How Real is SAP’s Intelligent Enterprise?

Executive Summary

  • SAP introduced the concept of an Intelligent Enterprise as a major driver for its software.
  • We answer where this concept originated and how valid it is.

Introduction

The term intelligent enterprise is an outgrowth of the current obsession and hype around the term artificial intelligence. The term is problematic because it contains essentially a virtue within its name, and so thus like terms such as “smart bomb” or “smart watch” it tends to be self diluting over time.

But let us keep an open mind and review what SAP says about its Intelligent Enterprise offering.

Straight From SAP….or That is ASUG

We found several articles about the SAP Intelligent Enterprise from SAP, but we thought the article published at ASUG’s website was the most understandable. SAP marketing writes most of ASUG’s material, os when something is published at ASUG, it should be considered approved by or entirely written by SAP.

Let us take a look at how the article begins.

Intelligent Enterprise is for Next Generation Businesses?

Technology pundits, industry analysts, and enterprise technology providers are fond of sharing their visions for how next-generation businesses should operate. At the 2018 SAPPHIRE NOW and ASUG Annual Conference, SAP introduced its own vision, described as the “Intelligent Enterprise.” But what does this term really mean? And what does it mean for SAP customers?

Right off the bat, we now define one virtuous term, intelligent enterprise, through endorsing that it is what “next generation” businesses use. What is a “next-generation business?”

This is another reference to “something good.”

The logic goes something like this.

Good Item is Used….Only by Excellent Entities

This simply builds a series of positively associative assertions, things that are good are connected to other things that are good, which of course is all connected back to SAP.

Data-Driven Accelerated Outcomes?

SAP defines the term like this: “Intelligent enterprises effectively use their data assets to achieve their desired outcomes faster—and with less risk.” The speed comes from automating complex processes within the business and bringing them together around a united core of master data in the cloud.

Organizations need to buy into certain philosophies for this approach to work. SAP identifies four key enablers to the intelligent enterprise:

1. Customer-centricity

2. Data that drives differentiation

3. Digitized processes

4. A cloud-first approach

This is a bit generic. Several of these items are things that really no company would not admit to following, except perhaps being “cloud first.”

However, it does not ring true when SAP proposes this, because while SAP is aggressively cloudwashing its revenues as we cover in the article A Brightwork Warning on SAP’s Cloud Extension Program, most of SAP’s customers use their SAP applications on premises.

Business Processes + Intelligent Technologies?

When you consider SAP’s Intelligent Enterprise vision, it functions a little like a formula. It serves these key business processes through its intelligent suite of products:

  • Customer Experience
  • Manufacturing and the Supply Chain
  • Digital Core (ERP)
  • People Engagement (HR)
  • Network and Spend Management (procurement)

So SAP has very little customer experience business (read CRM). Yes, SAP customers use SAP for a lot of manufacturing and supply chain and ERP, and they use SAP for HR, and quite a bit less for procurement (SAP has little overlap between its ERP customers and its customers that use Ariba).

So all that we really have here is a statement of things that SAP customers use from SAP. There is nothing particularly different about this — and the same usage pattern could be documented 10 years ago on SAP accounts.

AI/ML/IoT/Leonardo

Then, where businesses want to apply intelligent technologies like artificial intelligence, machine learning, the Internet of Things (IoT), and more, they’re able to add those through SAP Leonardo. Finally, businesses need to go through the process of making sure their data is not only harmonized but moving much of it to the cloud, so they can manage it efficiently.

This is the obligatory or seemingly obligatory part of the article that mentions AI/ML. SAP has close to nothing to do with AI/ML, so we can throw those terms out.

Now we are left with IoT and Leonardo.

This article is written in 2018, but at this time Leonardo was already dead, which we officially declared in 2019 in the article Our 2019 Observation: SAP Leonardo is Now Dead. SAP has basically stopped promoting Leonardo — so if the SAP Intelligent Enterprise was based upon Leonardo, well that is a problem as it does not have any real future.

Intelligent Enterprises in Practice?

Given SAP’s focus on financial ERP applications, it often cites the example of invoice and payment matching, along with all the related approvals and subsystem ratification procedures such as separation of duty. We can now almost completely automate these procedures, while leaving a gateway for human hand-offs when we need to resolve anomalies. Of course, these anomaly resolutions can also be significantly automated as needed.

SAP’s financials in its ERP system is the strongest functionality in any of its applications.

However, it is not true that these processes are “completely automated.” They function about the same in S/4HANA as they did in ECC, and not many companies have moved to S/4HANA (and far fewer than stated by SAP).

This quotation is just inaccurate.

Embracing Automation?

Customers today can start to use this intelligent software-supported automation to shoulder repeatable, definable tasks. Embracing this change will allow companies to free up employee time and empower them to do more meaningful and strategic work.

What is intelligent software?

Did we miss something?

This is the same software as before SAP’s Intelligent Enterprise program was rolled out. All software contains intelligence, as does SAP’s but there is nothing here to support the creation of new term.

Let us see if the rest of the article justifies this claim.

Deeper Human-Like Intelligence?

As mechanized and back-end as these technologies are, customers can use SAP products to bring a human-like front end to the intelligent automation now being engineered into the enterprise. For example, we can create personalized and unique customer experiences using AI, chatbots, and other related voice technologies.

What is the human-like front end? I am being serious because I have never heard this term before. It implies that the front end is like a human. I have never used or seen a UI that looks like a human. The author may have meant that it is user-friendly.

SAP has SAPGUI and then lower used applications like SuccessFactors or Ariba that have more usable UIs (as they are acquisitions), but it is not like human like. There is no new automation. The AI is non-existant, and no one is using chatbots on SAP projects. Chatbots are for a company’s website, which is not something that SAP competes in, and chatbots aren’t particularly useful. Try asking one a question sometime.

Applying Something That is Not Demonstrated

Companies that want to apply these intelligent technologies can turn to SAP for frameworks to make this happen, such as SAP Conversational AI, an end-to-end toolkit for training, building, and monitoring chatbots. According to SAP, “These chatbots can be integrated with SAP and non-SAP systems and are available as preconfigured industry-specific bots. So far, users have built 60,000 SAP Conversational AI chatbots.”

Is this primarily coming down to adding chatbots to SAP? Again, chatbots are for website vistors (at least primarily).

The Crucial Cloud Connection?

The cloud is the essential connection across the entire intelligent enterprise. Whether on premises, public, or hybrid, the degree to which the intelligent enterprise gets smarter is a direct factor of the amount of secured network connectivity it engineers into the fabric of its new computing stack.

Why is that true? A hosted solution, hosted in a data center (that is not cloud) is also a connection across the entire intelligent enterprise. SAP then contradicts itself by saying

“whether on premises, public or hybrid”

Doesn’t that contradict the claim that it is cloud….that is what was stated in the previous sentence?

Intelligence that Comes from…..Blockchain?

Part of this “connectedness factor” will set customers up to harness new innovations like blockchain. SAP says it has recognized the part that blockchain plays in creating more-intelligent enterprises, so it’s developed SAP Cloud Platform Blockchain. This offers blockchain as a service, delivered at the right power and scope, based on individual customer needs.

SAP may have a cloud blockchain offering, but blockchain is not used my many SAP customers. Furthermore, blockchain is an online register — so why is it intelligent, or why does it contribute to the SAP Intelligent Enterprise?

It is not at all clear. SAP also states that it has 65 customers that participate in its blockchain initiative, but that still does not explain why blockchain is part of something intelligent.

The Intelligent Enterprise Adoption Curve

Ultimately, becoming an intelligent enterprise is about adapting and changing so you’re ready for what’s ahead. These types of enterprise-wide changes require significant investments and culture shifts, so SAP acknowledges that customers will adopt these changes in phases. And some organizations will undoubtedly move faster than others, acting as the early adopters.

But the nature of these changes can start to create a virtuous cycle. As organizations adopt technologies such as automation controls, chatbots, blockchain, and machine learning (ML) to gather more information, they will get smarter—continuing to speed up the cycle of innovation.

Many customers will still have a way to go before they become full-on intelligent enterprises. But these technologies exist, and SAP is ready to help customers start getting the most from them now.

In this explanation, SAP threw a lot of rather disassociated things into a big Christmas stocking and called it “Intelligent Enterprise.” And many of these things are things that SAP has very little to do with.

Conclusion

This is a incoherent and disassociative attempt to make some old things that SAP is involved with and things that are trendy but have little relevance to SAP to make something new and sexy for customers to get excited about.

There is no evidence from SAP that its Intelligent Enterprise is anything.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

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 Digital Transformation Content

References

https://www.asug.com/insights/what-makes-an-intelligent-enterprise

How Executives and Companies Now Make Up Transformations That Never Occurred

Executive Summary

  • Executives have begun referring to transformations that never occurred as resume builders.
  • Using the term transformation is now a way to take credit for a hazy accomplishment.

Introduction

Digital transformation is a common term used in the IT space and in particular in the SAP space. It is a recent term and also a highly problematic term. I now come across the statement that some SAP application was implemented for digital transformation or part of a digital transformation program.

Transformations Became a “Thing”

The term has now often been shortened to just “transformation.” Increasingly any corporate initiative is being labeled a transformation in order to give that initiative extra cache. There are many executives who desire to enhanced their resume by being thought to have lead transformations at their companies. We noticed this in the analysis of the description by former Infosys CEO, Vishal Sikka as we cover in the article How Much of Vishal Sikka’s Explanations on Artificial Intelligence is Complete BS?

