How Useful is SAP API Management?

Executive Summary

  • SAP API Management is resold Apigee and is promoted to improve integration.
  • How valid are SAP’s claims around SAP API Management?

Introduction

SAP offers the following video on the SAP API Management product. We have placed our observations about the video below the video.

SAP API Management as Part of SAP Cloud?

We have already written about how SAP Cloud is primarily a mechanism for upcharging other cloud providers in the article How to Understand SAP’s Upcharge as a Service. So right off the bat, an item that is part of SAP Cloud is a problematic item to use. Secondly, beyond the very poor financial terms of SAP Cloud, SAP Cloud is a highly inefficient PaaS to use. Therefore the connection between SAP API Management and SAP Cloud is a bit of a deal breaker for us.

Sharing Mobile Data, IoT and Production Data with SAP API Management?

SAP really only has control over one of these three areas. They have nearly no IoT business, they are a nonentity in mobile. Therefore this proposed ability to share SAP data among these three areas is not persuasive. The whole “sharing real-time data” statement is very much not educational. Any interface can be scheduled to run in batch or in real time.

Real Time Analytics?

Analytics can be run real time, which is called a refresh….but what does this have to do with SAP API Management?

Manage Your Entire Ecosystem of Customers and Suppliers?

SAP has the most difficult to integrate products in enterprise software. As for collaboration, SAP’s SNC product is no longer functional. Ariba is in decline and has never extended much beyond indirect procurement. In fact, placing one’s data into SAP is one of the best ways to reduce one’s interaction with outside entities. Therefore will all of these areas be magically improved by using an API management tool like Apigee, or SAP API Management? This seems like quite a stretch.

SAP and Microservices with SAP API Management

This quote is from the Apigee website.

“Many existing and legacy services are not built for modern scale. Consequently, enterprises are adapting legacy services for modern use by breaking up monolithic applications into microservices. In most cases, however, there are already many applications taking advantage of services from the monoliths. The transition to microservices must be done in a way that makes it seamless—invisible to those other applications and developers using the monolith services.

Design and build APIs that developers love. Easily create API proxies and visually configure or code API policies as steps in the API flow. Customize API behavior using JavaScript, Python, or Node.js. Transform from or to any protocol including SOAP, REST, XML binary, and custom protocols.”

There are several problems with this quote. Let us list them.

  1. Companies are breaking monolithic applications into microservice….but not SAP customers. SAP is firmly a series of monolithic applications, and there is no movement afoot to break them into microservices. What SAP is doing is co-opting the terms around microservices without actually becoming microservice in their design. This is the same issue with using the term containers with SAP. It is not a thing that is presently done with SAP. Secondly, SAP projects have all manner of higher priority items they need to invest in, such as evaluating code prior to S/4HANA implementations. It is unlikely that microservices area true emphasis area for SAP or their customers.
  2. SAP does not use Python or Node.js. They have documentation around SOAP, REST and XML but they are not a “thing” on SAP projects. SAP uses a language called ABAP that has nothing to do with anything mentioned in this quote, along with some Java. And ABAP is distinctly not appropriate for and web development.
  3. SAP is about creating interfaces with ABAP, sometimes to IDOCS which are hierarchical files that require extensive transformation. SAP has not changed its integration much since the 1990s in a way that has meant much for projects (new products have been introduced, but none of them have been competitive with custom integration using programming rather than interfaces, which is a topic we covered in the article How Non Programming Integration Hurts SAP Projects.

Conclusion

We did not evaluate Apigee for this analysis. Apigee may be a great product. However, it does not fit with how SAP operates and its technology foundations. The fact that SAP is reselling Apigee (and combining it with SAP Cloud) really only means that SAP is offering customers the opportunity to be upcharged for a product it has nothing to do with. It never makes sense to purchase a product through SAP, because SAP will exaggerate the price and also the claims made by the actual software vendor.

