SAP’s Recycled Indirect Access Damage Control for 2018
Executive Summary
- SAP has absorbed considerably negative pushback from customers since introducing indirect access.
- This lead SAP to engage in damage control by providing more deceptive information to customers.
Video Introduction: SAP’s Recycled Indirect Access Damage Control for 2018
Text Introduction (Skip if You Watched the Video)
SAP has just released new information regarding indirect access, which is best described as damage control by SAP after the highly negative response to indirect access from customers. SAP used several corrupt media entities that they control to get the word out and help them lie about how they have been approaching indirect access. Every one of these entities was paid off by SAP, or like ASUG, just a marketing front end for SAP. When interviewing SAP, these captive media entities pretended that they had no relationship with SAP. After strip mining customers with its fake indirect access concoction, Bill McDermott came up with the idea that SAP should be empathetic towards its customers and then lies about SAP licensing being separate from sales. SAP also makes several false claims about how SAP sold software in a pre-digital age. You will learn what SAP says in this damage control and our analysis of SAP’s damage control.
Our References for This Article
If you want to see our references for this article and other related Brightwork articles, see this link.
Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.
A Review of The Sources
I was first made aware of the official new information about indirect access from Jarret Pazahanick.
In his LinkedIn share, he provided links to the following entities.
- SAP
- Dennis Howlett (Diginomica)
- ASUG
- Vinnie Mirchandani
- ComputerWeekly
Before analyzing the content from various sources, let us review each regarding their relationship to SAP.
- Diginomica: SAP pays Diginomica. How much we don’t know.
- ASUG: ASUG has no independence from SAP, and ASUG is simply another outlet through which SAP releases the same information that can be found on SAP’s website.
- Vinnie Mirchandani: Was at one time independent of SAP, but later and as demonstrated in the book SAP Nation 3.0, switched to being controlled by SAP.
- ComputerWeekly: A fake journalistic entity that is simply the web front end for TechTarget’s marketing automation apparatus. Counts SAP as one of the many customers for its marketing automation information. This was covered in this article.
How SAP Creates an Echo Chamber
Our research into SAP has found that the entities that cover SAP are highly biased in favor of SAP. They almost all have financial ties to SAP, and they only rarely declare these financial connections (Diginomica is the only one in the list above that does).
This allows SAP to create an echo chamber and not to have its statements analyzed critically. SAP has the most advanced media manipulation apparatus that has ever existed in enterprise software. They are supported by almost all media entities but are supported by all major IT consultancies that have enormous SAP consulting revenues and who parrot whatever SAP says.
And here again, with this announcement on indirect access, we have almost all of the sources that were either funded by SAP or controlled by SAP (as in the case of ASUG).
Now that we have established the bias of the sources available on this topic let us get into the announcement analysis.
The SAP Indirect Access Announcement
As usual with all SAP press releases, the SAP announcement on indirect access is riddled with falsehoods.
Here are a few examples.
SAP Leading the Industry in Transparent Licenses and Pricing?
“SAP is shaking up the industry and raising the bar on software licensing practices by tackling ERP licensing for the digital age with new licensing practices, new rules of engagement for usage and compliance, and a new pricing model — all developed jointly with our customers, user groups, analysts, and influencers.”
Uuuuum……utterly false.
Along with Oracle, SAP is known for having the most confusing and extractive licensing in enterprise software.
We have the SAP pricing list/spreadsheet, and it is challenging to determine what the price of something should be. SAP account executives cannot price software themselves but must rely on internal pricing specialists. And that is before the discounts are applied, which is an entirely different topic.
SAP not only restricts its price list, but it declares that revealing its pricing is an actionable offense.
This is covered in the following article.
Where is the Published Pricing from SAP?
If SAP is so dedicated to transparency, why isn’t the new change to publish the Internet’s pricing list?
The answer is simple. SAP wants to create the impression of transparency while maintaining its long-held opaque pricing. For readers who like to see an example of pricing transparency…
See the PlanetTogether pricing page.
This is transparent pricing. You can tell exactly what you will pay.
Last we checked, PlanetTogether did not even employ any salespeople. True SaaS applications provide pricing transparency. This is yet another reason SAP is not cloud/SaaS. (Note: PlanetTogether does not bring indirect access claims against its customers)
SAP Built on Trusting Relationships with Customers?
