How to Understand The Software Vendor SAP

What Does This Article Cover? 

  • This definition will be from the perspective of an SAP implementor.
  • How does SAP break down in terms of its software strengths?
  • What early decision was instrumental in SAP’s growth to become the largest enterprise software vendor in the world?
  • What is SAP’s relationship to IT departments?

Introduction

SAP is a German software company, and the largest enterprise software company in the world. While German, the higher use of enterprise software in the US market versus anywhere else in the world, has made US the number one market for SAP. SAP started as an ERP (Enterprise Resource Planning) vendor, which had 4 major modules. These are:

  • Sales and Distribution
  • Materials Management
  • Financial & Controlling
  • Production Planning

ERP offered an integrated solution which combined very rudimentary supply chain and operational functionality with more advanced financial and sales order and pricing functionality. ERP systems also subsumed MRP functionality, which prior to ERP was sold as a separate application. SAP became the most successful ERP vendor in the world, and used this revenue stream, relationship with partners, and relationship with customers in order to move into a very large areas of enterprise software. This includes..

  • BI/BW – Data Warehousing / Analysts
  • PI – Application Integration
  • CRM – Customer Relationship Management
  • APO – Advanced Planning (supply chain)
  • Solution Manager – Document repository and landscape management

These are just some examples. A more useful question might be what enterprise software does SAP not compete in. SAP has mostly grown through internal development, however, there is quite a bit of evidence that SAP copied some of its intellectual property from other vendors. This comes to us from court cases where vendors allege SAP of doing this, from my personal experience of seeing functionality appear in SAP after it was already in software of a vendor that SAP had a partnership with. In fact, there is a great deal of question in my mind as to whether the xApps program, was simply a giant competitive intelligence gathering exercise by SAP. For companies that signed up to the higher level of xApps partnership with SAP, SAP reputedly offered them a contract that the smaller vendor should declare all of its intellectual property to SAP, and that if SAP found anything that was undeclared, that essentially SAP could use it.

SAP’s Growth

SAP is now a massive company, but its growth into so many areas have also lead to many quality problems with their applications. SAP and the major consulting companies deny this. However, this point cannot be refuted, as I see this first hand as I troubleshoot APO systems, and am exposed to the extremely limited capabilities in the BI/BW Data Warehouse. I have written previously that several of SAP products are so weak, that I doubt they could survive if they were not part of SAP. While not generally discussed, because of the general unwillingness to write uncomplimentary things about SAP, a number of their products are actually disabling to the businesses that buy them.

IT

Two major departments or divisions are part of enterprise software implementations, the business and information technology. Information technology does things like maintain the applications, database and infrastructure for the software that the business uses. For reasons that are not entirely clear, but are at least somewhat related to personal career incentives or the incentives within the IT department, SAP is very attractive to IT departments. This is interesting because SAP is one of the most, if not the most difficult enterprise software application(s) to maintain. This is highlighted in this article related to total cost of ownership. Cases where uncompetitive SAP offerings are selected over much better competitive offerings, it is almost always IT that has cast the deciding vote. SAP’s sway with IT departments is so powerful, and in many cases resulting in such bad choices for the business that on many occasions it appears that the IT decision makers actually work for SAP, and look out more for SAP’s interests than that of their own company.

SAP’s Technology

SAP can be broken down into three basic areas, the user interface, the business logic, and the data backend. Of these three, SAP is only differentiated from competitors in the business logic layer. SAP’ lags other vendors in the technology aspect of its applications, in many cases using very dated approaches. An example of this is included in this link. SAP’s development approach with respect to business logic is to offer so much functionality in so many areas that the company can hypothetically meet any business requirement.

Partnerships

SAP made an important decision early in its life to essentially outsource it is consulting to large consulting companies. It is unclear if SAP understood at the time how important this would be to their later success, but it is one of the most important factors, easily more important than SAP’s actual software. This is because once large consulting companies are able to make more money on SAP, than on competing applications, the consulting company has an incentive to recommend SAP.  SAP makes so much money for the large consulting companies that they in a way remotely control them. The loyalty is so strong that the consulting partners will cover up or make excuses for functionality in SAP. Consulting companies have also helped SAP steal intellectual property from other vendors as is discussed in this article:

The SAP Ecosystem

Therefore, SAP is best understood as an ecosystem rather than a distinct company. There are the numbers of people who actually work for SAP, but then there is the larger grouping of individuals outside of SAP who make their living based upon SAP software, and this includes many people in the large consulting companies, and independent consultants (such as myself). SAP puts so much money into so many people’s pockets that there is for most intents an purposes a media black-out about how SAP actually works or often does not work on projects.

Conclusion

A definition of SAP could go on and on, as there are so many aspects to cover. However, the list above are some important considerations in order to understand what SAP is.

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