How SAP Sucker Punched Customers with S/4HANA

Executive Summary

  • SAP continually overstates of the number of S/4HANA customers that are live.
  • SAP has misled customer how much cost and time S/4HANA is for ECC customers minimizing the problems with S/4HANA.

Introduction

SAP’s S/4HANA is an interesting product. It is made more interesting in that it has what is in our estimation one of the highest overheads of any application ever introduced. This issue was highlighted by the following comment by Amed Azim.

“C4/HANA is SAP’s final attempt at getting the CRM story right. The intelligent enterprise and the front-back office suite all hinge on customers being already on S4/HANA for DATA to be shared between SCM and CRM systems. Solving for S4/HANA migration, again.”

This is correct. It is not only C/4HANA, but other SAP applications are forecasting that many customers will be migrating to S/4HANA. However, S/4HANA’s penetration is extremely low.

SAP’s Continual Overstatement of the Number of S/4HANA Customers

As of SAPPHIRE 2018 SAP stated that it had sold 8900 licenses of S/4HANA and had 1500 customers live on HANA. We published a Study on S/4HANA implementations. What we found was that SAP has been greatly exaggerating the numbers of live S/4HANA implementations since S/4HANA was first introduced.

Upgrade to S/4HANA or Lose the Value of Support?

SAP thinks that companies that don’t move towards S/4HANA are really missing out. In fact, SAP has stated that..

“If you are paying maintenance but not getting innovation, there is no reason not to upgrade. Support value comes from being upgraded.”

However, the cost of migrating to S/4HANA is enormous. The costs hit SAP customers for more angles than they can possibly forecast before they perform the implementation. And of course, Hasso Plattner who lives in a perpetual land of unicorns proposes that S/4HANA reduces a company’s TCO!

“Dr. Plattner says in the book “You wouldn’t believe my prognosed TCO savings (for S/4HANA), but here are some facts, data entry is three to four times faster, analytics is ten to one thousand times faster, the development of extensions is much faster, and there is significantly less database administration work, with a data footprint of 1/10 and an unlimited workload capacity via replication.””

Our score on Hasso’ “facts” are as follows:

  • Data Entry: No evidence presented, but no reason to think data entry is three to four times faster. If Hasso is referring to SAP Fiori, we found Fiori to be slower than SAPGUI!
  • Analytics: Slower than a lower hardware footprint for the same year of Oracle, DB2 or SQL Server.
  • Database Administration Work: Significantly more database administration work, as we cover in our Study into the TCO of HANA.
  • Data Footprint: Estimated to be between 30% and 50% smaller, as we cover in the article The Secret to Not Talking About the Cost of HANA.

Amazingly, SAP wants to be paid for the S/4HANA upgrade. And the major consulting companies are doing whatever they can to hide the cost of upgrading from customers. Furthermore, SAP is building its strategy around S/4HANA. However, if S/4HANA penetration continues to be so low, then what about these other items that rely upon S/4?

How SAP Could Improve its Customer Numbers with S/4HANA

SAP has two easy decisions to make on S/4.

  1. Certify Oracle, DB2 and SQL Server for S/4. This will stop penalizing companies and be forcing them to use the disaster that is HANA.
  2. Make S/4HANA free. S/4HANA should be covered by the normal upgrade. There is no reason for SAP to stab customers who already paid for ECC maintenance.

Those two things would do wonders for S/4HANA. A third thing they could do would admit too much defeat, so they won’t do it. but it is the following:

  1. Replace the HANA schema with the ECC schema. This will minimize the breakage of customizations and integrations.

The column-oriented design is entirely unnecessary for an ERP system.

Conclusion

Buying and implementing S/4HANA for companies that have ECC is a ridiculous proposal because of the costs it imposes on the customer. Its like SAP was body-slamming its customers in a way that will lead to some of the IT leadership losing their jobs because of how disruptive and expensive (in implementation) S/4HANA is. Secondly, there is no way around most of these costs.

We predict that S/4HANA is going to cost SAP customers in the future and lead to SAP’s declining market share in the large ERP market in the coming years.

Brightwork 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

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

Who is the Most Accurate Source on SAP?

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