From this article, we noticed a rewriting of history to fit his background into participating in the transformations category.

Rewriting History

Vishal has a curious explanation for why he is so uniquely qualified to lead an AI startup, and at least of the reasons he listed was his participation in transformations.

I have a Ph.D. in AI and have had the opportunity to work in large companies in enterprise software and services. I understand transformation in a way that few people do because I have lived through two large-scale, successful transformations. I thought it was time to take advantage of the unique gifts I have been given. That’s how I ended up here.

Also, what transformation is Vishal referring to?

Did SAP Transform When Vishal Sikka Was CTO?

SAP degraded as an organization while Vishal worked there, with more employees and work being done in India, leading to terrible support, and then Vishal getting tied up in what Teradata asserts is IP theft in order to build HANA as we cover in the article How True is SAP’s Motion to Dismiss the Teradata Suit. (And Teradata further asserts in court documents that Vishal Sikka was entirely on board with the IP theft.) I have been following SAP since 1997 and I don’t know what transformation Vishal is referring to.

Vishal then left SAP unexpectantly and under unusual circumstances.

Did Infosys Transform When Vishal Sikka Was CTO?

Next, he took the top position at the horrible Infosys — a firm which does nothing but US worker displacement and rigs the H1-B visa program for which they were found to have defrauded as we cover in the article Who Got the $34 Million Fine from the Infosys H1-B Fraud Case?

When Vishal started working for Infosys they were an H1-B mill that engages in H1-B fraud and is known for nothing except low priced, low skilled IT bodies. And after Vishal left, Infosys is known…..for the exact same thing.

What is the transformation again?

Conclusion

The term “digital transformation” is a throwback to an age when digital technologies transformed processes, but at this point, it makes little sense to use it as a term as what is currently happening is that new hardware and software are simply replacing older hardware and software.

The term “transformation” is an outgrowth of the term digital transformation and is nearly untestable in that just about any executive is prone to state that their involvement in a company lead to a major improvement. However, in the examples provided above, the companies used in the example provided by Vishal Sikka work about the same as they did prior to Vishal Sikka’s addition, as they did after Vishal Sikka moved on. This term will most likely be continued to be used in this fashion until it ceases to have the same impact it once did, and then at that point, a new term will be created that carries a new appeal by virtue of its novelty.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

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 Digital Transformation Content

References

How a New Startup Aims to Use AI to ‘Amplify Humanity’

Why Jelena Perfiljeva Refuses to Debate Brightwork Research

Executive Summary

  • SAP resources tend to live in a bubble where they only consume biased content.
  • This makes it very difficult for them to tolerate fact checking.

Introduction

We perform fact checking, and we fact check SAP along with a number of other entities in the IT space. As this fact checking contradicts SAP’s marketing, this causes cognitive dissonance on the part of many SAP resources, for whom all they know is repeating SAP information. One such resource is Jelena Perfiljeva.

Jelena Perfiljeva wrote the following tweet about Brightwork Research & Analysis.

This tweet is in response to use contradicting anti-Brightwork comments on SAP’s page by SAP resources. The comments repeatedly asked for the SAP resources to do something other than make personal attacks and to provide specific details that Brightwork Research & Analysis published that were false. Not one of the SAP resources replied. Which includes Jelena Perfiljeva. But what Jelena Perfiljeva did is instead change venues to Twitter where she commented that I lived “under a bridge.”

This goes along with a storyline that I am a troll. The evidence that I am a troll according to SAP resources is that I fact check or contradict SAP.

Our Response to Jelena

We reached out to Jelena on Linkedin. Here is the message.

If you want to debate me, I am right here. We can have a debate on HANA or any other topic. What it looks like to me is that you are trying to stay away from any substantive debate and are trying to smear Brightwork, but without doing the work to understand the topics. A person with your background is not really in a good position to debate me, so you appear to be having an emotional reaction and are trying to get back at me.

But if you are going to do it, you need to provide evidence. Calling people you disagree with mentally unbalanced is unethical on your part. Responding to comments in batch is not an indicator of a person being unbalanced. If you and others are going to comment, I am going to comment in return. You should expect that.

Jelena’s response to this message? She disconnected from me on LinkedIn.

SAP Resources Often Lack Calls for Evidence

Jelena is generally offended by our repeated requests for evidence, as can be seen in the following tweet from Jelena.

I repeatedly asked for evidence or some specifics from SAP resources in numerous comments, and Jelena does not appreciate this. As with many SAP resources, they prefer to work off of feelings and not to contradict Brightwork’s conclusions with evidence.

Jelena’s Ready Made Excuse for Not Being Able to Debate the Specifics

By categorizing a fact-checking service as a troll and she justifies being unwilling to support here positions. We have debated Jelena previously and found she argues about things she knows nothing about — and simply takes whatever position SAP takes and assumes it is right.

This is the exact same strategy used by Barbel Winkler as we cover in the article Is Bärbel Winkler Correct the Brightwork SAP Layoff Article Was Fake News?

 

Conclusion

Most SAP resources and Jelena Perfiljeva is yet another, don’t care what is true. They are not able to debate their positions (Jelena is an ABAPer and knows next to nothing about most of the research at Brightwork), but instead choose to smear any entity that covers SAP, but is not paid off by SAP.

SAP resources like Jelena Perfiljeva, Barbel Winkler and so many others will tolerate and amount of inaccuracies from SAP, and the SAP ecosystem because they feel like it lines their pockets. This is under the idea that any lie is acceptable, as long as it comes from your side.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

References

See Our Other SAP Support Content

The Brightwork SAP Bribery Tracker Per Country

Executive Summary

  • SAP has a number of international bribery cases.
  • This table was created in order to keep these bribery cases and to catalog likely future SAP bribery cases.

Introduction

At Brightwork Research & Analysis we have long held that SAP is a highly corrupt company, and its rise had much more to do with its ability to corrupt other entities in IT than anything to do with its technology.

Soft Versus Hard Corruption

Internationally “soft corruption” is a daily activity with SAP. For example, SAP applications are recommended for the only reason that it is profit-maximizing for SAP consulting companies, even though it is very rare that an SAP application is able to meet its sales conjectures and SAP has some of the lowest success levels of any software vendor. SAP partners repeat any falsehood proposed by SAP and work against the interests of their “clients,” as we cover in the article What is the Real Story with SAP’s Run Simple? 

This table only catalogs the “hard corruption.”

SAP Bribery Cases Per Counry

 
Bribery Case
Country
Description
1The Guptas Scandal
South Africa
SAP is accused of using its partners in South Africa to pay off Gupta companies in order to obtain contracts from Eskom and South Africa Rail, which we covered in the article How Deloitte, McKinsey, the Guptas and SAP Ripped Off Eskom
2Tanzania Port Authority
Tanzania
SAP is accused of using its partners in Tanzania to pay off companies in order to obtain contracts from The Tanzanian Port Authority.
3Unspecified
Kenya
SAP is accused of using its partners in Kenya to pay off companies in order to obtain contracts from The Tanzanian Port Authority.
4Various Panamanian government contracts
Panama
"Vicente Garcia, SAP International’s former vice president of global and strategic accounts. now sits in a federal prison serving a 22-month sentence for bribing foreign officials. Garcia pled guilty to one count under the Foreign Corrupt Practices Act (FCPA) in August 2015 for bribing Panamanian government officials in a successful attempt to win large software contracts for SAP."

Conclusion

Overall, in our estimation, “soft corruption” far exceeds the “hard corruption” that is listed in the table above.

Hard corruption makes the headlines because it is explicitly illegal, however, soft corruption is the far bigger issue with SAP and it is accepted as simply a natural part of IT.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact-checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

References

https://www.bloomberg.com/news/articles/2019-02-28/sap-eoh-unit-accused-of-bribery-in-tanzania-techcentral-says?sref=tnzoy5oH

http://www.fraudjournals.com/sap-liable-for-employee-bribery-scheme/

https://www.channelpartnerinsight.com/channel-partner-insight/news/3071905/sap-faces-second-public-sector-corruption-investigation-in-africa

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How SAP is Cutting Some of Its Partners Out of the SAP Support Business

Executive Summary

  • SAP has had a long term arrangement where it allows partners to take first level support.
  • With its Cloud Extension program, SAP is changing this arrangement for many SAP partners.

Introduction

We covered in the article A Brightwork Warning on SAP’s Cloud Extension Program, how SAP has pushed for customers to convert to their on premises SAP applications to cloud applications, and how this extinguishes the support contract and is converted to a cloud subscription.

When is cloud not cloud? When it is cloud on paper. This is the second innovation we have been able to trace to SAP regarding cloud, after their upcharge as a service as we covered in the article How to Understand SAP’s Upcharge as a Service Cloud.

What is Cloud on Paper?

Cloud on paper is where an on-premises application is “converted” to a cloud application, even though the conversion may not happen for years, while SAP claims the conversion to cloud to Wall Street.

This takes the support contract and converts it to a cloud subscription that cannot be canceled for normally between 3 to 5 years.

It should be pointed out that cloud was originally supposed to reduce lock-in and was supposed to be a month to month term (at least). However, SAP violates nearly every tenant of cloud and like Oracle, continues to call its offering “cloud.” We are covering this issue, and it extends far past SAP and Oracle with vendors claims to be cloud without even trying to meet the definition of cloud.