“SAP built its business on long-term, trusting relationships with its customers. To address this, we listened to extensive customer feedback and thoroughly reviewed our processes and practices around indirect access. As a result, SAP is introducing new organizational and governance changes to further consistency in our sales and audit practices.”
False. And a backdoor brags to boot.
SAP has this pattern where they combined false information about their history that you are forced to read through to get to the actual meat, which is disrespectful to the reader. Imagine if I made my readers wade through a bunch of false claims that I had a.) Won a Nobel prize, b.) Finished 2nd in Figure Skating at the Sochi Olympics, c.) Was voted the best dancer in San Diego County.
Also, for a supposed relationship based upon so much trust, we have documented an enormous number of lies told by SAP to their customers over the years, as you can verify for yourself in our A Study into SAP’s Accuracy.
Indirect access is one of the most brazen examples of illegally harvesting and misleading a customer based on the history of enterprise software.
Are SAP Sales Separate is Now from Auditing?
“We are imposing a separation between license sales and license auditing, both from an organizational and from a process-governance perspective to promote objectivity and neutrality. Only the Global License Audit and Compliance (GLAC) organization will initiate, approve or terminate license audits.”
This will end up being false, but it is not the primary issue with SAP licensing.
First, let’s look at the reason for this statement.
This is SAP’s attempt to mitigate the perception that there is a complete lack of independence between sales and auditing — which happens to be true (there isn’t any). But, SAP does not use auditing the same way that the worst offender, Oracle, does. It has been known that SAP uses indirect access claims when the account manager has determined that they are not getting as many sales out of the account as they think they should.
The bigger issue with SAP is how indirect access is applied…..not auditing. And indirect access is entirely at the discretion of the account executive along with their VP. That is, it is a sales decision whether to bring an indirect access claim against a company. Indirect access has one purpose — to scare SAP customers away from purchasing non-SAP software.
Therefore, ultimately all auditing, indirect access is quite obviously tied to sales targets.
What SAP is Doing With This Announcement?
Ahmed Azmi made the following observation about the announcement.
“This issue isn’t going anywhere because SAP keeps trying to mislead everyone.
“This is NOT indirect access. This is third party access tax. Even in the “new” model, a PO triggered by Salesforce CRM is taxable but the same PO triggered by Callidus isn’t. The tax applies only to third-party product access. An indirect SAP product access is exempt.
This is a tax on third-party software. It has nothing to do with business value. It’s anti-competitive and will only make customers’ SAP estate radio-active.”
Ahmed is 100% correct in this observation. And his labeling of the SAP estate as “radioactive” contributes to the framework of interpretation of indirect access.
Ahmed noted that SAP has most of the people writing on this topic using their vernacular and definitions. Indirect access is not a non-SAP system calling functionality or data in SAP. That is called application integration.
SAP uses new applications like IoT and CRM to posit that this creates a new issue of applications accessing their systems, but that is a smokescreen. This is designed to trick people who are not technologists as to the reason for coming up with the falsely repurposed term indirect access. Indirect access has a specific definition, which we covered in this article.
The Definition by SAP?
And it is not the definition that SAP is using. SAP’s definition of indirect access is undifferentiated from application integration.
SAP’s sequence of dealing with indirect access looks like this.
- Step 1. Introduce a false construct perverting the definition of the term indirect access to mean, as Ahmed observes, a “third party access tax.”
- Step 2. Receive blowback from using this anti-competitive tactic in both lawsuits and pressure sales.
- Step 3: Attempt damage control by releasing additional false information, with proposals that the new false information is in the customer’s best interests.
Damage Control 2.0
This is also not SAP’s first attempt at damage control. At the previously SAPPHIRE, SAP introduced a new policy regarding indirect access and a white paper on indirect access, which we analyzed in this article.
Bill McDermott gave a highly deceptive presentation regarding indirect access widely applauded by the SAP echo chamber. Bill McDermott cynically stated that SAP needed to be “empathetic towards customers.”
SAP released a new pricing structure for transactions hailed as a positive development for customers by SAP’s compliant and paid-off media echo chamber.
These entities never questioned why any customer should have to pay anything for what is undeniably application integration.
The Framing of the Announcement by Diginomica
One of the articles that covered this announcement was by Diginomica. Some of the coverage in this article seemed even-handed. Still, there are several problematic statements by Diginomica which have to make one wonder how much SAP’s financial contribution to Digninomica affected its coverage.
Here are some examples.
SAP’s Claims Regarding Indirect Access are True?
