The SAP Acquisition Playbook

Executive Summary

  • SAP gained cloud market share exclusively via acquisition. This playbook demoted in-house development into a second-class citizen.
  • We cover how SAP’s dysfunctional acquisition strategy works.

Introduction

Bill McDermott became CEO at SAP February 7, 2010.

His goal was to make SAP number one by market share in cloud apps.

He looked at the market and found lots of fragmentation.

Many smaller app companies waiting to be “consolidated”.

Bill went on a shopping spree in 2011 and never stopped.

 

The History

Between 2011 and 2018, SAP acquired

Crossgate, SuccessFactors, Ariba, Hybris, Fieldglass, Concur, Callidus, and Qualtrics.

In the same 8 years, SAP also acquired

Coresystems, Recast, Gigya, Abacus, Plat.one, Altiscale, Fedem, Roambi, SeeWhy, KXEN, Camilion, SmartOps, TicketWeb, Syclo, Datango, RightHemishpere, Crossgate, Cundus,  and Secude.

 

The Cloud Story

Every cloud app SAP sold since 2011 was acquired not developed internally.

 

The Problem

Acquiring three companies every year for eight years looks great on Excel sheets and sounds great in press releases.

Instant revenue growth, more market share, and more products. In reality, getting that many companies, teams, and products working together is absurd.

Too many apps that were never designed to work together.

None of the acquired cloud apps is integrated with SAP’s core.

The acquisitions just transferred the fragmentation to SAP’s product portfolio.

 

The Result?

Dozens of functional silos added to SAP and customer landscapes.

Tech stacks and technologies that don’t work together.

Duplicate apps and overlapping functionality.

High cost and failure rate of integration projects.

Internally, SAP sales targets were never achieved.

Product development and integration deadlines never met.

Eventually, SAP called in a “cleaner”.

Elliott Management convinced the board to remove top SAP sales and product executives and approve a massive restructuring plan to consolidate the exploding portfolio.

Multiple products to be “de-emphasized” then jettisoned, others combined or replaced by technology partner offerings.

Thousands laid off last January.

 

What’s Worse?

8 years of acquisitions (instead of in-house development) killed the engineering culture at SAP.

SAP in-house development still builds apps using ABAP and 4GL NetWeaver technology.

Other than that, great strategy.

The Problem: A Lack of Fact-Checking of SAP

There are two fundamental problems around SAP. The first is the exaggeration of SAP, which means that companies that purchased SAP end up getting far less than they were promised. The second is that the SAP consulting companies simply repeat whatever SAP says. This means that on virtually all accounts there is no independent entity that can contradict statements by SAP.

Being Part of the Solution: Fact-Checking SAP and Consulting Firms

We can provide feedback from multiple SAP accounts that provide realistic information around SAP products — and this reduces the dependence on biased entities like SAP and all of the large SAP consulting firms that parrot what SAP says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. SAP and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide.

If you need independent advice and fact-checking that is outside of the SAP and SAP consulting system, reach out to us with the messenger to the bottom right of the page.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other SAP Acquisitions Content

References

https://www.bloomberg.com/news/articles/2019-04-24/sap-elliott-are-said-to-have-held-strategy-talks-for-months

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

The Top 3 Things to Look for In a Cloud Service Provider

Executive Summary

  • Companies often can use help in what to look for in a cloud service provider.
  • These are our top three items.

Introduction

Before moving into cloud service provider selection, it is important to establish some of the following principles for selection.

How Companies Tend to Approach Cloud Migration

Customers often approach cloud migration with an inappropriate framework, and this is right from the beginning of the evaluation process. Normally, they begin by comparing cloud service providers to each other (AWS versus Azure versus GCP).

This is a natural approach, but it is not an approach that will lead to the best outcome.

How We Recommend Setting the Framework for Selection

  • In our view, the best framework is to compare each service provider to their own IT.
  • Essentially, cloud adoption means that customers outsource IT service management. This is a viable option only if the service provider is more efficient than the customer’s own IT. If not, customers end up with less agility, less availability, and higher TCO.

Let us move to the three primary selection criteria. 

#1: Agility

If a company moves to the cloud, they expect their business agility to increase, and certainly not to decrease. We know a few customers who recently migrated to a cloud services provider in the US. After moving their applications, their support tickets are now measured in days instead of the hours it previously took their own internal IT staff.

Why?

Because problem tickets and change requests are handled internally on the provider side by multiple teams (product support and hosting operations). The operations teams have no product expertise and vice versa. Moreover, each team has its own set of SLAs. Each customer request triggers multiple internal change requests involving multiple teams operating in different locations and time zones.

#2: Availability

Consider release management. When the service provider applies a patch or upgrade, it gets applied by the operations group to all customers on the same application version. This causes days of downtime.

Why?

Because each customer has specific configuration and extension environment. These changes are not tracked by the hosting service provider.

  • In the past, application owners and administrators had to coordinate change management with their own IT who tracked all changes into their ITSM databases.
  • When customer IT released a patch or upgrade, they knew exactly the status of each specific application environment and they incorporated the latest changes into their release packages.

Another scenario is increased downtime compared to customer’s own IT service level agreement (SLA).

Why?

Because some cloud service providers have a dependency on their colocation facility provider. This means that customers have to deal with multiple sources of planned and unplanned downtime. We covered this in detail in the article The Problem with the Oracle Cloud and Colocation.

Moreover, customers have to deal with multiple SLAs instead of one SLA with their own internal IT.

Companies love using the term “one throat to choke.” However, whose throat do you choke for a 24-hour production outage?

#3: TCO

Customers often compare the TCO of different cloud providers to each other.

As we stated earlier, this is not the most helpful framework.

Why?

  • Because customers want lower TCO than their own in-house IT.
  • If a customer’s IT has lower TCO than a specific provider, they end up spending more not less.
  • A cloud service provider can deliver lower TCO than a customer’s in-house IT in specific scenarios. Customers should verify these scenarios as they plan their cloud migration journey.

Let’s look at some examples.

Example 1: Self-service (Automation) Versus Manual Service Provisioning

Service providers vary vastly in their service delivery capabilities. On one end, customers need to open a ticket to provision an instance or increase the capacity of an attached storage volume. In this case, the work is performed manually by teams that support hundreds or thousands of customers across dozens of time zones and the cost of labour increases with every new customer onboarded.

Example 2: The Cost of Labor Has to be Transferred to Customers.

On the other end, there are providers with mature self-service and automation capabilities. This means that less manual labour is needed for most customer requests. For example, with AWS CloudFormation, a customer can create an entire data centre (or VPC) using a single script file including all the resources needed across all regions and accounts. Labour-intensive service providers have higher TCO due to the increased cost of labour. Moreover, labour-intensive service providers have lower agility due to manual work and rework introduced by human errors.

Example 3: Right-Sizing Infrastructure Versus Rehosting (Lift and Shift)

Customers often assume, incorrectly, that the cost of cloud infrastructure must be lower than their in-house IT. In some cases, cloud infrastructure TCO can be much higher than on-premises for the same workload. The first factor is scale. If the service provider operates at scale, they can command the highest volume discounts from manufacturers and they can pass part of these cost savings on to customers. Niche providers lack the economies of scale and the associated cost savings.  

The second factor is infrastructure technology. Some service providers operate a single-tenant dedicated infrastructure where customers have to commit to a multi-year contract. In this case, customers end up with the same over-provisioned infrastructure footprint they had on their own premises and their TCO will surely increase not decrease, at least by the cost of the migration.

The hardware refresh cycle for most companies is 3-5 years. This means that when they procure infrastructure, they have to plan for maximum capacity projected over 5 years of user and data growth. Invariably, they end up with over-provisioned in-house infrastructure with all the associated capital and operational expenses. This, of course, is one of the major benefits of cloud service providers. 

The result.

Cloud service providers capable of rightsizing customer workloads elastically can provide significant TCO gains anywhere between 30% to 60%.

This issue with over-provisioning was covered in our book How to Understand On-Premises Proprietary Servers and Server Vendors, hardware vendors make their money selling servers, and they have overstuffed customers with servers, and have done little to enable their customers to improve the efficiency of their previous purchases? There is a little incentive as it would simply reduce the number of servers they could sell.