SAP has still yet to master multitenancy, nor have its HANA Enterprise Cloud (HEC) partners. The SAP Cloud (which is managed by SAP unlike the HEC) is really just a storefront at this point. The HEC “constellation of hosting providers” pretending to offer cloud and pretending to be associated with SAP but which are all managed independently from SAP are still referred to as cloud in the marketing literature.

One might ask the question as to why HEC partners are necessary if its cloud — and of course the answer is that HEC is faux cloud.

It is hosting.

When hosting is simply moved from the company’s own data center to the vendor’s data center, there is little benefit to the transition.

And SAP is not interested in investing in its cloud infrastructure. SAP is pushing customers to far less efficient private hosting providers that pretend to be cloud while announcing the Wall Street that they are deepening their partnerships with the hyperscale cloud providers.

The following graphic is from SAP on this exact topic of converting customers to cloud on paper. SAP has pushed for this conversion to happen by Dec 31, 2019, with SAP knowing full well that the customer is both not ready to migrate off of on-premises.

In the case of conversion of the on premises BusinessObjects license to the SAP Analytics Cloud (SAC) subscription, the SAC is extremely immature, and SAP just recently introduced the SAC as a replacement for its sunset Lumira, which was supposedly the future until just recently. 

The Negative Feature for a Customer’s Third Party Support Options

There are several negative features about the SAP cloud conversion program. One is related to the elimination of third party support options.

If SAP is successful in converting companies to cloud subscriptions, which a big part is converting the support contract to the subscription, then the ability of companies to access third party support is of course greatly limited. In the case of converting BI and BusinessObjects customers to SAP Analytics Cloud, this coverts the support into a cloud subscription, even though the cloud product (SAP Analytics Cloud) is barely used. Or not used for some time in any case. In addition to booking the faux cloud revenue, SAP will have blocked out the potential to use third party support for that part of their SAP footprint.

In this case, the cloud, which remember was originally intended to increase the freedom of buyers, is used to further lock-in buyers and reduce their options.

How Do SAP Partners Fit Into Cloud Conversions?

In many cases, SAP has the entirety of the customer support contract for the on premises applications. In this case, the revenue switching (from support to cloud subscription) does not change much, as money continues to flow to the same entity (SAP).

However, in cases where there is an SAP partner that owns the first level support contract, it means that SAP must pull the support contract from the partner. And it means the revenues are transferred from the SAP partner to SAP.

This pulling of revenues from these partners will naturally allow SAP to show cloud revenue growth when it is instead just pulling in maintenance revenues that previously sat at partners. Obviously, many SAP partners did not go along with this. However, SAP had an out. They always have the right to cancel the partnership agreement. And this allows SAP to perform the conversion to subscription revenues.

For 2019, on-premises conversions to cloud had to occur before the end of the 2019 year.

Some SAP Partners Being Snapped Up by Other Partners

This has caused many SAP partners to lose significant revenue and made them susceptible to being acquired at firesale prices. One company named Seidor has been acquiring these companies in Latin America. Seidor is about to go IPO in the US and is pitching this a growth story, however, what is not discussed is how Seidor is obtaining this growth.

The Longer Term Implications of Support Contracts Being Removed from SAP Partners

At one point SAP was a growth story and it led to a great increase in the number of partners. SAP offered its consulting and sometimes support business to partners, in exchange for being recommended by these SAP partners. This had much more to do with SAP’s growth than SAP’s technology.

However, SAP cannot meet the growth targets it has laid out to Wall Street with authentic license sales. Therefore, it has needed to cut corners to obtain revenue. SAP customers are by in large not moving to S/4HANA, and HANA stopped growing as a product a number of years ago as we cover in the article Why Did SAP Stop Reporting HANA Numbers After 2015?

  1. Corner Cut Number One: One of these corners was to introduce the fallacious type 2 indirect access (we cover the distinction between Type 1 and Type 2 indirect access in the article How to Best Understand Type 1 Versus Type 2 Indirect Access.
  2. Corner Cut Number Two: The cancellation of partnership agreements in order to convert support contracts sitting in smaller partners into cloud on paper subscriptions is a second corner cut that while it will buttress SAP’s revenues in the short term shows that SAP’s growth period has come to an end, and the overall SAP ecosystem is now contracting. However, as SAP has the ability to pull in revenues from the ecosystem so that they appear on SAP’s income statement, this contraction will not be apparent for some time.

Conclusion

SAP’s cloud extension program or “cloud on paper” program will allow SAP to show large revenue growth in cloud for the 4rth quarter of 2019, which is why we are predicting this exact outcome in the 2019 Q4 analyst call.

We also predict that as all of the analysts on the call hold SAP stock as we covered in the article Why Analysts Do Not Ask Challenging Questions on SAP’s Quarterly Calls, and Wall Street analysts tend to perform such shallow analysis, none of the major firms will pick up this story, and the IT media entities will uncritically report SAP’s extravagant cloud growth.

Microsoft, IBM, and even Oracle grant partners access to initial partnering schemes with full sell capabilities because it’s in their interest to do so. The fact that SAP has periodic purges is used to threaten and coerce active members of the ecosystem who have something to lose if they don’t behave. SAP has a high annual churn. However, it is not because they prune and trim the best.
Instead, it is because they have a small percentage that is guaranteed to keep their partnership (say big firms) but then other partners are partners that can be burned.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

References

https://www.seidor.com/content/seidor-com/en/seidor/noticias/seidor-resultados-2018.html#

See Our Other SAP Support Content

Fact Checking SAP Causes SAP Resources to Seek Safe Spaces

Executive Summary

  • SAP resources live in a bubble where virtually all media coverage towards SAP is positive.
  • This causes them to be triggered by fact checking of SAP.

Introduction

Since we have been fact-checking SAP, we frequently receive comments from SAP resources that have nothing to do with the content but everything to do with the tone. Here is one such example.

To me Brightworkresearch and the author of that article always sounded like they were on personal vendetta against SAP. Just the language used didn’t look to be from unbiased analyst.

But everyone is an analyst this days and to stand out in a sea of “content generators” one has to be different ,  so maybe that’s their angle. – Denis Konovalov

Notice that the commenter here refers to the fact that he thinks that Brightwork sounds like we have a personal vendetta. This is quite a claim, but this is not evidence. This is our response to Denis.

This seems to be a repeat of Barbel’s overall argument, which asserts that everything can be determined by the “tone” of an article. Let us take a look at how well your and Barbel’s hypothesis around using tone to determined intention and bias.

What is Gartners tone? Quite neutral right? How about Forrester. Again neutral.

Therefore by applying your and Barbel’s hypothesis, both Gartner and Forrester should be considered unbiased. However, it is public information that SAP pays both of these entities.

Brightwork is virtually the only research entity that covers SAP that is not paid by SAP. And we are the only real fact-checking service and website for both SAP and Oracle.

Unsurprisingly, you do not want SAP fact-checked, as you are pro-SAP. Therefore, you make an accusation that you can’t support, which is that there must be some personal vendetta and your evidence? Tone. You see, we would never do that. We would never smear a source because we did not like its tone. And secondly, tone is not a determination of what is true, and it is also not (as I just proved) not a good indicator of whether a source is biased.

The fact neither you nor Barbel have any evidence of bias against Brightwork, however, I do have conclusive evidence of bias by you, and in fact all of the commenters on this blog, including Barbel as having a pro-SAP bias. And that it appears to me is that individuals with a pro-SAP bias seek to smear the only independent fact checking body that covers SAP rather than addressing any of the specific arguments of the research. It also brings up the question, if you have a 100% proven financial bias, should you be accusing people of being biased? I would say no.

Therefore even though tone cannot be used to determined bias, Denis does not bother to test his hypothesis. Denis’ financial bias combined with the fact he has no interest in understanding or exploring Gartner’s or Forrester’s bias. Denis wants the fact checking we do to be wrong, does not want to invest time in bringing up specifics, and will lose any debate on the topic, therefore he simply states that something sounds like it must be bias.

SAP Resources Being Triggered

The following comment again makes a claim that the articles are too angry.

I feel the same way. Any valid points those articles bring quickly get drowned in the sea of misplaced anger. Must be some story there, I’m actually curious what did SAP ever do to Shaun – Jelena Perfiljeva

This is our response to Jelena.

It is quite convenient that you also point to the questions of tone. My observation is that you can’t contradict the points. You are like Barbel an ABAPer. You would not have the domain expertise to contradict the fact checking in the articles as only a relatively small portion of the Brightwork content covers ABAP. And even if you where to put the effort into analyzing it, you would not publish anything that contradicts SAP, because of your financial incentives.

However, you do know that you don’t like the content because it critically analyzes SAP which you don’t want. Do you know who Barbel relied upon for validation on the HANA material, Paul Hardy, another ABAPer who knows nothing about HANA, and also made a number of false claims about what Brightwork has said and then refused to debate any topic. Paul Hardy’s reading comprehension has him concluding that we think stored procedures don’t speed performance. There is nowhere Brightwork ever published this. I would know. Why Barbel would ask another ABAPer to validate HANA statements I have no idea.

Secondly, your presentation of Brightwork makes it appear that we only fact check SAP. That is not correct. Here is our coverage of the How Real is theOracleAutonomous Database. We concluded that Oracle is pulling one over on customers. Is that a problem for you also? Or did you stop reading because the article was just too angry? Do you need a safe space? Well here is one at South Park.