“Until around six-seven years ago, IA to SAP systems was a non-topic. SAP claims that IA has always been part of contractual arrangements and therefore customers were on the hook for IA licensing costs.”
SAP claims this, but it is not true.
SAP had indirect access in its contractual arrangements, but SAP deceptively changed the definition of indirect access to mean something else than its agreed-upon meaning.
This is why the often declared advice offered to SAP customers to “check their contracts” is not helpful. The answer is not in the contract. The answer is in the perverted definition of indirect access.
SAP’s Previous Policy Was Pre-Digital Age?
“The problem is that this policy developed during a pre-digital age. It is easy to see how in modern systems landscapes, where we’re talking about machine-driven data input, that the number of ‘users’ could explode. From SAP’s perspective, that didn’t matter. The contract says ‘user’ (with numerous and lengthy definitions), and that was an end of it.”
When was SAP selling software that was in a pre-digital age? SAP never sold a general paper ledger. There was no pre-digital policy that SAP’s license covered. SAP has always been a software company. Software and the data it creates are stored digitally. It is not stored any more digitally in 2018 than when SAP became very popular in the 1980s.
This commentary about SAP developing pre-digital age policies is misdirection and deception, pure and simple.
Second, what is machine-driven data input? Is that application integration? Sounds like it.
- When did SAP not have application integration?
- Also, why would it cause the number of users to explode?
There is no evidence of greater uncompensated usage due to any new technology change.
When SAP was first purchased, it was integrated with the legacy systems of its customers. Right from the first implementation. (oh yes, and even R/2 was…….say it with me now, “DIGITAL”)
Indirect Access as a Virtual Non Issue
Something which apparently few are interested in bringing up is that true indirect access is only very rarely an issue.
Indirect access is when a company uses a UI to circumvent the named users on the software. It is so infrequently an issue that almost no one today actually knows its true definition. In fact, no other vendor but SAP bothers worrying about it. We are quite serious. Try to find another vendor that enforces indirect access claims. We are aware of one other who tried to copy SAP, but they were too small, and they failed to enforce not true indirect access but SAP’s perverted definition of indirect access.
We can count our hand the number of times we have heard of this as an issue, and all the cases were with companies based in Asia.
SAP Consultants Are in a Quandary Regarding Who’s Interests to Prioritize?
“Consultants and advisors were equally in a quandary because it became difficult to adequately advise customers considering alternatives in areas like CRM, non-strategic sourcing, and HR. This was especially true where customers were considering IoT projects where the number of connected devices that could trigger an SAP transaction was often unknown.”
This is also false.
SAP partner consulting firms only implement SAP projects. I have worked with these companies for the better part of 20 years. I have never run into a single company that ever served as anything but a repeater of whatever SAP said. They have repeatedly shown no concern for their clients and may as well be the consulting arm of SAP. Most of them compete with how much they can show their subservience to SAP. Secondly, their subordination to SAP on messaging is spelled out in the partnership agreement.
Therefore the idea that consultants and advisors are in a “quandary” is just false. They take the side of SAP in nearly all cases. In fact, we have several documented examples of SAP partner consulting companies hiding indirect access liabilities from customers. (it would have reduced their potential to make the sale, so better to keep it quiet).
Is SAP Scrambling to Come Up With Solution to Indirect Access?
“In our yearlong conversations with SAP, it is clear that despite the problems, the company was busy scrambling to find a solution that would be fair on all sides, handing this unenviable task to Hala Zeine, with whom I’ve had the most contact.”
Really?
Let’s take a step back.
Indirect access is an illegal and false claim of usage on the part of SAP. And Diginomica’s impression after speaking with a major funder of theirs is that SAP is “scrambling to find a solution that would be fair on all sides.” SAP is “scrambling” for a fair solution — to redress is a policy that is both based upon a bed of lies and is illegal as it violates the tying agreement clause of US anti-trust law? (as we cover in this article)
Is this what we are supposed to believe?
We have a way to redress this issue immediately. SAP could, for example, stop enforcing the illegal sales tactic called faux or Type 2 indirect access.
All of this is a bit like saying that a man who abuses repeatedly abuses his wife is “scrambling” to find a solution to the problem of spousal abuse. The fastest way to do this is to stop punching his wife in the face.
SAP “Believes XYZ” Now Considered Evidence?
“Today, SAP believes it has come up with a fair answer and the noises coming from SUGEN and other user groups are encouraging.”
Does SAP believe? As in Trump, believes that 3 million illegal aliens voted in the US Presidential election?