By connecting Apigee/SAP API Management to the SAP Cloud, they drastically reduced the value of Apigee. Not only will SAP demand an upcharge for Apigee, but they will upcharge customers on any usage of APIs that are developed by Apigee as they will consume cloud services.

The fundamental problem is that SAP does not work anything like the environment that Apigee was designed for. Apigee is designed to manage services run from cloud service providers like AWS and GCP using modern development approaches under the construct of openness.

This is the exact opposite of how SAP environments work.

Now, we should mention that we/Brightwork is very much a supporter of the model proposed by Apigee. And we wrote two books about how to bring cloud services to SAP and Oracle environments and address the topics of microservices and containers and new development approaches taking place in the cloud in great detail. So we have no disagreement with the model presented by Apigee. However, this cannot be effectively performed within SAP’s construct. SAP had a comparative advantage in ERP systems, and it is attempting to use the account control built up from its ERP heritage to extend and insert itself into the cloud. Customers should be careful not to let SAP do this because so far, SAP has added nothing to the cloud except cloud confusion. The leaders in the cloud are far away from SAP in technology and approach. In fact, SAP should be considered an anti-cloud company. And the more customers allow SAP to insert themselves into their cloud, the more the cloud will turn into a negative ROI item that is entirely controlled by SAP.

And all of this is why we are predicting so much cloud expenditure will be wasted through SAP customers taking advice from SAP and their consulting partners on the topic of the cloud.

  • SAP is a non-starter as a cloud provider or cloud thinker. Most of what SAP states about the cloud is not correct or helpful.
  • Customers that want to use Apigee or a similar tool along with innovative cloud service providers for new development should absolutely do this and then connect this SAP independent development back to SAP. However, they should not touch SAP API Management with a ten-foot pole.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

SAP Contact Form

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

References

https://apigee.com/api-management/#/products

AWS and Google Cloud Book

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

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

Does Hiring Large SAP Consulting as Work as Political Insurance?

Executive Summary

  • A primary reason for hiring the major SAP consulting firms is for political insurance.
  • This means that if the project does poorly, that the decision makers can say they went with a major brand.

Introduction

Large SAP consulting companies have a long history of ripping off their clients. However, they continue to be used. Why? Well, one hypothesis is that the large consulting companies provide political cover for decision makers. Even though Deloitte or Accenture or WiPro or Cognizant or another SAP consulting firm constantly take advantage of their clients, they are at the very least “major brands.” Looked at this way, they can be seen as political insurance.

Paying to Get Robbed?

I recall a project where IBM was not getting what it wanted and they declared

“We cannot guarantee the success of the project if XYZ happens.”

I remember thinking, how does IBM guarantee the success of anything? You pay IBM and they support a project. There is no guarantee.

The risk is with the client. All that IBM does is bill the customer, there is no “guarantee” provided by any consulting firm.

How SAP Consulting Firms Increase Project Risk

These firms greatly increase the risk of failure of projects. Here is why:

  • The Consistently Poor Quality of Product Information Emanating from SAP Consulting Firms: The information they provide is of such self-serving and inaccurate quality. If you cannot find out what is true from the SI, then you are destined to implement incorrectly.
  • The Inability to Contradict SAP: The SAP consulting firms compete with each other to gain the approval of SAP. They will agree with SAP on anything they say, creating a fake impression of an independent third party.
  • Intense Hierarchy: No one but the top people on a project have any ability to determine what information will be released to a customer. All of the technical resources are entirely subordinate to the senior members, who are in turn subordinate to the most senior members within the consulting firms where policy is made.

Therefore the waste is worse than just their billing rate, they push companies to implement the worst systems (the most immature, worst fit for the requirements — the ones that the consulting firm specializes in billing for) and often in the worst way for their clients.

It is similar to paying robbers to come into your house to rob you. Typically you can just get robbed for free.

Given Their Track Record, Why Do the Major SAP Consulting Firms Continue to Sell Work?