Conclusion

Agility, availability and TCO are the three most important criteria to apply when selecting cloud service providers. Our approach pushes against the comparison between service providers in the initial phase of selection. Instead, customers should benchmark cloud services against their own IT. If multiple providers are found to offer higher agility, availability, and lower TCO than the customer’s own IT, then we can move to comparing service providers against one another.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other Cloud and Multicloud Content

References

https://www.bain.com/insights/rightsizing-your-way-to-the-cloud/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Is SAP a Cloud Provider or a Cloud Buyer?

Executive Summary

  • SAP presents itself as a cloud provider.
  • We evaluate whether this presentation matches how it operates its businesses.

This article focuses on SAP, but the lessons cloud just as well be applied to Oracle. 

Introduction

This article began as a response to the following quotation from Vinnie Mirchandani.

The Quotation

“After two decades of cloud applications (NetSuite and Salesforce were born in late 1990s) if you look at a grid of applications by industry, by geography there is only 20% or soin the cloud. Most cloud apps are concentrated in HCM, CRM, accounting areas, not operational areas or industry functionality. Even there, if you look for support for Brazil or China or the Czech Republic your choices drop off very quickly. These industry and regional white spaces won’t last forever. We are seeing startups target them, in industries like financial services, big banks are developing solutions to sell to others. The opportunities are limitless, but SaaS vendor investments have been grudging.” – Vinnie Mirchandani

Not true in SAP’s case.

But this gets to a basic question and a question that people tend to gloss over before jumping into discussions on SAP’s cloud offerings and strategy. And that is…

Is SAP a Cloud Vendor?

Our conclusion is that SAP is not a SaaS vendor. SAP is a SaaS buyer. Let us take a look at the evidence.

  • Buying SaaS Applications: Every single SaaS application SAP sells is acquired. Their choices are therefore limited to SaaS companies they can buy since they don’t internally develop any SaaS apps. In November of 2018, SAP spent $8 Billion on Qualtrics, which we covered in the article Does SAP’s Acquisition of Qualtrics Make Any Sense? and another $2.2 Billion on Callidus in April 2018. And no one really has a very good handle on how these applications complement what SAP offers and in our view, both acquisitions just added more noise to SAP’s offering and increased their cost and management overhead. We analyzed C/4HANA (which Calladus has been rolled up into) and found the overall solution to be lost in space as we covered in the article How Accurate Was Bluefin Solutions on C4HANA? Overall, none of these acquisitions looks like they are actually for SAP, rather they are made to boost the stock price in the short term and to increase executive compensation. That is the major misinterpretation of many software acquisitions, many of them are for the executives, not for the company. 
  • The CEO said they want to focus on CRM and front office. So SAP is investing in front office technologies at a time when CRM is already saturated and dominated by Salesforce. Now SAP must integrate all their front office and SaaS apps with their back-office ERP to deliver the promised complete customer experience combining X data and O data.

Remember X and O data? This was all the rage back in November when SAP acquired Qualtrics and trying to tell investors, customers and the media what a great acquisition Qualtrics would be, but it will probably be an expired concept by the time you finish reading this sentence. SAP’s marketing department may be on to a new slide. 

Where Are We Again?

SAP also invested in HANA and now they are competing with Oracle and Microsoft as a databases company and they are competing in IaaS and PaaS with AWS, Azure, and GCP as a cloud company. And they are competing in AI and ML and RPA and and and… Don’t forget that SAP also acquired SuccessFactors for $3.4 Billion, Ariba for $4.3 Billion, and Concur for $8.3 Billion.

That’s a lot of investment. A lot of investment for applications that don’t have much to do with SAP’s primary offering. We found this quote of interest with respect to SuccessFactors. 

“In the SAP Universe, SuccessFactors is no longer really new, but integration in perfect ERP / ECC 6.0 (E2E) processes has not been successful to date. “We are working on it and know exactly about our deficits,” – E3

SuccessFactors was acquired in 2011 — how can we still be discussing integration deficits in 2019?

They even invested in Ticket-Web: A ticket system for sports and entertainment. This is because ticketing systems are……naturally connected to ERP? 

SAP has a strategy for all of these applications. Follow me on Twitter and be informed when we figure out what it is. 

The Strategy is Everything

The one-stop shop for everything model, as proposed by SAP and so many SAP consulting firms? 

How is IBM doing with this model? 

SAP spent $10 Billion on Qualtrics and Callidus to go after the CRM market and integrate back-office ERP with front office apps and upgrade hundreds of thousands of ECC customers to S/4 by 2025 and become the best database in the world and the best cloud platform and the best AI and make the best vertical apps in specific industries to compete with HP in telecom and Bosch in IIOT.

And that is a lot of “ands.”

However, Volkswagen Group and Amazon Web Services just announced they are developing the Volkswagen Industrial Cloud together.

  • Where was SAP when this happened?
  • What about the SAP Cloud that SAP has spent so much time promoting? 
  • How likely is it that SAP pitched SAP Cloud to VW for this initiative and lost this opportunity to AWS (hint..very)

VW is a German company and SAP is right around the corner and they have a long-standing relationship. Why did VW reach out to far geographies when they can’t see opportunities in auto manufacturing inside Germany? 

Conclusion

SAP poses as a cloud provider, but they really aren’t one. They are a cloud buyer.

SAP feels they need to try to maintain the illusion of being a cloud provider because their cloud strategy for cloud services is to coerce (often through broadscale application discounts) customers to buy cloud services through them. This is so SAP can upcharge the actual cloud services providers as we covered in How to Understand SAP’s Cloud Upcharge on AWS Storage.

This is ultimately a short term strategy. But to pull it off, SAP will continue to pose as a cloud services provider, so this is what they will do. As with Oracle, there will be a lot of discussion around the cloud, but not much cloud.

As for SAP’s SaaS acquisitions, none of them is important to SAP’s strategy or to their long term viability.

The Problem: A Lack of Fact-Checking of SAP

There are two fundamental problems around SAP. The first is the exaggeration of SAP, which means that companies that purchased SAP end up getting far less than they were promised. The second is that the SAP consulting companies simply repeat whatever SAP says. This means that on virtually all accounts there is no independent entity that can contradict statements by SAP.

Being Part of the Solution: What to Do About SAP

We can provide feedback from multiple SAP accounts that provide realistic information around SAP products — and this reduces the dependence on biased entities like SAP and all of the large SAP consulting firms that parrot what SAP says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. SAP and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. When SAP or their consulting firm are asked to explain these discrepancies, we have found that they further lie to the customer/client and often turn the issue around on the account, as we covered in the article How SAP Will Gaslight You When Their Software Does Not Work as Promised.

If you need independent advice and fact-checking that is outside of the SAP and SAP consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other SAP Cloud Content

References

https://mailchi.mp/b4bmedia/die-meinung-der-sap-community-1707-315765

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

What Is Different About the Q1 2019 SAP and Oracle Layoffs?

Executive Summary

  • The recent SAP and Oracle layoffs are different from prior rounds of layoffs.
  • The layoffs are byproducts of broad internal restructuring plans. 

Introduction

The recent Oracle layoffs and SAP layoffs had the following characteristics.

  • Oracle’s board approved the restructuring plan for fiscal 2019 of up to $432 million.
  • The company spent $297 million on restructuring through the first nine months of its fiscal year, which ends May 31.
  • In SAP’s case, the approved restructure budget was $1 billion to be completed by June 2019.

Understanding the Oracle Layoffs and SAP Layoffs, Starting with the Organizational Chart

An important aspect of both plans is the departure of the most senior product executives from SAP and Oracle.

The confirmed exits include:

  • Thomas Kurian (president of product development) and Amit Zavery (VP cloud platform) were among the recent high-profile departures from Oracle. Both have joined Google.
  • Kurian as Google Cloud’s chief executive and Zavery as VP of engineering heading the Apigee team.
  • Most of the headcount reductions are concentrated in Oracle’s development and cloud hosting organizations.

At SAP, the changes to the top level org chart are equally significant.

The confirmed exits include:

  • Björn Goerke: SAP CTO and president of SAP cloud platform.
  • Bernd Leukert: member of the executive board, products & innovation.
  • Rich Heilman: Director, HANA labs.
  • Rodolpho Cardenuto: Head of SAP partner organization.