How would this sentence work in the opposite?
Would, for example, SAP ever say that “we believe we have come up with a completely unfair answer?”
Probably not, right?
SAP Is Often Not Fairly Compensated for Its Value?
“SAP still wants to be paid where it thinks it adds value. Whether that is real or imagined is a whole different story, but it does mean a fundamental shift in the way this topic is priced.”
SAP has $23 billion in yearly revenues. Is getting paid a habitual problem for SAP? If so, it is the first we have heard of it.
In fact, the evidence works in the opposite direction. We have observed and documented numerous cases where SAP and their consulting partners should offer refunds to companies for failed software.
This includes software that should never have been released or purchase. Here are some examples:
- SAP EWM
- SAP SPP
- SAP SNC
- SAP TM
- SAP PP/DS
- SAP PLM
- SAP SRM
- SAP CRM
- SAP BW
This is an abbreviated list, but all of these products are so deeply flawed they either fail or they add extremely little value for the companies that use them. In our Study Into S/4HANA Implementation, we found that SAP had lied to numerous companies about the readiness of S/4HANA and that those implementations almost all failed.
What about the value promised by SAP with these applications and other applications that are either complete write-offs or long-term maintenance money pits? We still get requirements for recruiters for SAP applications skills that have no hope of being taken live.
Why?
How the SAP Consulting Market Works
Because they continue to be recommended by Deloitte, Accenture, Infosys, etc.. they could not care less if any application is ever taken live, so they recommend SAP applications where they can bill customers. No matter how many times the big consulting companies fail, they will always be included in the next round of selection because customers think they need a big name consulting company. This is an unbreakable feedback loop that removes the major consulting companies from success in implementations.
Many implementations would have been successful if the non-SAP software had been selected (implementations tend to be more successful when the software is functional).
In fact, it is difficult to find more waste than in the SAP ecosystem. And one does not exist because there is no other software vendor that enjoys the continued support and protection of the most influential and corrupt consulting companies.
We argue and can demonstrate that SAP is hugely overpaid for the value it adds to companies.
Therefore, SAP can say whatever it likes, that they believe this or believe that they believe the moon is made of green cheese, but Diginomica should not repeat what SAP says without critique.
SAP Account Executives Can No Longer Initiate Audits?
“The much hated ‘surprise’ audit is going away. SAP has explicitly split audit and sales from one another. This means that while routine audits are a part of ongoing contractual obligations, EAs cannot initiate an audit because sales are not part of the audit organization and vice versa.”
And we previously stated, we found this highly unlikely to be true. But Diginomica states this as a fait accompli.
How does Diginomica know if this is true? The ink is not dry on the statement, and it is now in the rearview mirror?
SAP Believes Account Executives Act With the Customers’ Best Interests in Mind?
“In closed conversations, SAP has made clear to me that while it believes the vast majority of EAs act with the customers best interests in mind, those who violate SAP’s audit policy will be punished. If that means letting go of an otherwise rock star performer then so be it.”
Really?
What a thunderbolt courtesy of Diginomica! That access is really paying off as Diginomica is truly sharing the inside scoop with us mere mortals.
Would SAP admit that the vast majority of its EA’s do not act in the customers’ best interests? If not, then what is the point of this sentence? It is axiomatic and therefore carries no information.
Rest assured, no rock star performers will be let go — SAP has repeatedly demonstrated that it does not care about anything but money.
How SAP Will Monitor Their Customers
The following observation is from Voquz, a company that supports SAP customers in license matters.
“Starting November SAP will automatically begin measuring customer’s usage of the nine document types via their USMM tool, which SAP mandates customers run annually for self-declarations. The ability to discover IDA puts SAP in an unprecedented position to force non-compliance discussions as a routine step with all customers. In an official document from last week titled “SAP Global License Audit and Compliance Update”, SAP lays out its framework for future IDA License Fee enforcement. In their latest update, SAP also proclaimed that they separated Sales Teams from Audit Teams to prevent abuse. In reality, the criteria above will trigger audits as routine follow-ups based on your interactions with SAP’s Sales Team. an SAP-initiated License Exchange will override potentially beneficial terms from your old contract which creates additional audit opportunities for SAP, you’ll start paying for IDA when you haven’t in the past, and odds are high you will be rushed into an unsolicited S/4 migration project.” – Sebastian Schoofs
This is an excellent analysis by Sebastian and Voquz.