As observed by Ahmed Azmi.

“Customers really don’t have better options unless they’re willing and capable of doing the work themselves. Many don’t have that ability in house. It’s much easier to outsource everything to an SI and take what they can get. If the system under-delivers, they must downplay the problems because they are part of the project. Customers really don’t have better options unless they’re willing and capable of doing the work themselves. Many don’t have that ability in house. It’s much easier to outsource everything to an SI and take what they can get. If the system under-delivers, they must downplay the problems because they are part of the project.”

Where Does Competition Occur in SAP Consulting?

The description laid out in the previous comment essentially proposes the SAP consulting firms as being selected primarily for appearances (insurance, lack of personal responsibility in selecting a “brand” etc..).

This means that the various consulting firms “compete” but only within the context of agreeing with whatever SAP says. Therefore customers can choose from what amounts to the same rigged advice from any of the companies.

  • The consulting firms do not complete on which can implement in fact, because the implementation history of each is unknown.
  • SAP recommends companies that follow SAP’s directives, always placing client interests at the bottom of the trough.

Those that do what SAP says, get more business. In this sense the more you lie for SAP, the more business you get. In fact, in our research into the media output of SAP consulting firms, we find almost no variance between the information published by any of them. This would not be such a terrible thing, but the issue is that so much of the published information is false. That means that a wide variety of consulting entities are publishing the same false information……because it comes centrally from SAP.

Therefore, the competition is greatly based upon who can lie better for SAP.

Conclusion

The competition between the SAP consulting firms is within a very narrow context, and mostly not what is good for customers. If one chooses Deloitte or Accenture there is little practical difference in the quality of information that the customer will receive.

The political insurance that decision makers obtain from selecting one of the major SAP consulting firms comes at an enormous cost, and not only greatly increases the costs of implementation, but also increases the risk of failure. Therefore, while perhaps functional for the decision maker, it is dysfunctional for the companies that end up paying the consulting bill.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

SAP Contact Form

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

References

Enterprise Software Risk Book

Software RiskRethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Rethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Better Managing Software Risk

The software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’t

In this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation.

Chapters

Chapter 1: Introduction
Chapter 2: Enterprise Software Risk Management
Chapter 3: The Basics of Enterprise Software Risk Management
Chapter 4: Understanding the Enterprise Software Market
Chapter 5: Software Sell-ability versus Implementability
Chapter 6: Selecting the Right IT Consultant
Chapter 7: How to Use the Reports of Analysts Like Gartner
Chapter 8: How to Interpret Vendor-Provided Information to Reduce Project Risk
Chapter 9: Evaluating Implementation Preparedness
Chapter 10: Using TCO for Decision Making
Chapter 11: The Software Decisions’ Risk Component Model

How to Understand SAP’s Strange Predictive Analytics for ML

Executive Summary

  • SAP states that they have advanced predictive analytics for machine learning.
  • In this article, we review the predictive analytics that SAP offers.

Introduction

SAP offers the following predictive analytics for machine learning.

Anomaly Detection with Principal Component Analysis

Here is the example SAP provides.

“A railway operator uses sensors in locomotives. Four motors each have four temperature sensors. If the motors are working correctly, all 16 sensors send data about a synchronous increase or decrease of temperature. PCA notes when this behavior changes. You would use this algorithm to monitor this behavior and to detect if sensors send temperature data that differ from other sensors, which might indicate that a motor is damaged and needs to be maintained.”

We are trying to think under what circumstances this ML algorithm would make sense to use.