Bulletproof Windows…In My Safe Space

Here is our coverage of Why Gartner and Forrester Do Not Want TCO Calculated.

Once again, is that true or false?

Or is it not possible to determine because we all “feel” there must be an inappropriate tone against Gartner or Forrester? Can any statement by any major IT entity be fact checked, or is all fact checking evidence of a personal vendetta or of “anger?” Well how convenient. No need to address the actual content as long as one can tap out because the tone is not properly “safe.”

Fact checking multibillion dollar revenue per year entities is just so “mean.” How will Hasso Plattner’s personal fortune every recover from such indignities? How about Larry Ellison? Sure he is worth $72 billion, but he probably got his feeling hurt when we called out the Autonomous database. I hope he is ok. Should Brightwork send him a fruit basket and a get well card?

The characterization of every commenter on this blog post, seems to confuse critical analysis with either vendettas or anger. And the conclusion is that we only fact check SAP, we don’t.

We fact check many entities in IT.

We are virtually the only independent source, and we expose the reality of things in IT. We are not paid by SAP, Oracle, Gartner or any other entity. So we are going to publish what we think is true — not what makes the people on this blog post “happy.” It seems as if we were corrupt and were paid off by SAP, and distributed SAP press releases from SAP as does ASUG or CIO, that we would immediately make everyone on this thread overjoyed.

Conclusion

SAP resources want information about SAP to be published entirely by corrupt entities that are paid by SAP. This is why we created the article and the poll, Poll Results: Should Brightwork Sell Out to SAP?

The answer from SAP resources is yet, they want Brightwork to publish the same false information that is published by ASUG or CIO or Gartner about SAP. The only acceptable information about SAP to SAP resources is positive information that repeats whatever is claimed by SAP.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

References

Search Our Other Accuracy on SAP Content

How Competitive an Option is SAP Analytics Cloud?

Executive Summary

  • SAP has made a big push for customers to migrate from Business Objects to SAP Cloud Analytics.
  • In this article, we analyze the wisdom of using SAP Cloud Analytics.

Introduction

This graphic is from SAP’s Cloud Extension Program. SAP compares the SAP Analytics Cloud, Tableau is expensive and owned by Salesforce, which is a faux cloud vendor that locks in customers, and Power BI is produced by Microsoft, another of our lowest-rated vendors. One should be purchasing only the bare minimum from these vendors as they perform similar tricks on customers as SAP and Oracle (although certainly not as egregious). Of course, due to some core products, it is difficult to get off of Microsoft entirely. But if one can restrict purchases to the Office Suite and some SQL Server instances, then this is a big win.

SAP Analytics Cloud Competes With Top Visualization/Analytics Solutions?

Tableau is a leader in the visualization category, Power BI is close behind at a much lower price. SAP Analytics Cloud is still being developed and not a competitive solution. This means that SAP Analytics Cloud will be both worse to use than either of the other options, and the implementation cost will be far higher. This is particularly true for Power BI which is carving out a low cost and high impact part of the market — and was a major factor in cooling off Tableau’s growth and making them an acquisition target by Salesforce.

SAP proposes to sales reps and to partners that SAP Analytics Cloud is something that it isn’t. SAP claims equivalence with Tableau or at least strongly implies this. See for yourself in this SAP Analytics Cloud video. 

Notice again, that SAP is creating a burning platform by stating BO Explorer, Dashboards or Xcelcisus are at end of life.

SAP’s claims praising SAP Analytics Cloud do not match our evaluation of the product. We consider SAP Analytics Cloud completely uncompetitive with either Tableau or Power BI, or really any other of the major visualization tools. And as we will discuss further on in the article, we don’t even recommend Tableau or Power BI.

Secondly, both Tableau and Power BI are not competitive with pure cloud analytics offered by cloud service providers. The idea that anyone would purchase a five-year subscription from SAP for such a low rated product is a joke.

Notice the option below.

This is AWS QuickSight pricing. Notice it is “real cloud” in that the terms are monthly.  And it is extremely low cost at only $18 per month per user.

A few questions naturally occur to us…

  • Why would anyone pay hundreds of thousands of dollars to SAP for a substandard immature product with a five-year term?
  • Why would any company allow its support contract (which should be canceled if BusinessObjects is being “end of lifed.”

QuickSight is also connected to AWS’s backend data warehouse. Eventually, the company could move entirely off of the BusinessObjects data warehouse (using Redshift for instance) onto AWS as well. 

Working Sans Sales Rep

We did not have to deal with any sales rep to spin up a QuickSight instance. We just went out to AWS and brought it up.

If these types of visualization tools are available so easily and are so good — what is the motivation to purchase through a sales rep and deal with any of that overhead? It seems that so many IT decision-makers that work in SAP accounts just do not know what is available to them easily at web service providers. Any data that is in the BusinessObjects Universe can be easily uploaded to Quicksight.

Overall, QuickSight is easier to use, is quicker in response, is far more mature creates more compelling analytics, and is simply a superior application versus SAP Analytics Cloud. And all of that is before even counting the far lower price, better terms, and enormous backend capabilities of AWS.

*An option we will look at in the future is Google Cloud Looker. However, the Looker acquisition is still relatively recent, so we will hold off until some more time has passed and Looker is better integrated into GCP. 

Conclusion

SAP Analytics Cloud is a very poor option and is uncompetitive versus many other options. SAP is trying to migrate Business Objects customers to the SAP Analytics Cloud, but the two solutions have nothing to do with each other. One can now access superior analytics solutions right on AWS at a tiny fraction of the cost charged by SAP, and these can be accessed on flexible terms, terms that SAP will not offer its customers.

Essentially the SAP Analytics Cloud does not meet the definition of cloud in its terms.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

References

Search Our Other Data Warehouse Content

How to Remove ABAP from SAP Environments

Executive Summary

  • ABAP is a highly inefficient development language that should be removed from SAP accounts.
  • This article will explain how to do this.

Introduction

ABAP is actually not a fully functional development language. It is rather a report writing language with a large number of libraries. The problems with ABAP are covered in the article Why Did SAP Customers Follow SAP’s Advice on ABAP?

What To Do with ABAP

Customizations should be pulled out of ABAP. There is no reason to be coding in ABAP or to have tables or code in SAP.

A service can be created that integrates with SAP and that allows full flexibility on the languages used that are purpose fit to the coding challenge. If any cloud is desired, which is increasingly an effective way to develop, ABAP is a major hinderance as we covered in the article Why ABAP is a Major Hindrance for the Cloud.

Continually Losing Efficiency with ABAP

The more companies stay with ABAP, the more they lose control of their environment. It is difficult to understand the continuation of the use of ABAP, but a major reason is that ABAP is continually pushed by both SAP and the SAP consulting firms. With SAP consulting firms in particular making a lot of money billing for inefficient ABAP development.

These inefficiencies are highlighted by Rolf Paulsen, a long-time developer with experience in many languages.

The Issue with The Language Being Intertwined with the Platform

ABAP is only available to SAP customers and required a running SAP Netweaver instance (or S/4HANA instance). Unlike other languages, you cannot just download a compiler or interpreter, open your favorite editor and start your “Hello World” program. In ABAP, the language is baked into the platform. The developer edits code stored in database tables of the ABAP platform like a clerk edits an order or invoice. This is a fundamental disadvantage and burden of ABAP compared to other languages and the root of many other hindrances.

The Issue with the Language Being OUt of Date with New Database Features

ABAP is legacy and the discovery of database features from the 90s that SAP is celebrating in the last years does not affect many lines of ABAP code in S/4HANA. But many customers have many ABAP developers employed and have require that these can continue to create value. The “ABAP in cloud” thing is mostly addressed to those companies and their CEOs. Hey, if you stay with SAP, your experienced ABAP developers can continue to work – no need to learn a new language, no need for restructuring.

And of course, this is a major problem. Developers should be learning a new language because ABAP is a very poor development language.

The Logic of Developing Outside of ABAP

It is true that customization should be developed outside ABAP.

If SAP tries to force their customers into S/4HANA Cloud SaaS, there cannot be customization inside the ERP system itself and you have to develop against open interfaces and APIs.

It does not make any sense to use ABAP (Cloud) then. One challenge is to get a seamless user interface for both ERP system and custom development. By providing OData that is not very widespread outside SAP and Fiori that consumes OData easily, SAP does a good job in keeping customers close to their development tools like SAP Web IDE.

SPA is presenting a false explanation of the continuation of using ABAP. When companies use SAP’s tools, those companies lose.

Replacing “Legacy” By Porting Entire Applications to SAP

There was an illusion that if you recreated “legacy” systems in SAP this would be a good thing. But this only lead to higher costs, less flexibility, and agreement to use SAP’s development tools (and SAP’s consulting partners.) But SAP has nothing of value to offer development.

Their internal development efficiency is appalling, the ABAP efficiency on projects is very poor. Its time to admit that SAP has no development knowledge to offer, and the generally available public languages and tools and approaches are superior to what SAP is and has recommended.

Conclusion

SAP and its surrogates bamboozled customers for decades into adopting one of the most inefficient development platforms. And while it never made any sense, it was so easy to do. You don’t have to actually be a developer or have a development background to figure this out.