(We could not confirm 3 more senior level departures at the time of this writing so we will not include them here).

Bernd Leukert is gone.  Bjorn Goerke is gone. Ken Tsai, who had global product marketing responsibilities for HANA, SAP Data Hub, SAP Vora, is now vice president of Adobe’s Experience platform. All of Bjorn’s product teams are slaughtered: ABAP, HANA, UI, JAM, Big data, Mobile and many more. Not just Neo, but any SAP proprietary service on any platform. Everything related to Cloud Platform & Mobile in North America was shuttered – several teams across several cities. Didn’t matter how old/young, good/bad. Layoffs announced in US, India, Japan, Hungary, Germany, Singapore, Canada, UK, China, Ireland, Malaysia, France, and Vietnam. SAP’s engineering culture died this week.

What is Oracle’s Plan After the Oracle Layoffs?

At Oracle, the Oracle layoffs resulted in the restructuring which covers two major organizational changes. The first is the significant downsizing of Oracle cloud infrastructure group (OCI) and the second is merging advanced customer support (ACS) organization with Oracle managed cloud services (MCS) organization.

According to our sources, OCI has been operating at a net loss for years. Both sales and renewals are commercially insignificant. The OCI downsizing and headcount reduction aim to reduce operating costs. Merging ACS and MCS, on the other hand, mean that Oracle legacy support personnel (think EBS and JDE) will be utilized for cloud operations support. A number of roles on both sides were made redundant as a result of this merger.

Downsizing OCI and merging ACS with MCS are complementary moves. To understand the rationale behind the plan, we need to understand the evolution of OCI. OCI is Oracle’s infrastructure as a service (IaaS) business. OCI started life in 2013 with Oracle’s acquisition of Nimbula. Nimbula was founded 2008 by Chris Pinkham and Willem Van Biljon who developed the Amazon Elastic Compute Cloud (EC2). Nimbula Director software allows users to implement IaaS-style private, public, and hybrid clouds.

As a business, however, OCI always operated at a loss.

The problem with Oracle cloud is now well-understood in the industry. And the critical factors are the following:

  1. Oracle came late to the cloud party. Almost forced by Wall Street’s love affair with SaaS companies and their predictable recurring revenue business models.
  2. Oracle realized that building cloud infrastructure is extremely expensive and time-consuming. It takes years to buy land, build, equip, and staff facilities, and lay private fiber underneath metropolitan centers and oceans around the globe. Oracle simply did not want to make the investment as Oracle has a short investment horizon built around getting quick hits. 

If They Come, We Will Build It

Oracle’s solution was to adopt the “If they come, we will build it” mantra and instead of building their own cloud, Oracle started leasing colocation space from Cologix and Digital Realty.

This seemed like a solution until customers started complaining from long and repeated outages sometimes lasting for 24 hours, which was a topic we uncovered and published in the article The Problem with the Oracle Cloud and Colocation.

  • With 100% of Oracle’s facilities operated by third-parties, customers had to deal with planned and unplanned downtime from multiple parties each with a different set of SLAs.
  • Oracle cloud customers do not receive service credits for either planned or unplanned downtime.

Comparing AWS, GCP and Azure’s CAPEX to Oracle’s CAPEX

In 2017, Amazon, Google, and Microsoft each spent more on CAPEX than Oracle has in its entire history.

CAPEX spending on cloud infrastructure is both a leading indicator of the ability to compete at scale and a confirmation of success with customers. In cloud computing, CAPEX is the ultimate form of putting your money where your mouth is because no amount of jawboning alone will conjure up data centers or pack them with millions of servers.

The $75 billion in cumulative buybacks since 2012 have boosted Oracle’s earnings per share even as the company’s operating income declined over the same period. The capital return program depleted Oracle’s FCF, depriving it of investment dollars into cloud infrastructure and driving leverage to record highs.

Oracle is unlikely to keep up the current pace of buybacks, which are running $10 billion per quarter. Even a reversion back to the historical average buyback of $3 billion per quarter over the coming years will be inadequate to meet consensus estimates.”

What is SAP’s Plan?

At SAP, the internal change in product strategy and organization is much wider.

The SAP Cloud Platform (SCP)

SAP is clearly extending its third-party IaaS strategy into PaaS. Instead of building an in-house PaaS offering, SAP is adopting third-party solutions from technology partners like AWS, Azure, and GCP. This shift will extend to IoT, ML, data management and analytics.

According to Diginomica’s founder Dennis Howlett:

“It seems that SAP has determined that it cannot realistically compete with AWS, Google and Microsoft for cloud platform offerings and is, therefore, scaling those back.”

and…

What is more worrying is that sources tell me that SAP’s cloud retention rate is not as good as they would like.

E3zine presents a similar explanation:

SAP is charging way more than other cloud providers, but is unable to offer quality consulting. The result? Many customers turn away from SAP Cloud and consult with SAP partners to install a system based on AWS or Azure.

According to E3zine editor in chief, Peter M. Färbinger:

Bill McDermott basically admitted defeat when he introduced the motto “Embrace” to SAP FKOM 2019. This is at least a hint at a clear direction: SAP wants to embrace hyper scalers and squeeze their money out of them.

Brightwork research has confirmed that SAP is up-charging customers as we covered in the article How to Understand SAP’s Upcharge as a Service Cloud. For example, AWS sells storage in Europe/Frankfurt for $2.3 per 100 GB/month. SAP resells the same storage block in the same region for $7.86 per 100 GB/month. That’s a 342% premium.

Customers realized they can cut out the expensive middleman and go directly to AWS, Azure, and GCP.

Moreover, SCP has severe technical problems that make enterprise adoption practically impossible. For instance, SCP still runs on HTTP 1.1 instead of 2.0. That’s a security and performance show-stopper.

SCP also has no support for VPC and SCP IOT has no native support for MQTT, which we covered in the article AWS and Google Cloud Versus SAP Cloud with HTTP 2.0.

SAP Products Outside of Cloud

This article has focused on cloud reasons behind the two restructurings, but here are some other issues SAP has for restructuring.

HANA

According to Josh Greenbaum, the principal analyst at Enterprise Applications Consulting:

“HANA is no longer differentiated. Entrepreneurs and developers can find similar technologies on AWS, Azure and other clouds. SAP HANA ranks 20th in popularity according to DB-engines. SAP is no longer vying to become the dominant database on the market. SAP is not going after that strategy anymore.”

The HANA motivation for restructuring was something we covered in the article SAP’s Layoffs and a Brightwork Warning on HANA.

Leonardo

Sam George, director of Microsoft Azure Internet of Things, announced during MWC on February 25th, that SAP will be offering Azure IoT platform, device management, and edge connectivity to SAP Leonardo customers. We declared Leonardo as a dead product in Our 2019 Observation: SAP Leonardo is Now Dead. And after great fanfare when first released and a planned pivot point from SAP to move the emphasis away from HANA, Leonardo is now little mentioned. This is something we predicted in Why Leonardo Seems so Fake and Is Leonardo Necessary to Ensure Frozen Ice Cream Delivery?

S/4HANA

Holger Mueller explains in his Enterprise Software Musings blog:

“SAP realized in spring of last year that it cannot deliver on the SAP S/4 value proposition – which was R/3: The integrated end to end ERP+ suite. It was taking Leukert and team too long, Salesforce was gaining, C/4HANA was created. All this is history – but it does not make Klein’s job easier. S/4HANA will likely be the SAP Finance system, everything more is on the test stand.”

We covered S/4HANA’s lack of go-lives in the article A Study into S/4HANA Implementations and How Accurate Was SAP on S/4HANA’s Go Live Numbers?

Holger is quite correct S/4HANA has made very slow development progress and has already passed its fourth anniversary, and still, it is difficult to find customers live on S/4HANA.

Due to a lack of demand on some of its most highly promoted products, SAP is reducing developer headcount in multiple product areas including HANA, S/4HANA, SCP, and Leonardo. SAP pundits and SAP resources have asked that we not focus on these developments within SAP, the logic goes that it is insensitive to analyze layoffs and what they mean. This position is reinforced by the new CTO Juergen Mueller in what SAP has framed as “dramatic and impressive transformation.”