Distance-Based Failure Analysis Using Earth Mover’s Distance

“An airplane contains electric devices that have batteries inside. These electric devices are equipped with at least two sensors that send data. Sensor A sends data about measurements of electric current, sensor B sends data about voltage measurements. An electric device could also have a sensor C that sends data about temperature measurements. The data sent by the three sensors not only depends on the electric device itself, but also on other factors that affect the electric device and its batteries. These factors could be the weather conditions at heights of several kilometers, how often the device is used in the cockpit, under which conditions the pilot uses the device, and so on. It is therefore normal that data sent from the three sensors might vary around a certain mean score. The data from each sensor can be visualized in a one-dimensional histogram. For multidimensional visualizations, scatterplots are used. This visualization is like a fingerprint of each battery in the airplane. To compare the sensor data of different batteries without looking at and comparing each visualization, a distance measure for probability distributions is needed. One of these measures is the Wasserstein metric, or EMD. It can be used to measure deviation from a known good reference fingerprint of a battery, or to measure differences between several batteries of the same type, for example.”

Same thing applies for this algorithm.

Remaining Useful Life Prediction Using Weibull

“The Weibull algorithm can be used to calculate the expected remaining useful life (RUL) of an asset, and to calculate the probability of failure of an asset.”
This would be used to determine the failure rate of say a service part.

Anomaly Detection Using Multivariate Autoregression

“An example might be the changes in the outflow temperature of a system, which after a while is also reflected in the inflow temperature of a downstream system. MAR can handle different kinds of sensor values, and autonomously ranks their influence on each other. The algorithm can therefore handle noisy or random signals.”

This is another strange choice for a machine learning algorithm.

Strange ML Algorithms

SAP’s choice of ML algorithms is quite strange. Common ML algorithms include the following:

  1. Support Vector Machines
  2. Learning Vector Quantization
  3. Naive Bayes
  4. Classification and Regression Trees
  5. Linear Discriminant Analysis
  6. Logistic Regression
  7. Linear Regression

Interestingly we can’t see the ML algorithms that were selected by SAP being used.

ASUG on SAP Predictive Analytics

“So how does one actually buy Predictive Analysis? There are, it turns out, several different methods, and I’ll do my best to make it clear:

1. It’s bundled into SAP Lumira, within the Lumira code base, Gadalla says. But there’s a catch: You have to buy a key code to “light it up,” he says.

2. But if you buy Predictive Analysis, you get Lumira for free. (Got it?)

3. Predictive Analysis is embedded within about 20 different HANA apps (such as CRM, SCM, Partner Relationship Management and Liquidity Forecaster).

4. Predictive Analysis is also bundled with a HANA box, “where I’m using HANA as a server, where I’m doing my analysis,” Gadalla says.

Current pricing on SAP Predictive Analysis is $20,000 per seat with a minimum purchase of 5 seats, according to Gadalla.

No discussion of a new SAP product would be complete without that requisite HANA mention, of course. Gadalla reports that HANA went head to head with top competitors in doing clustering analysis, and he claims that competitors’ wares took 40 hours to do the job whereas HANA took just 2 minutes. “It was the same exact equation and same exact data,” he says.””

First, all of the algorithms used by SAP are in the public domain. SAP had nothing to do with creating them. So why are customers being changed to use them? Secondly, the HANA database will do nearly nothing to help anyone run predictive analytics faster. We run predictive analytics ML on a laptop using MySQL and it normally takes less than 20 minutes for them to run, a time we can switch to another task. And the time in running ML is in analyzing the output not in running the algorithm.

Conclusion

SAP is lying to customers with respect to its ML.

  1. The ML algorithms selected by SAP don’t make much sense for what customers would normally use them for. The use case examples show how odd it would be to use them. Only the Weibull algorithm appears usable (for predicting service parts failure).
  2. The database does not matter that much for running algorithms so that connecting to HANA is inaccurate. And the comparison of 40 hours to 2 minutes is asinine. That did not happen. And HANA’s is really only designed around optimizing analytics.
  3. The ML algorithms are not SAP’s, they are public domain. Secondly, the algorithms that SAP selected don’t appear to be ones that customers would want to use. Anyone can run these ML algorithms on data in their system without having to pay SAP anything, and HANA is irrelevant running ML algorithms. But why would any customer limit themselves to SAP’s incorrectly selected algorithms? Anyone can run a public domain algorithm on any data set without SAP being involved in any way.
  4. SAP is lying from 4 different dimensions all in one, and trying to take advantage of customer’s lack of knowledge around ML.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