It is long past time to refactor ABAP code into the best development languages of one’s choice. And IT departments should never again listen to application vendors for advice as to what development language to use, what development environment to use, development approaches to use, etc.. This is because any advice offered by applications vendors is simply the camel’s nose in the tent to increase their account control. 

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

References

How To Reduce Your SAP Investment

Executive Summary

  • Sometimes we receive the question of how to reduce the investment into SAP.
  • This article explains how to do this.

Introduction

We recently received the following question.

Curious to review any research or opinion pieces Brightwork has available on SAP Certified development partners and how one could improve an existing ERP platform instead of getting rid of them.

How to Do It

One is to stop buying, decommission and discontinue support on non-ERP applications purchased from SAP. The logic for erasing the non-ERP applications is that every application introduced by SAP outside of its ERP systems is one of the lowest-rated applications in their respective software categories.

The waste in ERP systems, particularly from large vendors is covered in the book Software Wasteland, a quotation of which we have in the article The Enormous Waste of ERP Systems

If companies can shrink their SAP footprint to just the SAP ERP system then they release funding. For instance, it also allows the support to be canceled for everything but the ERP system which saves a lot of money every year. A major reason that companies cannot get better applications is that their budgets are being consumed by support dollars going to underperforming SAP applications, as well as constantly being asked to buy more low quality and ill-fitting applications.

This infographic from Rimini Street (a third-party support provider for SAP and Oracle and other vendors), illustrates the problem with large vendor lock-in. This is the end state of customer capture on the part of large vendors. Their intent is to capture the decision-making apparatus (normally the IT department) so that the department looks to their own personal benefit versus the benefits that the software provides to the company. We cover this topic in the article To Whom Does Your IT Department Owe Its Allegiance?

The faster and more of SAP applications that can be decommissioned, the faster a company can move to better quality applications. In fact, simply outsourcing SAP support to a third-party support providers will by itself allow a company that has SAP ERP to pay for all of the items listed in this article. It will also save money on future SAP implementations which are exorbitant. Although this is only one choice. In many cases, the best option is to pull support internal. Buying support from SAP is so expensive, that there are several better options, both of them far higher quality than staying with support from SAP, as we cover in the article The Giant Margins for SAP and Oracle Support.

The approach of reducing the investment in SAP is based upon treating SAP as legacy, which any realistic analysis of SAP, its costs, its performance, the value of SAP, SAP’s inability to develop and to improve applications, is a natural conclusion.

Extracting Oneself from ABAP

Then the second technique is to get out of SAP’s ABAP maze. This is using a programming language that one of the poorest ones available and that locks one into SAP. This background on ABAP is covered in this article Why SAP Customers Followed SAP’s Advice on Coding in ABAP.

This article gets into issues with ABAP in the cloud and explains why the more ABAP a customer has the more difficulty they will have moving items to the cloud How to Understand the Problem with ABAP in the Cloud.

Different programming languages are better at different things, and therefore, it makes sense use a combination depending upon the application in question. When we were having our application created, we received responses from development entities that recommended Java, when it was not the best language for the needs of the application. Those that develop in a particular language tend to recommend that language, so it is critical to get unbiased advice on the language or languages to use prior to beginning development.

Reducing the SAP ERP Footprint

The only desirable functionality within SAP ECC or S/4HANA is the financial module.

If one looks at the functionality of sales order management, demand planning, supply planning, production scheduling, pricing, inventory management, MRP, DRP, warehouse management, etc.. those areas are all available in a far superior way, and with far less overhead than ECC. If we take CRM for example, SAP does not have a viable CRM product, so this system will nearly always have to be obtained from another vendor and connected to SAP’s ERP. The Sales and Distribution module in SAP ERP predates CRM systems, however, since that time, CRM systems have increasingly taken over part of what SAP ERP did. CRM Switch which promotes using sales orders in CRM (versus ERP) explains it this way.

CRM

There are a number of benefits to implementing orders in CRM. Several of these will be clearer after we go through an example order below.

Create a Better Experience for New Customers: An internal sales order can be the centerpiece of customer engagement from the time of sale to the completion of delivery or implementation.

A More Efficient Transition from Sales to Finance: As an intermediate step between opportunities (or quotes) and invoices, orders make for a more streamlined and complete handoff from sales & operations to finance.

A More Precise ROI on Marketing Activities: The value in the lead source field can be set to flow through from an opportunity to order. If the order record is set to calculate margins, marketing ROI can be calculated on gross profit rather than revenue. If add-on orders from a customer inherit the same lead source as the original order, the long term revenue from a customer can be attributed to a specific source.

Sales order functionality in SAP ERP ignores sales order origination or any of the context of the origin of the sales order. SAP ERP is really just about processing sales orders and allowing an availability check to be performed against the sales order.

G2Crowd lists 300 CRM systems!

However, many of them are designed to be used along with sales order functionality in and ERP system. Therefore, if the sales management functionality is dropped in SAP ERP, one needs a CRM system with a higher degree of functionality. However, the CRM market is quite competitive and applications can be acquired at low cost and there is no reason to pay the high cost of a Salesforce.

OroCRM is a very nice CRM system and it is open source and can be spun up immediately on AWS. 

But a CRM system alone does not replace SAP sales order management functionality. The second part of replacing SAP sales order management is sales order management software.

Sales Order Management, Inventory Management, and Availability Checking, Invoicing, Payment Processing and Purchasing

This topic began at sales order management, but we found an all in one application that also does several other items that can replace other commonly used SAP ERP functionality.

Stitchlabs offers a beautiful and enjoyable to use application that can replace the sales order management functionality, and the inventory management and availability checking functionality, invoicing, payment processing and purchasing in SAP ECC or S/4HANA. 

This is a more detailed demo. Everything in Stitch is integrated to both one’s website as well as any sales channel, for instance on Amazon. These orders are constantly updated to Stitch and the inventory in Stitch reduced. Orders can also be created within Stitch. 

As Stitch is the inventory system, all that is necessary is to integrate SAP ERP financials, and then mothball the rest of SAP ERP. Stitch already has an adapter to QuickBooks and Xero (another online accounting application), but an adapter would need to be created to SAP ERP finance and accounting. However, after this, all of the other systems can be integrated to Stitch, which is far easier to integrate to, versus integrating to SAP.

Furthermore, Stitch as online adapters to applications in the following categories.

  • Accounting
  • Ecommerce platforms
  • Marketplaces
  • Point of Sale
  • Shipping and Fulfillment
  • 3PLs
  • Warehouse Management Systems

Using any of these adapters means that the integrations are ready to use right online.

Demand Planning & Supply Planning

SAP ERP has unusable forecasting functionality, and nearly all companies forecast external to SAP ERP. SAP’s APO or advanced planning application offers some of the worst modules in the supply chain planning space, with TCO that is off the charts (and this does not stop them from being the most recommended by the big bad IT consulting firms)

Demand Works Smoothie (Brightwork profile here) and Forecast Pro (Brightwork profile here) are quite reasonably priced and highly proven forecasting applications that are easy to purchase and use. Both of these applications are such a good value, that they are nearly always as worthwhile purchase (at least a few limited licenses), just to get a working statistical forecasting application for prototyping. That is even if the company ends up eventually buying a different forecasting application down the road, both Demand Works Smoothie and Forecast Pro licenses tend to get used — one way or another. Along with the application comes extremely knowledgable support from both vendors.

Smoothie offers the ability to perform supply planning in the same application (Brightwork profile for Smoothie supply planning and capacity planning here). Smoothie allows planned orders and forecasts to be sent to a solution like StitchLabs.

Forecast Error Management and MRP/Supply Planning Parameters

As good as Demand Works Smoothie and ForecastPro are, there is a necessity to perform comparative (one forecast versus another forecast) automated forecast error measurement in aggregate and to optimize the MRP/supply planning parameters.

Brightwork Research & Analysis has a free application (but requires a support contract) that does both of these things. See the Brightwork Explorer for more details. 

The Brightwork Explorer has both a simplified error measurement approach as well as a simplified S&OP to ensure that the parameters sent to the supply planning system fit within constraints and the financial plan. ForecastPro and Smoothie have S&OP functionality that is better for a more detailed view and with a different intent.

Production Planning and Scheduling

Only manufacturing companies need production planning and scheduling. And here sometimes a packaged solution is a good fit, but other times, a customer solution is best because production scheduling is one of the most industry specific applications. For companies that fit into their functionality, PlanetTogether is an excellent choice. Simio offers the ability to create a sophisticated model of a wide variety of production processes. The production planning and scheduling system would need to be integrated to the supply planning system. The supply planning system would then connect back to the inventory system.

Drop SAP’s Data Warehouse and Analytics

SAP has a very large number of data warehouse installed base between SAP BW and BuinsessObjects. However, the SAP BW is an extremely dated application with very low productivity that was not good when it was initially developed but is now entirely uncompetitive. BusinessObjects has been little improved since its acquisition in 2007, and it now at end of life. Since these applications were developed, cloud data warehousing – which is far more efficient and less expensive has become available.

As we cover in the article How SAP’s Cloud Extension Program is Bad for Customers, SAP has been trying to move customers to SAP Analytics Cloud, however, there is little reason to use it. Cloud analytics/visualization software like AWS QuickSight is far superior and available for around $18 per user.