“Honestly, I read some of these articles and they are basing assumptions about SAP HANA on a restructuring program that was announced earlier this year. I don’t want to minimize the anxiety that a restructuring creates for employees who are impacted. In cases where individuals make comments about their feelings or they question specific decisions, this is understandable. Personally, my hope is that SAP or our partners retain as many of these colleagues as possible. The facts about the strategy itself are what I have explained here. The restructuring is designed to invest more of our resources in areas where SAP customers tell us they expect us to invest. New SAP HANA innovation is one of those key priority areas.”

We hope that readers appreciate what Mueller is saying….layoffs in HANA for a product that has not met expectations does not mean anything. Oh, and layoffs and restructurings are no longer actually layoffs and restructurings, they are now dramatic and impressive transformations.

Restructuring Specifics

  • Oracle: The Oracle layoffs restructuring plan is a “cleanup” of Thomas Kurian’s development organization. The purpose of OCI headcount reductions is to cut the costs of running an unprofitable cloud business.
  • SAP: At SAP, the plan aims to remove the current development leadership and associated developer costs. SAP’s acquired SaaS applications (Ariba, Concur, Fieldglass, Hybris, SuccessFactors) remain fragmented. The HANA migration plans were never met including the internal pilot of migrating SAP’s own Employee Central to HANA. None of the acquired ML technologies was successfully integrated into SAP apps. The PaaS play with SCP has clearly failed to attract developers and the dream of the intelligent enterprise looks more distant than ever before.

Conclusion

The story overall is that both entities aren’t adjusting to the cloud. This might be difficult for many readers to process, but this is because readers may be paying more attention to what Oracle and SAP say about their cloud versus the reality of where Oracle and SAP are in the cloud.

If neither company is going to offer their own cloud services, and if both companies are simply going to put an overlay onto other cloud service providers, neither company need those employees.

Our Prediction for SAP and Oracle with Cloud Services

There is no real way that SAP or Oracle can get back into the cloud game. They have made extremely little progress in their cloud offerings and are out of the running. This is in part why the SAP layoffs and Oracle layoffs were necessary.

The choice for both companies is simple. They can either stick with the approach of making their own cloud — undermining their application business, or they move to outsource the cloud to AWS/GCP/Azure/etc.. and focus on their actual business.

SAP gave up running their own cloud services (please do not confuse this with SAP’s SaaS acquisitions, here we are discussing cloud services), something they said they were 100% dedicated to building just a few years ago and stating that they refused to outsource cloud services to AWS/GCP/etc as we covered in the article Diginomica, Steve Lucas on HANA, Oracle, IBM, AWS, Azure. However, within one year of holding to this stated policy, they rolled out the multicloud policy, as we covered in the article How to Best Understand SAP’s Multicloud Announcement. They performed a full 180, without almost any IT media entity or IT analyst pointing out this dramatic switch.

Now Oracle is fighting reality that they cannot compete as a cloud service provider — but it is inevitable — Oracle will have to follow SAP and give up on any pretense of being a cloud service provider. Like SAP, Oracle will eventually try to use their account control to markup the cloud services of the public and private cloud service providers.

While many pro-SAP and pro-Oracle resources will likely find this characterization offensive, Salesforce, a company with far more cloud knowledge than either SAP or Oracle outsourced their infrastructure to AWS years ago. There is no reason to assume that application or database companies have any particular domain expertise in being cloud service providers.

The Problem: A Lack of Fact-Checking of Oracle

There are two fundamental problems around Oracle. The first is the exaggeration of Oracle, which means that companies that purchased from Oracle end up getting far less than they were promised. The second is that the Oracle consulting companies simply repeat whatever Oracle says. This means that on virtually all accounts there is no independent entity that can contradict statements by Oracle.

Being Part of the Solution: What to Do About Oracle

We can provide feedback from multiple Oracle accounts that provide realistic information around a variety of Oracle products — and this reduces the dependence on biased entities like Oracle and all of the large Oracle consulting firms that parrot what Oracle says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. Oracle and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. This is how companies end up paying for items which are exorbitantly priced, exorbitantly expensive to implement and exorbitantly expensive to maintain.

If you need independent advice and fact-checking that is outside of the Oracle and Oracle consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

References

[1] https://www.linkedin.com/pulse/problem-oracle-cloud-ahmed-azmi/

[2] https://www.benzinga.com/analyst-ratings/analyst-color/19/03/13334842/oracle-cant-keep-up-10b-in-buybacks-per-quarter-nomura-

[3] https://diginomica.com/saps-restructuring-hunger-games-game-of-thrones-or-both/

[4] https://e3zine.com/2018/11/29/hybrid-cloud-first/

[5] https://e3zine.com/2019/03/21/embrace-cloud-trends/

[6] https://www.linkedin.com/pulse/iot-platform-review-sap-ibm-aws-ahmed-azmi/

[7] https://www.cmswire.com/information-management/a-tale-of-two-saps/

[8] https://azure.microsoft.com/en-us/blog/mwc-2019-azure-iot-customers-partners-accelerate-innovation-from-cloud-to-edge/

[9] https://enswmu.blogspot.com/2019/02/musings-sap-democratizes-product.html

*https://news.sap.com/2019/03/sap-cto-juergen-mueller-five-questions/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Brightwork Advisory Note: A Change in SAP Development Strategy

Executive Summary

  • SAP is now making significant changes in product development strategy.
  • In this advisory note, we cover the reasons for this strategy shift and what it means for the future of SAP developers and customers.

Introduction

SAP’s board has recently come to terms with two important realizations. First, customers are moving to cloud with or without SAP. Second, that the biggest force holding SAP back in the cloud race is SAP’s own development organization. Clearly, a decision was made to put SAP on the right track.

The Cloud Journey

SAP’s cloud journey started in 2011 with the acquisition of SuccessFactors. This cloud acquisition strategy continued for a decade. SAP acquired Ariba in 2012, Hybris in 2013, Fieldglass and Concur in 2014, Callidus in 2018, and Qualtrics in 2019. At the same time, SAP made a number of acquisitions in IoT, AI, big data, and RPA. Fedem, Altiscale, and Plat. One in 2016, Recast.ai and Contextor in 2018.

Over the past decade, every SAP cloud application was acquired NOT developed internally.

SAP favored cloud acquisitions over in-house development for a number of reasons. First, developing enterprise cloud apps takes years. An acquisition, on the other hand, delivers an instant new product, instant new revenue stream, and instant new customers.

In a press interview a few days following the Callidus acquisition, SAP’s CEO Bill McDermott said:

“It would have taken too long to build it”

and…

“We did that to get another cloud revenue stream in the mix” [1]

The Cloud Acquisition Side-Effect

SAP’s cloud acquisition strategy had an unfortunate side-effect. It robbed SAP’s own product organization from the opportunity to evolve beyond the monolithic, ABAP, NetWeaver application server and embrace modern cloud methodologies, architectures, and tooling.

With SAP’s cloud apps being exclusively acquired not developed internally, the development organization was effectively kept in the dark ages for too long. Developers had no compelling reason to upgrade their skill sets and remained focused on doing things the old way.

Moreover, The acquired cloud properties continued to operate as independent entities with their own siloed development organizations and none of the “cloud DNA” was infused into SAP’s own development organization.

The Pull of the Monolith

The monolithic development mindset at SAP made it practically impossible to build services. Cloud services (IaaS, PaaS and SaaS) are distributed, multi-tenant, loosely-coupled, API-driven, independently and horizontally scaled. Monoliths are massive, centralized, single-tenant, tightly-integrated, vertically-scaled systems. SAP HANA and Leonardo are examples of how this monolithic development mindset handicapped SAP’s cloud transition.

HANA  was born as a specialized OLAP appliance. Later, the product included an OLTP database, an application development platform, and an application server supporting the world’s most sophisticated ERP application suite.

Can you imagine the complexity of making the smallest development decisions for a product with this many design goals? More importantly, this monolithic approach is completely incompatible with how cloud services are consumed. How do you charge a customer who wants to use Search and Streaming services only? How do you scale the mobile service only?

SAP Leonardo also started life as an IOT platform then grew to include analytics, machine learning, big data, data intelligence, and blockchain! The same monolithic development mindset that wants to build large, complex, tightly-coupled, single-tenant systems instead of smaller, specialized, lightweight, API-driven distributed services.

