How To Best Understand SAP as Legacy for Software Companies

Executive Summary

  • It is increasingly evident that SAP has a very high maintenance overhead and that the new products from SAP are worse than SAP’s ERP system.
  • The new concept for getting value from SAP is to use non-SAP applications with non-SAP infrastructures like AWS and Google Cloud.

Introduction to SAP as Legacy

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

The Flaw in the Current Interpretation of SAP

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

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

How Other Software Companies React

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

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

Software Vendors Effectively Following the Wedge

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

Yet does your company know SAP to widen that crack?

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

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

The Software Company’s Understanding of SAP

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

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

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

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

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

The MCA Solutions Story

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

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

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

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

So where are we close to 10 years later?

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

The MCA Application

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

SAP never demonstrated any competence with SPP.

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

For competing vendors, you cannot rely upon prospects to do their research on SAP’s products or the SAP products’ overall usage in the marketplace.

SAP’s Problematic or Dead Applications

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

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

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

The Problem with SAP’s Flexibility

SAP systems significantly reduce the flexibility of their customers. With indirect access, SAP can control which applications are connected to SAP applications. This dawning awareness of SAP’s inflexibility is highlighted in the following quote from the book SAP Nation 2.0.

“When ERP was in its heyday, CEOs and business executives wanted reliable and integrated solutions, so they seized upon ERP as the way to provide….Business stakeholders still want these same qualities, but now they assume that these qualities will be present in any software solution, and their requirements have switched to the twin concerns of lowering IT costs and seeking increased flexibility. A system that is not sufficiently flexible to meet changing business demands is an anchor, not a sail, holding the business back, not driving it forward.”

How the SAP Partner Program Censors Partners and Reduced Competition

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

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

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

SAP’s Leverage Over SAP Partners

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

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

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

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

The following are essential characteristics of the partner program.

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

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

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

The Importance of Software Vendors Knowing The Limits of Their Knowledge

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

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

How SAP Will Deal With its Customers that do Not Comply

If you do not show interest in buying SAP, you will most likely be subject to an audit.

Ray Wang describes this.

  1. “Open up dormant accounts. After pleasant introductions, new sales reps will use this technique to further deals.  Former sales reps agree this is a shake-down for cash technique.
  2. Drive sales through fear of audits. Audits are used to start the discussion.  Unsuspecting customers who no longer have context about the original contract may fear a breach of contract.
  3. Scare customers into making additional purchases. Threats are used to set expectations.  The vendors often waive the issue if the customer buys additional licenses as a “compromise.”
  4. Force compliance into new licensing policies. Vendors use this as a way to drive conformity to new license models.  The move from concurrent usage to named users was one example.
  5. Meet territory sales goals. Unscrupulous sales managers suggest this technique to meet their numbers.  Sales reps are told they are defending the vendors’ license rights.” – Ray Wang, Constellation Research.

Inappropriate Constructs in IT Decision Making for Companies Using SAP

Every SAP shop in the world is now following a faulty construct. It is a construct somewhat based upon the past, but which was always exaggerated, and it goes something like this.

SAP is a leading software vendor. We rely upon SAP’s new products to improve our IT capability. SAP’s applications are not always the best, but they connect back to the “mothership,” the ERP system. Therefore, whenever possible we will buy SAP.

This construct has been leading to bad IT software decisions at companies using SAP for over twenty years. The downsides of relying upon this construct are about to get worse. Here is why:

  1. Post-ERP Applications: SAP’s non-ERP applications have not been value-added to companies that implemented them. And we have several decades of data points on this fact.
  2. S/4HANA and HANA: SAPs new ERP system S4 is not compelling, and its new database, HANA, is not differentiated from the competition.
  3. SAP Support Decline: SAP support has dramatically declined in the past ten years and is now mostly outsourced to the lowest cost countries, pushing the maintenance burden to SAP customers. SAP now expects a 90% margin on the 23% basic support that it charges customers.
  4. Indirect Access and Other Trickery: Lacking the ability to meet Wall Street growth demands, existing SAP investments are increasingly a liability. This is because SAP intends to use its power, size, and legal muscle to use indirect access to either receive monies for ERP licenses or arm-twist purchases of uncompetitive applications.

This construct is reinforced by companies using SAP by both the IT department within the company. And the consulting company without. As the best decision becomes to migrate or diversify away from SAP, the IT department and the IT consulting companies push in the opposite direction.

Many IT departments place SAP above the interests of the business of the company they work for. This observation has come from many years of interacting with IT departments at companies using SAP. I have presented to numerous IT organizations the problems with various SAP applications that they purchased over the years, and I am invariably told that.

“The thing is Shaun, we are an SAP shop.”

Therefore, SAP customers should be on notice that your IT department will, in most cases, lack sufficient independence from SAP to represent the interest of the company they work for, and by the way, that pays their salary. How this was accomplished, at least the full story, is still a mystery to me.

  • The IT Department: The IT department and IT consulting companies had somewhat of a role, which will now increasingly serve as a barrier as the reduction in SAP investment begins.
  • Large IT Consultancies: As for the large IT consulting companies. They have hundreds of thousands of SAP consultants and investments in SAP and revenues from SAP. The only advice they provide for a large IT consulting company is to invest more in SAP implementation. The large IT consultancies have a business model to protect, and it will be protected. These companies are a major liability. Given this environment, what is the value of that advice exactly?


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

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

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

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

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

Note on the SAP xApps Program

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

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

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