QuickSight is excellent and does is priced on a month to month basis. And there is also a free trial, and one does not begin actually paying much of anything until one uploads significant volume. SAP Analytics Cloud, on the other hand, has multiyear terms.

The more we use QuickSight the more we like it. QuickSight allows one to switch out a characteristic for another characteristic without recreating the entire graph. 

We did not have to deal with any sales rep to spin up a QuickSight instance. We just went out to AWS and brought it up.

If these types of visualization tools are available so easily and are so good — what is the motivation to purchase through a sales rep and deal with any of that overhead? It seems that so many IT decision-makers that work in SAP accounts just do not know what is available to them easily at web service providers. Any data that is in the BusinessObjects Universe can be easily uploaded to Quicksight.

And this comes with all of AWS’s backend such as Redshift, Glue, Anthem, and RDS among many other data services. SAP customers should seek to migrate to cloud data warehousing and analytics and cancel their support contract for BW, and Business Objects. SAP’s offering is inferior in multiple dimensions and also quite expensive both indirect costs, but even more so in indirect costs.

Notice that QuickSight is not listed in Gartner’s analytics MQ. Neither is any open source analytics. But Microsoft, which pays Gartner a lot of money is at the top of the Magic Quadrant, even though it is hard to see how PowerBI so good that it should be there.

Gartner is not looking out for the interests of their clients — they are looking out for their own interests, which is about profit maximization and is covered in the article How to UnderstandGartner’s Business Model.

Making good decisions means ignoring advice from pay to play analyst firms like Gartner.

Deeper Analysis

Something to point out, while we like QuickSight, we often want to punch out of a “straight” analytics application to do statistical analysis. In fact, the analytics applications is actually the second step after the analytics has been performed and needs to be presented.

Here, we go back to Excel — no big surprise, and also a tool like Exploratory.io.

As soon as one wants to check for relationships and explore the data, pure analytics applications are a bit limiting. Exploratory.io is far superior for the analysis that occurs before creating the presentation graphics. Exploratory.io has a long term free and you don’t have to start paying until you begin doing more complex things with the application. 

Do Not Purchase any SAP Cloud HEC or Other Cloud from SAP

SAP’s HEC (HANA Enterprise Cloud) does not have much to do with SAP. Instead, it is simply a conglomerate of non-multitenant cloud providers (Virtustream, Deloitte, Infosys, etc..) that SAP marks up. SAP hides the fact that they do not provide the hosting with HEC.

SAP is aggressively trying to cover up for the fact that aside from their cloud acquisitions, SAP has very little cloud business.

We cover in the article How to Understand SAP’s Upcharge as a Service Cloud. There is no reason to use any cloud service from SAP, and any cloud service purchased from SAP will simply be provided by another entity, while SAP walks away with their upcharge right off of the top. This public cloud upcharge occurs through the SAP Cloud (not the same as the HEC). SAP Cloud is really more of a showroom than something that gets used on projects. If a public cloud is used through SAP, as we cover in the article How to Understand SAP’s Cloud Upcharge on AWS Storage, that will also lead to paying SAP a multiple over something that is not even provided by SAP. SAP claims the right to markup a service they do not provide at least 4x and in most cases more. 

If you touch any part of SAP’s cloud, you will be upcharged. This is where the margins promised by Bill McDermott to Wall Street are planned to come from. How does SAP have the right to this upcharge? 

Databases

Where possible, companies should move off of not only SAP applications, but also SAP databases and Oracle databases (the most common database for SAP). SAP only certifies its applications on commercial databases, which is another disadvantage, and is now pushing companies to buy the exorbitantly priced SAP database called HANA.

Open-source databases have become so good, and Oracle has become so boated, and HANA has turned out to be nothing like advertised, that great open source databases like MariaDB and PostgreSQL beacon users, and can be spun up extremely easily on AWS/GCP/etc. Oracle’s advice in terms of using its database is becoming increasingly dodgy and contradictory to VMware, where one has to read between the lines to determine what is actually legal under the Oracle license (as we cover in the article What VMware Has to Say About Virtualizing the Oracle DB).

Oracle is promoting companies to push things into the database layer that should reside at the virtual machine layer. And managing Oracle or HANA licenses and support is a nightmare. Those issues go away with open source databases.

Using SAP Partners

Now on the question of certified SAP development partners. It is not recommended to use a certified SAP development partner because it means they will have to follow SAP’s recommended approach, which is not good for the company and is really just all about SAP. A big part of what SAP partners do is lie to their customers about SAP. The control over partners by SAP is covered in the article How to Best Understand the Pitfalls of Vendor Partnership with SAP.

SAP, of course, likes to pretend that custom code is only due to not following best practices, but this is false.

In fact, the entirety of SAP’s proposals around best practices are not based on anything real and are pure marketing conjecture as is covered in the article How SAP Uses Best Practices to Control the Implementation.

The Winning Approach

The approach recommended by Brightwork is to move towards the following:

  1. More open source
  2. More cloud services like AWS/GCP
  3. More custom code more best of breed (wherever it fits which is covered in this article When Should You Purchase Packaged Software Versus Custom Development?)
  4. Less SAP.

Being Harvested by SAP

SAP decreasingly cares if anything that it sells to its customers adds any value to its customers. Everything is based around meeting short term financial objectives and customers are viewed as passive entities to be lied to and to harvest.

We covered this issue in the article How SAP is Now Strip Mining its Customers.

This article is important because it demonstrates how poor the value is of SAP. And as time passes, SAP sales increasingly offer terms and conditions that reduce the percentage of the money flowing from SAP companies to SAP that is actually beneficial to SAP customers.

We cover in the article How SAP’s Cloud Extensions Are Used to Fake Cloud Revenues.

SAP is one of the worst offenders, but many of the large software vendors behave essentially similarly. The large vendors and the large consulting firms that work with them have little interest in providing value to their customers and clients. The intent is to maximize the extraction out of the account, and SAP, Oracle, IBM and Microsoft are experts and doing exactly this.

SAP Consulting Firms

To accomplish this, it is necessary to ignore advice from SAP consulting firms.

SAP consulting firms coordinate with SAP to lie to their clients about SAP, and get them to invest more into SAP, all to enrich the consulting firm. Any SAP consulting firm will read an article like this and say that it is entirely infeasible, and the only reasonable decision is to keep investing money back in SAP. Therefore, one cannot follow this program and expect buy-in from the consulting firms. Secondly, if the consulting firm gets news of this, one of the first things they will do is try to undermine the individual attempting this transformation. This means that the SAP consulting firm will not only communicate the strategy back to SAP (as they are onsite usually more often) and will strategize about how to stop it, but they will oppose the transformation because they realize what it will mean for their future billings.

Conclusion

None of the things listed in this article can happen if SAP or SAP’s approved partners are involved in decision making. Everything this article discusses means reducing account control. However, SAP and all of their partners are about maintaining or increasing their account control. This gets to the topic of what was promised in terms of the ERP systems versus what happened as we cover in the article How ERP is Similar to an Out of Control Octopus.

Throughout this article, we recommended smaller vendors or open source. Generally, this is the best value in the enterprise software market.

However, some companies are more comfortable with larger vendors. Many companies see large size as an indicator of quality, when in fact, it is normally the opposite that is true. The smaller the vendor the more customer-focused that vendor is, and the less focused on Wall Steet they are. As an example, just compare getting a response on a support ticket from SAP or Oracle versus a smaller vendor. With smaller vendors, I normally get through immediately to a domestic experienced resource. The experience is entirely different from large vendors.

If one were to switch out some of the options provided above for larger vendors, they would certainly be better off (if the applications were well selected) than staying with SAP. But it should be remembered that normally the larger the vendor, the more difficult that vendor is to deal with, and the more lock-in they tend to apply in their terms and conditions and the more shenanigans involved in how their sales force operates.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

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 as Legacy Content

References

*https://www.stitchlabs.com/no-erp/

https://www.riministreet.com/Documents/Collateral/Rimini-Street-Infographic-Conflict-Between-Innovation-and-IT-Overhead.pdf

https://www.skulabs.com/features/orders

https://www.galleysolutions.com/

https://go.tradegecko.com/

http://www.vekia.co.uk/

*https://crmswitch.com/crm-value/crm-sales-orders/

The Real Story on ERP

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion

A Brightwork Warning on SAP’s Cloud Extension Program

Executive Summary

  • SAP has created a sales program that will cause a number of customers to convert their on premises SAP environments to cloud — on paper that is.
  • We cover this program that SAP does not want to be known outside of just those customers they share this with.

Introduction

SAP has introduced a program for migrating SAP customers to the cloud…but migrating them only on paper. And while doing so they make the customer sign a termination agreement for the on premise portion of the licenses hence turning it all into a subscription contract out of the blue.

The Current Impact of the Program

Regionally that has created a beehive of activity amongst SAP’s salespeople because that’s the easiest “sell” on the planet. They only need to justify a dollar transaction and they get compensated for the entire maintenance base that was once an on premise footprint.

This is true even if the conversion marginally touches those licenses. To understand how this program works, let us get into its details.

The Details of the Program

The following is from SAP’s document Extension External Rules Cloud Extension.

The customer may partially terminate existing on-premise licenses and associated maintenance payments (services including SAP® Enterprise Support, SAP Standard Support, or SAP Product Support for Large Enterprises) in conjunction with a purchase of a subscription to cloud solutions from SAP. Premium support engagements (SAP MaxAttention™, SAP ActiveEmbedded and SAP Safeguarding) cannot be terminated in conjunction with a subscription to cloud solutions from SAP. SAP Business One is not in scope.