By comparison, consider how AWS AI products are designed and offered. Specialized, single-purpose, fully managed services each covering a specific AI use case.

Mission Impossible

As an ABAP developer, how do you make the transition to the cloud? Here’s a slide from SAP TechEd 2018. SAP expects ABAP developers to learn: UX, SAP HANA, State of the art development, and Cloud. A piece of cake, especially when all cloud apps were acquired!

The New SAP Cloud, IoT, and ML Strategy: Less Proprietary, More Technology-Agnostic

  1. The board recently approved key personnel changes at the top echelon of the development organization including the CTO, product development leadership, and teams.
  2. The NEW SCP IaaS and PaaS strategy will be significantly less SAP proprietary and more technology agnostic. SCP/Neo and Leonardo IoT will move to Azure by the end of the year. [2]
  3. SCP/CF will expand its PaaS offering with more investments placed on open source.
  4. SAP HANA will expand into smaller, more specialized product groups. Expect a fully-managed AWS RDS for HANA by mid-2020 similar to AWS RDS for PostgreSQL, Oracle, and SQL Server. The service will support automated provisioning, scaling, backup, and recovery.
  5. Going forward, product development will be increasingly collaborative with technology partners (AWS, Azure, and GCP). The goal is to integrate SAP products into third-party platforms as discrete, specialized, and metered services allowing administration and consumption via native admin consoles, standard API calls, and a broader portfolio of IaaS/PaaS services.  

Conclusion

The success of Microsoft, AWS, and Google as technology companies was driven by their focus on developers. Their go-to-market has been B2D2B. Once developers adopt a new product, they do the internal selling on behalf of vendors. It’s a bottom-up, social proof strategy.

SAP’s traditional approach has been top-down targeting senior executives and budget owners. This approach has limited success in technology-driven categories like IaaS and PaaS where the value is more evident to developers, architects, and product owners.

Outside of SaaS, which is purely acquired, SAP’s internal developer culture needed an immediate and radical transformation. The first pragmatic phase of this transformation is now underway.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other SAP Custom Code Content

References

https://www.philly.com/philly/blogs/inq-phillydeals/software-sap-ceo-bill-mcdermott-ma-callidus-hana-s4-spm-william-20180202.html

https://azure.microsoft.com/en-us/blog/mwc-2019-azure-iot-customers-partners-accelerate-innovation-from-cloud-to-edge/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Categories SAP

How Accurate is Oracle’s “Cut Your AWS Bill in Half”​ Guarantee?

Executive Summary

  • Oracle has made many claims about cutting the bill of AWS customers dramatically.
  • We investigate this claim by Oracle.

Introduction

We caught SAP lying about its promise to reduce the costs of customers using AWS. After reviewing how Oracle constructed this premeditated lie, This is the kind of BS that makes you so angry you want to drown puppies.

Note to Oracle customers, even though dealing with Oracle pushes one to the limit, it is still not ok to take it out on puppies.

Oracle cannot compete with AWS on price.

Anyone can verify this by using the pricing calculators to compare specific service pricing. However, when Oracle claimed they will cut your AWS bill in half, we actually thought Oracle finally had become serious about cloud and decided to subsidize their cloud services with their vast monopolistic support revenue instead of spending tens of billions every year on stock buybacks.

But we knew that Oracle services are priced much higher than AWS so lowering their prices by at least 50% across the board sounded too good to be true. We decided to do what we do best at Brightwork Research.

Here’s the offer. You can verify it for yourself on Oracle’s website at this link.

Reading the Fine Print from Oracle

All you have to do is read the fine print at the bottom.

The guarantee is valid until the 31st of May 2019.

Workloads must run in Oracle’s Automated Data Warehouse Cloud or Oracle Autonomous Transaction Processing Cloud.

The offer only applies to the Bring Your Own License of the above services.

Why is This “Guarantee” Only Valid Until 31st of May 2019?

Oracle Automated Data Warehouse Cloud and Oracle Autonomous Transaction Processing Cloud (the only services to which this offer applies) requires the Oracle Multi-Tenant database option as a pre-requisite.

Until the 31st of May 2019, Oracle is waiving the cost of this option. After 31st of May 2019, it will be mandatory for customers to have licenses in place for Multi-Tenant ($17,500 list price per Processor + 22% annual support) and in the case of over 16 OCPUs (cores), Real Application Clusters ($23,000 + 22% annual support).

Source : P59 of Oracle PaaS and IaaS Universal.

Additionally, customers who use the standby option will have to license Active Data Guard ($11,500 list price per Processor + 22% annual support).

This means that customers using Oracle’s Automated Database / Data Warehouse Cloud services will see $40,500 per OCPU cost increase from June 1st, 2019 when this promotion expires. At which time, they will be required to buy licenses for Multi-Tenant and Real Application Clusters.

Why Does the Offer Apply Only to “Bring Your Own license”?

Oracle wants to keep customers locked into the same on-premises processor core licensing model. When you pay by the processor core, you pay ALL the time regardless of actual usage.

  • You pay for test/dev licenses when no work is done on holidays and weekends.
  • You pay when production systems are idle after hours.
  • You pay for 30% utilization as much as other customers pay for 90% utilization.

A key economic benefit of cloud services is paying only for what you use either by the hour, storage, query, API call or reads/writes. With AWS Redshift, you simply pay by the hour or you can use Redshift Spectrum pricing and get billed $5 per terabyte of data scanned.

The Real Cost Comparison of AWS Redshift Versus Oracle ADW

We did our own cost comparison between AWS Redshift and Oracle ADW. We used the exact same AWS instances and storage Oracle quoted in their performance benchmark comparison at this link: – https://go.oracle.com/database-comparison-aws. This comparison reflects the typical database usage (24 X 7) and consequently costs likely to be incurred.

This 1-month consumption projection is based on AWS and Oracle website pricing at the time of this writing (Late Feb 2019). 1 month = 744 hours (31 days) continuous usage. Oracle price based on Pay as You Go. AWS price based on demand.

OCPU is assumed to equate to 1 core of a physical processor. vCPU is assumed to equate to 1 thread of 1 core of a physical processor. Storage has been matched based on available AWS instance-based storage. AWS EU (London) Region used. All figures exclude licensing.

As you can see, AWS Redshift is between 40% and 50% cheaper than Oracle ADW. Remember, no license costs were included. If we include license costs, Oracle’s costs go up by $40,500 / core (multi-tenant + RAC) and $52,000 / core (standby) starting June 1st, 2019.

Conclusion

AWS cut their prices 70 times since 2006. That’s an average of 5 price reductions every year. They can do this because they operate at such a massive scale, they command the highest volume discounts from suppliers. Amazon buys hardware not only for the millions of AWS customers but also for their e-commerce business. A business that processes 51% of all US e-commerce transactions. At their meteoric rate of growth, they can afford to pass these savings on to customers and still make a margin. Growth drives down cost per customer which drives down prices leading to more growth.

Oracle is trapping customers. There are no price reductions and no savings. With Oracle, you get shafted, guaranteed.

References

Oracle’s Autonomous Database Cloud service offering and guarantee here.

Oracle PaaS and IaaS Universal Credits Service Descriptions here.

Screenshot from Oracle’s ADW service descriptions (a near-identical description is also present for the Oracle Autonomous Transaction Processing)

Oracle Autonomous Data Warehouse Pricing used (25th February 2019)

AWS Pricing Used (25th February 2019)

The Problem: A Lack of Fact-Checking of Oracle

There are two fundamental problems around Oracle. The first is the exaggeration of Oracle, which means that companies that purchased from Oracle end up getting far less than they were promised. The second is that the Oracle consulting companies simply repeat whatever Oracle says. This means that on virtually all accounts there is no independent entity that can contradict statements by Oracle.

Being Part of the Solution: What to Do About Oracle

We can provide feedback from multiple Oracle accounts that provide realistic information around a variety of Oracle products — and this reduces the dependence on biased entities like Oracle and all of the large Oracle consulting firms that parrot what Oracle says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. Oracle and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. This is how companies end up paying for items which are exorbitantly priced, exorbitantly expensive to implement and exorbitantly expensive to maintain.

