overall, SAP does not respect the creation and intellectual property of other software vendors. I have been in some meetings with SAP where at some point during the discussion with our client regarding using other vendors to meet functionality requirements that SAP could not meet, the SAP resource stated that SAP was

“…always scanning the horizon for functionality, and eventually will put any functionality into its own applications.”

And that because of this, there was never any reason to look outside of SAP, as anything outside of SAP, would eventually reside inside of SAP, and you could simply buy it from SAP.

And in fact, this is how it works. If a new area of enterprise software becomes, “hot” SAP will normally extend a “partnership” agreement to a vendor in that space. This allows SAP to pretend that they are somehow related to the software category (even though they don’t have an offering), and they then go about attempting to reverse engineer the software vendor’s product so they can offer their competitive product.

Indirect Access as a Way to Block Vendor Partners

The most recent trick employed is called indirect access. SAP’s version of indirect access which has nothing to do with the previous definition of indirect access. We call SAP’s indirect access, Type 2 indirect access to differentiate it from Type 1 indirect access. And SAP “loves” its vendor partners so much that it uses the faux construct of Type 2 indirect access to scare companies away from purchasing any non SAP system and connecting it to SAP.

  • “No Matter What, Don’t Use Our Partners”: SAP often brings up indirect access implications to the customer after they have lost the software selection to the partner vendor.
  • “Oh, By The Way, You Owe us Millions”: In other cases, SAP waits until the implementation of the competing vendor is complete, with its consultants working on the implementation and SAP account management fully aware of the implementation, and then brings an indirect access claim after the fact. This is what happened with Diageo.

Conclusion for the Software Vendor

SAP partnership program is a misnomer. SAP partnership program consists of an abusive relationship which is anti-competitive and seeks to co-opt vendors while duplicitously blocking them out of SAP customers. This is why in many cases we have advised software vendors to not become SAP partners. One might argue that SAP need not have a partnership program at all. However, if it did not have one, customers would not see the logos, and would gradually come to accept that any application can be connected to SAP. In this way, the SAP partnership is much like a racket. It creates a need which did not exist before the partnership program, and the resolution is becoming an SAP partner, which allows SAP to exert its will over competitive vendors. 

  • By becoming an SAP partner, the software vendor falls under the influence and the rules and regulations of SAP which are entirely designed to the benefit of SAP and the liability of the
    software vendor partner.
  • SAP interference into vendor partners has even gone to the extreme where SAP has reached out to software vendors and asked them to discontinue their product. If that software vendor complies with SAP’s request, then SAP offers them in compensation referrals to specialize in consulting in SAP product which of course is a direct competitor to the product that SAP would like to see removed from the marketplace. In many cases “killing” an application requires purchasing the software vendor. However, in this case, SAP was able to attempt to do it (it did not work) through the partnership program.
  • SAP has used partnership programs in the past. Notably, the xApp program which Brightwork covered in the article It’s Time for the xApp Program to be Terminated, to take IP from partner software vendors.

There is more detail to the partnership program, but hopefully, this provides a flavor of the types of shenanigans that are engaged in by SAP in its partnership program on a continual basis.

Conclusion for the SAP Consulting Partner

A bobblehead SAP consulting partner covers most of the SAP consulting companies. They refused to challenge SAP, and actually, compete on how much they can ingratiate themselves to SAP. What this means is that SAP consulting partners cannot be trusted to provide objective analysis of SAP’s software or anything that SAP proposes. Through the partnership agreement with SAP, they are required to serve as repeaters of messaging. All of this is done while each of these consulting companies pretends to be advisors to their clients.

Conclusion on the Partnership Agreement

SAP’s partnership agreements are obviously created in bad faith. It is quite likely that the internal legal department for companies asked the question “is this something we want to do?” This is because the agreement opens up so many liabilities for the SAP partner.

SAP can only impose this partnership agreement on its partners because of its position in the market.

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References

https://www.sap.com/documents/2016/02/6c31deab-607c-0010-82c7-eda71af511fa.html

https://assets.cdn.sap.com/agreements/distribution-agreements/sap-partneredge-distribution-general-terms-and-conditions-us-english-v7-2015.pdf

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

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