This is simply a transfer of the on premises licenses (and the associated support liability) and converts the on premises version to cloud.

Clearly, a company cannot transfer to the cloud so quickly, therefore the primary objective is to change the license type at customers from on premises to the cloud.

The transaction requires an expanded investment with cloud solutions from SAP, given the substantial added value from this new hybrid scenario.

The contract term for a new cloud subscription is five years.

Notice how the term is five years, which is of course not at all cloud.

One of the definitions of cloud is that it has flexible cancellation terms. This is just another way that SAP diverges from cloud. But as these are on premises licenses, SAP will not accept convering a support contract to a terminable cloud subscription.

SAP is Auditing the Partial Termination?

In addition, SAP reserves the right to conduct additional license audits after the partial termination to confirm that software usage is terminated.

At first, this is confusing. If SAP intends to simply paper transfer on premises licenses to the cloud, then why would this clause exist? Analysis and discussion with a few people helped conclude that this is merely the “right,” it does not mean SAP will do it. Obviously, if they did audit the account, they would find the on premises version of the software is still being used, so SAP won’t audit the account, at least for a while.

But this actually creates a liability for the client. They are not supposed to be running those on-premises versions, per the stipulations in the conversion, even though it is a “wink wink, nod nod” understanding that they will.

The Effective Date of Partial Termination

The effective date for a partial termination of existing on-premise licenses and associated maintenance is January 1 of the following calendar year or the date of the initiation of cloud subscription payments, whichever is later.

No Refunds

There shall be no refunds of any fees paid, including software license fees or pre-paid maintenance fees, as a result of this termination.

Gartner’s Error in Their Analysis and The Implications for S/4HANA Cloud

Gartner has the following to say regarding the extension policy.

Who Should Consider the Extension Policies?
Any existing SAP customer with unused, perpetual licenses that are shelfware (see Note 1) who is moving to SAP Cloud or any licensed solution offering should make use of the Extension policy. Reallocate support fees where possible as part of the S/4HANA migration.

This is a shallow analysis.

Gartner leaves entirely undiscussed if the software that is “extended to” is even a good fit for the requirements of the company, or if it is sufficiently mature to be put into use.

Gartner also misses the point that extremely few companies can even use S/4HANA Cloud due to functionality footprint issues. Most companies cannot use S/4HANA Cloud because is footprint is so much smaller than ECC.

Gartner’s analysis is typically designed for low information readers, but in their analysis of the SAP Extension program, Gartner has fallen and they can’t get up. Gartner needs to do a better job of hiding the fact that they are serving as a mouthpiece for SAP. It is simply too easy to skewer them when they don’t at least make an attempt to look like they are providing independent analysis. 

How Common Are Successful S/4HANA Migrations?

The issue is that few customers are actually moving to the SAP Cloud. And few companies are moving to S/4HANA, and even fewer to S/4HANA Cloud.

The contract conversion allows a one-time reallocation of a customer’s entire existing SAP license estate to a new S/4HANA purchase. Unlike a product conversion, the Contract Conversion Program is not product-specific and provides credit on an entire license investment to date. Using this option, SAP and the customer terminate all existing contracts, appendices and order forms, and execute an entirely new contract based on the S/4HANA license structure. – Gartner

There are at least two problems with this.

  1. S/4HANA’s Maturity: As we have covered in great detail in articles like Why Did SAP Fake S/4HANA Maturity so Aggressively?, and Why Do SAP S/4HANA Customers Have to Sign NDA?, S/4HANA is still not ready to be implemented and has probably the highest failure rate of any of the major ERP applications, with literally a new failure coming to light every few weeks. Again, none of the product understanding is worked into this analysis, which makes Gartner look like they are simply repeating SAP’s marketing talking points.
  2. Contract Degradation: New SAP contracts are worse for customers than older contracts. For example, newer SAP contracts have more clauses around indirect access. Therefore, each new contract that is signed imposes new liabilities on the customers versus the older contracts. This is one reason why SAP is so interested in getting customers on “new paper.” Gartner, of course, does nothing to warn its clients about this issue. This is the problem with getting advice around SAP from an entity that receives around $150 million from SAP as we cover in the article How to View Gartner’s Financial Bias in Favor of Large Vendors, and Understanding The Brightwork Estimate of The Amount of Money Paid by SAP to Gartner Per Year. Gartner will simply not share items with clients that they know could help them in negotiation with SAP. Companies that rely on Gartner, without investigating their enormous conflicts of interest, are doing a poor job of verifying reliable sources of information.

One another piece of Gartner materials it states

For perpetual licensing: Obtain detailed price list information and use it to quantify license needs and determine the level of discounting required to make a deal within ERP budget constraints. Existing customers should fully leverage conversion and extension policies when transitioning to preserve the value of existing SAP ERP investments.

That is typical Gartner doublespeak.

It is amazing that Gartner charged someone for that analysis! Gartner clients might well ask the question..

Why are you charging us for this “analysis” if SAP already paid you to restate SAP’s sales proposal to us?

Secondly, “preservation” is not always the goal and in fact, is not always feasible. This is an approach that promotes emphasizing the sunk cost of the investment. Some investments, such as into BusinessObjects, (as we will soon discuss) don’t have a future. The only question is when to migrate off of them. Converting the support contract for BusinessObjects to SAP Analytics Cloud is not preserving anything. It is simply a bad decision which saddles the company with a substandard application at a high price.

It shows the compliance of Gartner to SAP and just another in a continual stream of evidence that Gartner is an unreliable source on SAP. Gartner is essentially providing false coverage of SAP’s issues.

It is impossible for us to believe that Gartner does not know that what they wrote about preserving investments is false, and was included in their advice to appease SAP. For this reason, we award Gartner our Golden Pinocchio Award. This is an award only given for the most outrageous lies. 

How is the Credit Recognized?

SAP will not register this conversation as sales though but as quota reductions.

SAP partners did not know that salespeople where getting compted on the entire maintenance base, not just the delta as one would assume. As SAP salespeople can go directly to the partner customer base, this has begun to happen. They “leaked” this into the partner community early Q4 just to make sure they can later say that they (SAP) gave everyone a fair notice.

The rate at which SAP recognizes customer credit is either 1.4x, 1.75x, or 2.33x depending on the term commitment, same goes for SAP salespeople, but not just for the delta (the pure cloud sell) but the entire base.

Introducing A Program to Customers Based on False Assumptions

From the document Sales Play: Business Technology Platform – Modern Analytics from November 2019, SAP makes the following assertion.

SAP has the largest BI install base of the industry, with thousands of active customers and most on-premise customers have successful deployments. SAP Analytics Cloud has an attractive vision: ONE SIMPLE CLOUD with smart features, integration with live SAP data and applications. Commercial incentives (Cloud Extension Policy) make it financially attractive to adopt SAP Analytics Cloud and stay with SAP rather than competitive tools. Customers can reduce their number of on-premise users, or exchange shelf ware and get started with SAP Analytics Cloud users. BI on-premise customers are slow moving and diverse, this is why we have a BI 4.3 release with Hybrid features to keep customers happy until they are ready or able to move their users to SAP Analytics Cloud. SAP Analytics Cloud Enterprise Readiness contributes to the modernization of analytics as part of the SAP Intelligent Enterprise realization.

SAP Analytics Cloud was just recently introduced and is not ready to be used for much. However, SAP will pretend to migrate customers to SAP Analytics Cloud with this program.

Customers can accelerate adoption of Cloud Analytics to support Modern Analytics while continuing with proven, robust on prem BI. They can benefit from the innovations and simplification of the cloud by leveraging hybrid combinations of the right fit for the right use case as they continue to modernize.

But they won’t be accelerating the adoption of Cloud Analytics. It will accelerate the illusion of adopting Cloud Analytics.

The Increase in Revenues from the Cloud Extension Policy

This shows the conversion of maintenance to cloud subscription. Notice the price goes up. And in the vast majority of cases, the cloud version won’t be used for years, but SAP will book enhanced revenues in the current period. This means that SAP is being paid for things that their customers are not using. However, as pointed out in the article How SAP is Now Strip Mining its Customers, SAP accounts already have a massive overhang of previous applications that were implemented but are little used. This program will further increase the percentage of unused applications on SAP accounts. Yes, the documentation by SAP frames this program as helping customers. 

This graphic shows an example of moving from BusinessObjects on-premises to a combination of Enterprise Maintenance and SAP Analytics Cloud. This pushes SAP Analytics Cloud into the account, but it has nothing to do with whether SAP Analytics Cloud is a good fit for the account. Again, notice the price goes from 500,000 Euro to 600,000 Euro — and who knows when the SAP Analytics Cloud will actually be used. SAP Cloud Analytics is currently one of the weakest entries in the visualization space, but again this program has nothing to do with application usage.

SAP sales will present this program without any type of analysis of the application.

The presumption will be that because the company has BusinessObjects (which is owned by SAP) and because SAP has an application called SAP Analytics Cloud, that has zero to do with BusinessObjects, that SAP customers will naturally move to this new application.

And in fact, the following slide explains this logic in more detail.

The Flawed Logic of Upgrading to Incomplete or Weak SAP Cloud Solutions

SAP argues in its video that only SAP can offer a visualization solution that essentially cuts into the maintenance cost — giving them an advantage versus Power BI and Tableau.