If you need independent advice and fact-checking that is outside of the Oracle and Oracle consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Oracle Cloud Content

References

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Our 2019 Observation: SAP Leonardo is Now Dead

Executive Summary

  • SAP made enormous claims around Leonardo. Several years after, these claims are so false.
  • Find out the current state of Leonardo.

Introduction

SAP Leonardo is part of a broad issue at SAP regarding failures with new product introductions.

October 2018: The Stock Drops 14%

Immediately after 3Q 2018 regulatory filing with the SEC, SAP stock dropped 13.83%. SAP SE (NYSE:SAP) declined 9.36% since February 2018 and is downtrending. It has underperformed the S&P 500 by 9.36%.

A year-long downtrend is too long to be seasonal.

In SAP’s case, analysts and investors see a problem with SAP’s product vision. Brinker Capital decreased its stake in SAP by 34.5%. SAP’s innovation centers around the “intelligent enterprise”. This innovation was expected to drive growth from products like S/4 HANA, Leonardo IOT and AI, and the SAP cloud platform (SCP).

  • None of these product lines, despite massive marketing spend, gained material market traction over the past 2 years.
  • On the opening day of the SAP UK and Ireland user group conference in Birmingham on November 2017, a survey revealed that only 2% of SAP’s customers intend to use the much-trumpeted Leonardo artificial intelligence (AI) initiative, and 43% were unaware of its
  • Leonardo kept changing its primary scope starting as as an IoT platform then morphing into predictive analytics and then AI.

Is Leonardo for IoT or for analyzing Videos with Machine Learning? Is it all just the same thing?

January 2019: 4,400 Employee Layoff

The announcement said SAP will replace 4,400 employees with people who have artificial intelligence and machine learning skills. In other words, SAP is going to hire thousands of data scientists. That is all lot of hiring for a product area where SAP has a negligible footprint. Companies double down when they see signs of demand growth, not the other way around.

February 2019: SAP Announces Departure of Bernd Leukert

According to his LinkedIn profile, Leukert heads strategic innovation initiatives at SAP. His role is driving the development of new growth opportunities for SAP in the area of the Internet of Things (IoT) and Industrie 4.0. He was the Godfather of SAP Leonardo and the concept of the intelligent enterprise.

Bernd gets into Leonardo 8 minutes into this video. Notice that Leonardo is connected to everything: Big Data, machine learning, and SCP. Nothing Bernd said about Leonardo turned out to be true.

February 2019: SAP Announce Partnership with Microsoft Azure IOT

At the MWC, SAP announced that SAP Leonardo will leverage services from Azure IoT, including Azure IoT Hub and Azure IoT Edge, to provide access to secure connectivity at scale, powerful device management functionality, and industry-leading edge computing support.

Connecting the Dots

SAP is resetting its product strategy. Leukert left SAP with immediate effect and Michael Kleinemeier got an extension of his contract until 2020. S/4 real adoption is estimated at around 5% and HEC is one foot out of the door. Leonardo is a complete flop and is no longer mentioned even by SAP’s mighty marketing machine. The layoffs are a global cull of underperforming teams across S/4HANA, HEC, SCP, and Leonardo product groups. SAP has decided to use Microsoft Azure for IoT instead of pursuing further Leonardo development.

Comparison of Brightwork Versus Other Sources on SAP

We have repeatedly pointed out that most other sources on SAP are unreliable. All of the SAP consulting companies helped SAP lie to customers by making something that was nothing (Leonardo) into something. The following is our analysis of one typical article from the SAP consulting company Bluefin Solutions.

Bluefin Solutions has been the source of an enormous amount of information around HANA and S/4HANA. Bluefin Solutions published an article by Brenton O’Callaghan. In this article, we will review the accuracy of this article on Leonardo.

Global Head of SAP Leonardo?

Bluefin Solutions has a history of giving exalted titles to individuals. This was the case when John Appleby was the “Global Head of HANA” before being promoted. This has occurred again with Brenton O’Callaghan being called the “Global Head of Leonardo,” and having this title featured prominently at the top of the article. This is misleading because SAP has very little business from Leonardo, and it is unlikely that Brenton O’Callaghan has many projects he is managing.

Leonardo will Speed Implementations

O’Callaghan begins by making a rather strange statement, implying that Leonardo, which is a solution for IoT and ML, will speed implementations of SAP that are not associated with Leonardo.

“SAP implementations are long, arduous, inflexible and costly, always have been, always will be”. Think again. Brenton O’Callaghan looks at why SAP Leonardo is setting a new level for all SAP implementations. As I reflect on SAP Leonardo, and the methodology it employs, I can’t help but feel that it was an inevitable evolution of the SAP world. I’d go as far to say that I suspect we’ll soon stop talking about it as a ‘thing’ and simply start living it in all aspects of SAP implementations.”

It is unclear what is this methodology that is specific to Leonardo or how it is so special. Even if the company does not implement Leonardo will this supposed benefit of methodology be accessible to the other applications? If not, why not?

Because of Leonardo, SAP/Bluefin Solutions Will Now Listen to the User?

“What we’re talking about, when we say Leonardo, is putting both the user and the business before the technology. It challenges us to listen to the user before proposing a solution and to be more imaginative in how we approach those solutions. At its very simplest level, it ensures we put the user at the center of our enterprise solutions, delighting them through simplicity and efficiencies that we expect today from any consumer application.”

This is an interesting admission. It implies that prior to Leonardo SAP and their consulting partner network did not listen to users before proposing a technology. That would be news to hundreds of thousands of SAP consultants working in SAP for decades.

SAP is Disrupting Itself

“Leonardo now gives us a tangible way of articulating a mentality shift that frankly must be applied to the SAP world. This is SAP disrupting themselves before somebody else does – and isn’t that what this is all about anyway! As my good friend, DJ Adams would say – disruption to allow disruption – that’s very meta!”

This quotation is wrong in several ways. First, SAP implementations look about the same as when I started working in SAP in the late 1990’s. The mentality has not shifted. As with most consulting companies, Bluefin Solutions seeks to leverage information asymmetries to extract the most out of their SAP customers, as do all SAP consulting firms I have been exposed to over the years. Secondly, someone is disrupting SAP, and it is not SAP. It is AWS.

Leonardo is the Focus of the SAP World?

“So yes, SAP Leonardo is the focus of the SAP world for now, and I believe it is going to be a part of every major SAP implementation going forward. However, I also predict that we will eventually start talking less about it and simply start living it instead…. Who knows? Perhaps one day I’ll be writing ‘SAP Leonardo is dead’ because it’s just an everyday part of SAP, and that wouldn’t be a bad thing.”

Leonardo was the focus (or one of the focuses) of the SAP world perhaps a year ago, but when this article was published by Bluefin Solutions in May of 2018, that had already not been true for a while. Leonardo was an emphasis point of SAP at SAPPHIRE 2017 (in June of 2017), but by SAPPHIRE 2018 it was barely mentioned. As for the “Leonardo Methodology” that is implied in the article where consultants now listen to users before recommending solutions, this is not even a discussion point on SAP projects.

This article contains so many problems. First, it tells the reader close to nothing about Leonardo, implying that its main value is as a methodology. However the author does not explain what this methodology is, instead merely implying that it is somehow not only good but transformational, and not only transformational to Leonardo implementations, but to SAP applications in general.

Conclusion

SAP Leonardo almost replaced HANA and S/4HANA as the primary marketing tentpole for SAP. Leonardo was the star of the 2017 SAPPHIRE conference but notably diminished in stature by the 2018 SAPPHIRE conference.

We predicted that Leonardo would fail way back in May of 2017 in Why Does Leonardo Seem so Fake? We covered some truly ridiculous claims around Leonardo in the article How Accurate Was SAP Saying Leonardo Ensures Frozen Ice Cream Delivery?

The marketing noise around Leonardo died. Now, it looks like the product that never was.

What to Do About Leonardo: Being Part of the Solution

There are two fundamental problems around Leonardo. What SAP said about Leonardo never made any sense. And secondly, the large SAP consulting firms promoted Leonardo as they normally just repeat whatever SAP says.

Accenture, as with all of the other firms lied to their clients about Leonardo. Very few companies actually tried Leonardo, but those that did failed, and Leonardo is now dead.