If we look at the vast majority of coverage on this announced new policy, most of the entities in some way drew income from SAP. SAP announces something completely antithetical to how they have always operated concerning pricing, offering transparency. One analyst compared the new pricing as a “stepping stone to Oracle Cloud and AWS pricing,” even though SAP’s pricing is entirely secret. That is under both the old plan and the new plan.
How can this be similar to AWS or Oracle Cloud if the vast majority of SAP’s revenues still come from on-premises software? But that is the least of the problems with the proposed analogy. AWS (and to a far less degree Oracle Cloud) publishes its pricing. See this link.
See the monthly AWS calculator.
A New Definition of Transparency, Opacity
And what does SAP say about the new prices? According to CIO, which is owned by the ruthless media conglomerate IDG and is paid by SAP and overall SAP toadie.
“With this new model customers have a choice. They can remain as they are today with their existing contracts and pricing, but if they would like to modernize their pricing and move to a more predictable and transparent approach, then they we would recommend this new pricing. We will work with each customer individually.”
Transparent?
“SAP won’t say what bundles will be available, nor how much they will cost: The final price will depend on volume and customer discounts.”
Right. SAP will extract the maximum amount of money from each account based on how good it is in negotiating. SAP has always had secret pricing and will continue to do so.
Comparing this pricing to AWS is missing on the topic of transparency of published pricing, the invasiveness to the customer, ease of access to pricing information, and SAP’s pricing history. But if you are within SAP’s orbit or reality distortion zone, this apparently makes some type of sense.
As for being a stepping stone, SAP can publish all of its pricing right now. There need be no intermediate stones to step upon.
All of this brings up the following question.
When Does Secret Pricing = Transparency?
Here is when.
Secret Pricing = Transparency
….when you are paid directly by SAP or consult in SAP and place SAP’s interests ahead of your client’s interests.
Indirect Access to Coerce Purchases of Lagging Products
A major aspect of indirect access is driving customers to products that SAP is on the hook to show gains to Wall Street. These are trumped-up poor value products that you can’t make any value argument for (S/4HANA is still incomplete, and HANA is worse than what it would replace). And forget the customers. Let’s focus on what is important.
McDermott and Enslin and Luca Mucic, and many others at SAP have large numbers of stock options they must exercise at a high price because checking Outlook, lying, and attending meetings must be compensated. But for these special snowflakes to accomplish this task, they must fake it. This is because of their over projections to Wall Street.
See this article which explains the expectations they have created with the financial analysts.
Operation Coercion
SAP can’t get these numbers by selling S/4HANA and HANA to customers even with enormous exaggerations in the “old fashioned way” (i.e., without indirect access coercion).
Therefore as observed by this article by Voquz, they need to coerce purchases. And the best way to do so is to pretend that SAP is “moving towards transparency” and make an announcement that amounts to damage control, to recast indirect access in a positive light, and as part of choice and openness.
Conclusion
This release of information is riddled with falsehoods and is primarily being analyzed by entities financially tied to SAP. As one would predict, the media entities’ coverage runs the gamut between highly SAP deferential to somewhat SAP deferential. So far, Voquz has been the only one that provided a detailed analysis of the policy and what it actually means. There are extremely few entities — such as Brightwork or such as Vinnie Mirchandani that will outright challenge SAP and call them out for their behavior (and in this case, Voquz).
We predict that this new policy will fail. It is very complicated to implement and has several booby traps. The types of usage pricing that AWS implements make sense. But this entirely secret pricing policy does not. This policy invites SAP into the customer’s environment to subject them to more monitoring, which is the last thing that any customer would want.
Customers should want to keep SAP as far away from their environment with as little information about the environment as possible. (SAP’s support is of so little value at this point that this can mean reducing the opening of tickets).
The more SAP knows, the more power is handed to them in finding ways to charge the account.
The Problem: Secrecy Around Indirect Access
Oracle, SAP, and their consulting partners, ASUG, and the IT media entities all have something in common. They don’t want indirect access understood. Media outlets like Diginomica are paid to distribute PR releases as articles, as we covered in the article SAP’s Recycled Indirect Access Damage Control for 2018. The intent is to lower SAP customers’ concern around indirect access so that indirect access is underestimated, as we covered in the article The Danger in Underestimating SAP Indirect Access.
The primary providers of information in the SAP space are all financially linked to SAP. SAP does not want indirect access understood, so these entities do as they are told by SAP.