This presentation is first, an example of anti-competitive behavior. However, second, it again completely ignores the capability differences between these applications. See our analysis of SAP Analytics Cloud in the article How Competitive an Option is SAP Analytics Cloud?

Notice again, that SAP is creating a burning platform by stating BO Explorer, Dashboards or Xcelcisus are at end of life.

SAP is not a superb alternative for the BusinessObjects Explorer. IT departments will now be pushing this application this on business users without any competitive software selection. Secondly, BusinessObjects has zero to do with SAP Analytics Cloud. Why would any company simply migrate to SAP Analytics Cloud without performing a detailed analysis of whether SAP Analytics Cloud is the best possible option? There is, of course, no discussion of this in any of the SAP documentation. SAP wants customers to migrate to SAP Analytics Cloud on the basis of the logic of simply converting the support for BusinessObjects to SAP Analytics Cloud. However, there is a far better way to cut the costs of BusinessObjects. Simply drop the SAP support on BusinessObjects. In fact, for some companies, they know BusinessObjects well enough that they can self-support.

The only thing BusinessObjects has in common with the SAP Analytics Cloud is they happen to be offered by the same vendor. There will be zero conversion of the many years of experience in using BusinessObjects as they are entirely different applications.

However, it is a simple matter to find third party support for BusinessObjects. Spinnaker is one that offers this. Notice Spinnaker’s warning about forced upgrades in the following quotation. 

Forced vendor upgrades and “self-service” support models are pushing SAP users to seek and adopt alternative third-party business intelligence platform support options. Organizations turn to Spinnaker Support for SAP BusinessObjects support – stand-alone or packaged with other SAP offerings – to better align BusinessObjects maintenance fees with the level of support received. Our customers gain personalized, full stack SAP support services while reducing their costs by an average of 62%. As our BusinessObjects clients have experienced, there are numerous advantages gained by switching to Spinnaker Support.

And this is exactly what Spinnaker warns about — a scam forced upgrade that is designed to falsify cloud revenues for SAP while removing the options for the customer.

Another option is..

This is what Rimini Street states that it supports for BusinessObjects. 

BusinessObjects Platform

BusinessObjects Analysis for OLAP

BusinessObjects Dashboards (formerly Xcelsius)

BusinessObjects Explorer

BusinessObjects Web Intelligence

SAP Crystal Reports

It seems as if a great way to respond to SAP’s forced upgrade and threats is to simply cancel support on BusinessObjects, and then find the third party support of one’s choosing.

*Brightwork Research & Analysis has no financial relationship with either Spinnaker or Rimini Street, and there are likely other BusinessObjects support companies that may be an even better fit for the needs of companies.

Therefore, it is probably a good time in the future to move off of BusinessObjects to leverage all of the new capabilities offered in cloud analytics and cloud data warehousing — however, by getting third party support and canceling SAP support, the migration can occur on the company’s schedule. As we will cover in further on, AWS services can be brought up incrementally at low cost, and the money saved in SAP support will easily pay for the AWS testing.

More Specifics on the Program

Just some more details on the program.

The Increased Waste That Will be Caused at SAP Customers Because of this Program

SAP uses the term “right-sizing” for its program. Yes, the maintenance base is reduced, but the overall costs (as shown in the previous slide) is higher. The customer ends up with an application that they will not use in the short term and may not use in the long term. 

This program has nothing to do with “helping” customers but allowing SAP to manipulate its cloud sales to Wall Street. Upon listening to Carol Clarke of SAP, she was completely deluded about the solution. It is the case that SAP sales leadership has no idea what the truth is of SAP’s applications. Carol Clarke thinks that SAP BI is very effective for customers, when in fact, SAP BI is a terribly inefficient data warehouse that we cover in the article The Amazing Disappearing BI Reports and BW as a Roach. BusinessObjects is now a dated application that SAP has done little to upgrade, as we cover in the article The Problems with SAP’s BusinessObject Acquisition.

SAP Data Warehouse/BI Installations are Highly Successful?

Yet Carol Clarke presents these applications as highly successful. SAP sales and sales leadership is completely deluded about how SAP applications are used. Iver van de Zand or SAP proposed in a sales leadership webinar thinks that they can compete with Tableau when SAP Analytics Cloud is nowhere close to competitive.

Here the annual maintenance reduction is shown per the number of years the cloud contract is signed. But of course, support will still be used. So this is just transferring support to the cloud subscription column. 

This shows the salesperson how to follow through on the process. 

This shows the three different revenue models that SAP follows. The first is the most common one applied, the second is the SaaS subscription — however, notice that the term again is far longer than what is normally considered the cloud. The final one is by transactions, but which only applies to just a few solutions, with Ariba being the most prominent.  

FAQs on the Program

These are to advise SAP salespeople about their typical questions regarding the program. Notice that one of the questions is whether the program is “approved” by revenue recognition. Why would this need to be stated? The reason is that the program does not actually sound “kosher.” So this is to assure salespeople that it has been reviewed by SAP’s accounting. 

Is This All Legal?

The legality of this is dubious because on their yearly fillings they omit the fact that these “sales” are nothing but paper signatures, and obviously don’t mention the fact that enterprises across the world have on-a-click burned assets without knowing about it.

Conclusion

The intent is clear.

SAP intends to push its customers to the cloud…on paper so that SAP can then report enormous cloud growth to Wall Street. This is why I chuckle when SAP sales reps reach out to me and tell me they are “helping customers.” You can’t “help” your customers if you work for an SAP management that is intent on misleading its customers. SAP sales reps are a tool for doing this. “Help” does not seem like the correct verb.

Q4 of 2019 will show (we predict) some of the highest growth of cloud ever in SAP’s history. SAP will then present this as an entirely holistic cloud demand — and evidence that SAP’s cloud strategy is a stunning success.

This is the exact type of behavior that led the Fireman’s Fund to sue Oracle, as we covered in the article Oracle Sued for Making False Claims About Cloud Growth.

The Problem with the Support Assumption

SAP charges 22% for maintenance which supposedly goes for R&D which benefits “loyal customers” as they say.

That is instead of doing the work we all do in the real world, which is upsell or cross-sell based on merits. SAP actually pulls a trick out of Sun Tzu, which is, if the other party is not willing to negotiate because their current position is good enough, they attack that “good enough” by making it worse.

SAP might say something like the following:

Since Lumira has not gotten the funding for R&D as was promised, and Explorer and Dashboards are EOL, your money has been redirected to other products which you are not getting part of, so, if you don’t want to continue (mind you this is actually what they say, they have not been funding accordingly in the recent past, so this is a fact) to be by paying maintenance for products we don’t care about, sign this paper.

  • In the real (non SAP) world, customers would be offered a manufacturer’s newest best product, even if it was not part of the original deal, and upsell it to the current customer base.
  • Why go through all the paperwork of partially terminating things? That’s just another part of the bait in order to get customers’ attention and force them to “go cloud,” at least in their minds.

The customer that won’t go this route, and currently pay maintenance for their BOBJ licenses, shouldn’t they be offered something in return because SAP has in fact not used that money (maintenance for R&D) for their benefit but SAPs benefit? shouldn’t SAP reduce any BOBJ BI customer’s maintenance base because they have publicly accepted that the 22% will not be coming back to those customers?

The Problem With Incentivizing Sales to Push the Conversion

This is taken from page 143 of SAP’s annual report.

Typically, we either do not pay sales commissions for customer contract renewals (emphasis added) or such commissions are not commensurate with the commissions paid for new contracts.

Thus, the commissions paid for renewable new contracts also relate to expected renewals of these contracts. Consequently, we amortize sales commissions paid for new customer contracts on a straight-line basis over the expected contract life including probable contract renewals.

Judgment is required in estimating these contract lives. In exercising this judgment, we consider our respective renewal history adjusted for indications that the renewal history is not fully indicative of future renewals. The amortization periods range from 18 months to eight years depending on the type of offering. Amortization of the capitalized costs of obtaining customer contracts is classified as sales and marketing expense. – SAP Integrated Report

This means that salespeople, who are normally not paid for the support revenues — are now being incentivized by sales to “convert” the support contract (which they cannot be compensated for) to cloud subscriptions, that they can be compensated for. This means that salespeople are incentivized to do something that is bad for their customers — and this is simply to paint a misleading cloud picture for Wall Street — and get the stock price up, and then get bigger payouts to the leadership at SAP.

This program is stated as if it is beneficial for customers, but it is actually very poor for customers.

We recommend not engaging in this program, and also not listening to Gartner on any topic related to how to purchase from SAP.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

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://www.riministreet.com/support-for-sap/sap-businessobjects

https://spinnakersupport.com/sap-support-services/sap-businessobjects-support/

Business Technology Platform – Sales Play/Modern Analytics – Selling Motion/Extend Analytics, SAP, November 21, 2019

https://www.gartner.com/en/documents/3893767/minimize-s-4hana-migration-costs-by-leveraging-conversio

https://www.gartner.com/en/documents/3970977/how-to-license-sap-s-4hana-software

How to License SAP S/4HANA Software Published 31 October 2019 – ID G00451266

https://support.sap.com/content/dam/support/en_us/library/ssp/offerings-and-programs/strategy/extension-external-rules-cloud-Extension-v8.pdf