HG Insights estimates 125 companies using Leonardo globally.

The Importance of Fact-Checking SAP

We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. SAP and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. This is how companies end up paying for a database which is exorbitantly priced, exorbitantly expensive to implement and exorbitantly expensive to maintain. When SAP or their consulting firm are asked to explain these discrepancies, we have found that they further lie to the customer/client and often turn the issue around on the account, as we covered in the article How SAP Will Gaslight You When Their Software Does Not Work as Promised.

If your company was lied to about Leonardo by SAP, reach out to us with the messenger in the lower right hand corner.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

References

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Why Oracle Cloud is Not Multi-tenant

Executive Summary

  • Oracle has made some curious claims regarding Oracle Cloud’s multitenancy.
  • In this article, we review the problems with these claims.

Introduction

Oracle very frequently compares its Oracle Cloud to AWS and to GCP and Azure. Notice the table below.

Comparisons like this assumed that each of the items is comparable. However, Oracle Cloud is not comparable to any of the major clouds. One reason is that Oracle Cloud is not self-service, as we covered in the article The Problem with Oracle OCI’s Machine Sizing. Another problem is that Oracle is not multitenant, while the other cloud service providers are. 

What is SaaS According to Oracle?

What Oracle calls SaaS is actually hosted on-premise products none of which are multi-tenant. Multi-tenancy permits a vendor to apply a software upgrade once and have it automatically work for dozens or hundreds of customers simultaneously. In a single tenant solution, the software vendor must apply the changes one customer at a time. The latter approach is very expensive and potentially error-prone. This explains the high frequency of outages experienced by Oracle cloud customers, especially for Oracle apps which we covered in the article The Problem with Oracle Cloud and Colocation.

The Example of Oracle EPM Cloud

The Hyperion suite includes planning (HPL), financial management(HFM), BI+, and uses Essbase as the database. Essbase is not a multi-tenant database so each customer has their own schema. When Oracle applies an upgrade, each customer must be upgraded individually because the customers don’t share a common (multi-tenant) database. Moreover, because the product is a single-tenant solution, different customers are on different versions of the product.

This means that patching and upgrading must be done individually because each version has a different patch and upgrade files.

Oracle and SAP on-premises apps are all single tenant. Between 10 customers you may have 3 or 4 different versions, 2 web servers, 2 different IAM solutions, etc… So each customer has a unique configuration, including a different database and even 2 customers using Oracle may be using different versions. one on 9i and the other on 11.

Conclusion

Oracle provides more false information about cloud that accurate information. And the issue of multitenancy is another area where Oracle pretends their clouds is like other cloud service providers but actually is not.

The Problem: A Lack of Fact-Checking of Oracle

There are two fundamental problems around Oracle. The first is the exaggeration of Oracle, which means that companies that purchased from Oracle end up getting far less than they were promised. The second is that the Oracle consulting companies simply repeat whatever Oracle says. This means that on virtually all accounts there is no independent entity that can contradict statements by Oracle.

Being Part of the Solution: What to Do About Oracle

We can provide feedback from multiple Oracle accounts that provide realistic information around a variety of Oracle products — and this reduces the dependence on biased entities like Oracle and all of the large Oracle consulting firms that parrot what Oracle says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. Oracle and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. This is how companies end up paying for items which are exorbitantly priced, exorbitantly expensive to implement and exorbitantly expensive to maintain.

If you need independent advice and fact-checking that is outside of the Oracle and Oracle consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Oracle Cloud Content

References

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

The Problem with the Oracle Cloud and Colocation

Executive Summary

  • Oracle presents the Oracle Cloud as if it is a competitive cloud offering.
  • In addition to functionality shortcomings, Oracle Cloud has location shortcomings as well.

Introduction

It all started with a conversation. The customer was angry. I listened, asked a few questions, and decided to investigate. You can read the customer story in his own words here.

The problem is repeated outages with Oracle cloud. Why so many and why do they last so long? Also, the standard practice with AWS, GCP, and Azure is that outages are compensated with service credits. Why are Oracle’s cloud outages different? Why don’t they come with cloud credits!

We decided to investigate and answer three questions:

  • Why does Oracle cloud have an unusually high number of outages?
  • Why do outages last so long?
  • Why customers don’t receive service credits for these outages?

Let us go over each item.

Why Does Oracle Cloud Have an Unusually High Number of Outages?

Oracle cloud is offered in 5 locations: Phoenix, Ashburn, London, Frankfurt, and most recently, Toronto.

Are these data centers owned or operated by Oracle?

The answer is NO.

These are all leased colocation facilities owned and operated by Digital Reality and Cologix. You can read the announcements by these colocation operators in the links provided. Oracle also uses Equinix and other interconnectivity providers. Here’s the announcement from Digital Reality:

And the recent announcement for the Toronto facility from Cologix:

Oracle cloud is entirely made up of leased colocation facilities operated by third-party providers. These third party providers have their own maintenance schedules for systems maintenance, updates, and upgrades. They also experience their own frequent unplanned downtime. Third party downtime adds additional downtime to Oracle’s own planned and unplanned downtimes. Customers have to deal with downtime from Oracle PLUS downtime from third-party colocation providers. This explains the Oracle Cloud’s high frequency of outages.

Why do Outages Last So Long?

When something breaks, there’s no single throat to choke. Oracle support blames the colocation provider and the provider turns around and blames Oracle. The provider often blames an ISP or the interconnect operator. Too many moving parts and no single ownership. This makes problem resolution extremely difficult and time-consuming. Keep in mind that these third-party providers don’t have a private fiber network connecting their facilities to other provider facilities. All communication has to go through the public internet. With so many cross-connects with backbone and regional networks, troubleshooting problems get exponentially harder and take much longer.

Why Customers Don’t Receive Cloud Credits for Outages?

There are two reasons.

First, Oracle cloud SLA doesn’t recognize outages caused by third parties as eligible for service credit. This applies to metered and un-metered services as you can read on page 5, section 3.3, The Definition of Unplanned Downtime.

When downtime, planned or unplanned, is caused by a third party provider, customers get no service credits.

Secondly, Oracle does NOT credit customers for Oracle’s own planned maintenance downtime. It actually says that in the Oracle cloud policy!

This means that downtime caused by Oracle maintenance, updates, and upgrades either for Oracle OCI or customer specific environments doesn’t count toward any customer service credits.

Conclusion

The problem with Oracle’s cloud is Oracle’s low level of commitment to the cloud. This is clear from Oracle’s anemic CAPEX spend on cloud infrastructure compared to other providers like AWS, Microsoft, and Google.

Instead of building and operating their own data centers and private fiber network, Oracle leases colocation facilities from different operators. This introduces a number of problems for customers such as the one showcased here. Namely, an unusually higher number of outages and much longer resolution times. Moreover, Oracle cloud customers do not receive service credits for either planned or unplanned downtime.

The Problem: A Lack of Fact-Checking of Oracle

There are two fundamental problems around Oracle. The first is the exaggeration of Oracle, which means that companies that purchased from Oracle end up getting far less than they were promised. The second is that the Oracle consulting companies simply repeat whatever Oracle says. This means that on virtually all accounts there is no independent entity that can contradict statements by Oracle.

Being Part of the Solution: What to Do About Oracle

We can provide feedback from multiple Oracle accounts that provide realistic information around a variety of Oracle products — and this reduces the dependence on biased entities like Oracle and all of the large Oracle consulting firms that parrot what Oracle says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. Oracle and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. This is how companies end up paying for items which are exorbitantly priced, exorbitantly expensive to implement and exorbitantly expensive to maintain.

If you need independent advice and fact-checking that is outside of the Oracle and Oracle consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Oracle Cloud Content

References

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

How to Treat Oracle Sales Reps as Passive Order Takers

Executive Summary

  • Customers frequently overestimate the helpfulness of Oracle sales reps.
  • We propose treating Oracle sales reps not as advisors or as a friendly entity, but as passive order takers.

Introduction

Oracle sales reps are set up as the go-to source for information about Oracle products, pricing, terms and conditions. In this article, we will explain why frequent interactions with Oracle sales reps is not only bad for your mental health but leads to inaccurate information.

What Do Oracle Sales Reps Know?

Oracle sales reps are hired for their ability to sell. Everything else is secondary.
Oracle sales reps will normally have never used an Oracle product and don’t spend much time learning about the experiences of their customers with different applications and databases that they purchased. I have worked with many Oracle reps, as a solution consultant and I don’t ask Oracle reps questions (except about pricing) they ask me questions. So it is odd that the customer sees the reps as a source of information (outside of pricing). As soon as a question is asked of a sales rep, they turn around and find someone they can ask. In fact, even pricing is often performed by a specialized pricing resource.

Inexperienced Generalists

  • The Oracle Sales Organization is Staffed with Inexperienced Generalists: Back in 2012, Mark Hurd spearheaded a corporate restructuring program to reduce the number of Oracle account contacts. In the past, customers had to deal with one sales rep for each of Oracle’s pillars: database, middleware, applications, engineered systems, and services. This was an inconvenience for customers who didn’t want to deal with that many reps from a single vendor. Mark’s program reduced this number from five down to one. Because of the enormous breadth of Oracle’s product portfolio, this single point of contact ended up being a jack of all trades, master of none.
  • College Hiring Program: The second change came with Mark’s college hiring program. Hurd launched this program in 2013 to hire thousands of college graduates straight from school to become salespeople. Since then, Oracle’s actively replaced so many experienced (expensive) sales reps with inexperienced (cheap) fresh grads as a cost-cutting measure to maintain operating margin against a sharply declining revenue growth. The competition from Microsoft and AWS considerably impaired database sales and the popularity of SaaS vendors like Salesforce and Workday hit application sales hard. SAP’s acquisition of SuccessFactors in 2011, Ariba in 2012, and Hybris in 2013 dealt a massive blow to Oracle application sales performance.

The end result is what we see today. A cheap, inexperienced sales rep hired straight out of college without field experience or industry knowledge. The majority are business administration and marketing communication majors without any computer science background or first-hand exposure to IT departments or project work.

Oracle’s Turnover of their Millennial Hires

Oracle’s sales reps are hired because they are cheap, not because they are experienced. Young people fresh out of college are attracted to the vendor brand name and run in droves to sign-up. However, so many don’t stay for long and most leave within 2 years. This high turnover rate means that Oracle reps are temporary commodities lacking both the field experience and the institutional knowledge required to provide customers with any kind of substantive advice.

Enforcing Oracle’s Predatory Practices

Oracle’s sales reps are compensated for enforcing Oracle’s predatory practices. Sales reps receive five to seven times more commission for cloud revenue. This financial incentive means that the quality of advice customers receive is highly suspect. Sales reps also conceal Oracle’s predatory tactics from customers

These include the following:

  • Changes to license terms that make it prohibitively expensive to run Oracle software in competing clouds. In 2017, Oracle quietly changed their core licensing factor (CLF) effectively doubling the license cost of Oracle database on AWS and Azure. Instead of pointing this out, Oracle reps claim that Oracle will cut your AWS bill in half, guaranteed.
  • Aggressive audits of software usage, known in Oracle sales as the Nuclear Option, in order to find opportunities to charge more. A developer may enable a debugging flag that requires a different license. A single flag like that can trigger millions of dollars in additional costs.
  • Policies that don’t recognize virtualization partitions in cloud environments. Though you may deploy your software to a two-core VM, Oracle may force you to license all 32 cores that are on that server because they don’t recognize the partitioning scheme as valid.
  • Demands for up-front lump-sum payments, called cloud credits, rather than pay-as-you-grow incremental payments. This pushes all of the risk to the buyer. The project you bought the software for may not work out but your money is gone. This model makes it prohibitively difficult and expensive to buy a small amount of software for an experiment that may or may not turn into a real product.
  • True-ups at the end of a contract, whereby Oracle charges you for what you’ve used above the contracted amount for the term of the contract. There are never refunds for what you’ve used below the contracted amount for the term of the contract.
  • Mandatory upsells of expensive consulting or other services or products.

Oracle reps treat customers solely as a source of revenue, rather than as a long-term partner.

What Do Oracle Sales Reps Know About Your Business?

One of the ideas of a sales rep is that they will know your business and therefore be able to recommend the right thing to you. However, Oracle is far too quota oriented for sales reps to fulfill this role even if they wanted to in other respects. With our clients, Oracle reps make repeated mistakes around the environments of their customers where they have already had operating Oracle systems for 10 or 15 years! How can this be? It sounds impossible, doesn’t it? Well, Oracle reps frequently turn over, and the knowledge of the customer’s environment dissipates. Everything the Oracle rep provides regarding the environment must be checked. It cannot be assumed that they have made the right estimations.

What is the Accuracy of Information from Oracle Sales Reps?

Low. Oracle is the lowest rated vendor in our Honest Vendor Ratings, tied with SAP.

This is for several reasons.

  • Oracle hires its reps without consideration for information quality.
  • Oracle sales reps are themselves provided with heaps of inaccurate information by Oracle.
  • Oracle’s marketing literature is quite inaccurate. For example, we can find large inaccuracies in any Oracle marketing document that is put in front of us.

Treating Oracle Sales Reps as They Should be Treated: As Passive Order Takers

Oracle sales reps lack the technical expertise or the objectivity to be used to tell you what applications or databases you should purchase from Oracle. As an example, the Oracle Cloud still has significant maturity issues, but you won’t hear anything about this from an Oracle sales rep. Oracle sales reps too consistently mislead clients that we have had to be trusted to provide insight to the prospect.

The Oracle sales organization is hierarchical and pushes sales reps to be a certain way, which is reactive rather than thoughtful. Oracle is far too responsive to Wall Street and to the quarterly earnings hamster wheel to place their customer’s interests ahead of their own.

All of this adds up why in the vast majority of situations we advise companies to treat Oracle and Oracle sales reps as passive order takers. Treating them this way is how they should be treated, and is what will allow the prospect to receive the best outcomes from the process. Ironically, the less that customers listen to Oracle sales reps, the better they tend to do with their Oracle investments.

Conclusion

This article is counter-intuitive. Customers are directed to “talk to their Oracle rep” but what do you find out when you do? Deloitte has to direct them because they are just a consulting arm of Oracle. Deloitte has a partnership agreement with Oracle, and they value their relationship with Oracle far more than with any one client. For this reason, the Oracle consulting companies stay away from offering any advice that might contradict Oracle or be seen as opposing their interests during the negotiation. The Oracle consulting companies are financially motivated to push their client to get all the information from Oracle. But we can say “wait, maybe you shouldn’t just “talk to your rep.” You need to go through the rep eventually, but you tell them what you need, they don’t tell you.

When we provide software selection support, we don’t spend much time talking to Oracle sales reps. We did not ask them questions when we supported them in pre-sales engagements, and we still don’t. We already have access to the Oracle information that we need, and our approach is to push interactions with Oracle to later in the process. And we don’t care what the customer buys, and make no more money if they buy A or B, or 2 of A vs. 3 of A. By telling Oracle what the customer wants to buy, it takes the inertia away from the Oracle sales rep. At that point, it simply becomes a question about price, timing and terms and conditions.

Post Article

Oracle sales reps and consulting companies will hate this article. They might point out that taking such an approach is not partnering with Oracle, and will not result in getting what you need. Our experience says otherwise. Both Oracle sales reps and consulting companies will dislike this article because it reduces their ability to control the account.

The Problem: A Lack of Fact-Checking of Oracle

There are two fundamental problems around Oracle. The first is the exaggeration of Oracle, which means that companies that purchased from Oracle end up getting far less than they were promised. The second is that the Oracle consulting companies simply repeat whatever Oracle says. This means that on virtually all accounts there is no independent entity that can contradict statements by Oracle.

Being Part of the Solution: What to Do About Oracle

We can provide feedback from multiple Oracle accounts that provide realistic information around a variety of Oracle products — and this reduces the dependence on biased entities like Oracle and all of the large Oracle consulting firms that parrot what Oracle says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. Oracle and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. This is how companies end up paying for items which are exorbitantly priced, exorbitantly expensive to implement and exorbitantly expensive to maintain.

If you need independent advice and fact-checking that is outside of the Oracle and Oracle consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Oracle General Content

References