SAP Contact Form

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

References

https://www.asug.com/news/sap-predictive-analysis-what-it-can-and-cannot-do

https://towardsdatascience.com/a-tour-of-the-top-10-algorithms-for-machine-learning-newbies-dde4edffae11

https://help.sap.com/doc/6a2cd93857fd4973baa558931701afcd/1.0.3/en-US/654d095bd73a401fb789491a23fc5bb5.html

Enterprise Software Risk Book

Software RiskRethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Rethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Better Managing Software Risk

The software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’t

In this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation.

Chapters

Chapter 1: Introduction
Chapter 2: Enterprise Software Risk Management
Chapter 3: The Basics of Enterprise Software Risk Management
Chapter 4: Understanding the Enterprise Software Market
Chapter 5: Software Sell-ability versus Implementability
Chapter 6: Selecting the Right IT Consultant
Chapter 7: How to Use the Reports of Analysts Like Gartner
Chapter 8: How to Interpret Vendor-Provided Information to Reduce Project Risk
Chapter 9: Evaluating Implementation Preparedness
Chapter 10: Using TCO for Decision Making
Chapter 11: The Software Decisions’ Risk Component Model

According to SAP, Indirect Access is All About Customers!

Executive Summary

  • There are plenty of firms that perform SAP advisement, but the advice ends up being rigged.
  • Large companies use advisement to provide advice that leads to other business.

Introduction

SAP published an article which proposed a curious narrative for how SAP views how SAP charges customers or indirect access. In this article, we will review SAP’s statements.

According to SAP, Indirect Access is Like Maintenance?

“Imagine a machine that needs repair. In the classical enterprise resource planning (ERP world), a service technician would read data from this machine, log on to the SAP system, and enter the request “spare part needed.” However, as many SAP customers digitize, now many of these machines can report errors, like the need for a new spare part, themselves. But if the request is processed in a system without any human interaction, how can SAP charge for it in a reasonable and fair way?”

Repairs are supposed to be covered by support. This is why SAP customers pay 22%+ per year in support, to have repairs taken care of by SAP. Second, there has never been an SAP customer…ever, who did not use SAP in a digital way. The primary reason for this is that SAP has only ever sold software. And software is by its nature digital…..software stores values as ones and zeros. Uwe Grigoleit, a multiple Golden Pinnochio Award winner (our most esteemed prize) restates this ridiculous proposal in the following quotation.

“User-based charging is not a realistic approach anymore in the digital world,” explains Uwe Grigoleit, project lead for SAP S/4HANA.”

None of the other vendors seems to be having a problem with it. Strange that SAP is the only vendor trying to use the excuse of digitization as logic for charging more for software.

Ding Ding Ding!

Just about everytime Uwe Grigoleit is quoted in any article, we wins another Golden Pinocchio. Uwe’s proposal about digital changes driving IA is not only completely false it is laughable. 

SAP Must Charge IA Because of IoT?

“Over the past year, a cross-functional team at SAP has developed a new pricing model for the use of SAP S/4HANA by devices and third-party applications rather than human beings. Based on a defined set of transactions — called ‘documents’ — in the ERP system, SAP no longer charges for the number of parties—humans, devices, etc.—accessing the system. Charges are instead outcome-based, a first-of-its-kind model. “Of course, you could provide every machine or IoT device in the company with its own user,” Grigoleit says. “But this is not feasible with hundreds or thousands of machines and devices. We are now charging our customers for the business usage of the system; they only pay when the system is working for them, processing transactions. This is the fundamental idea of the Digital Access Model.”

SAP is barely involved in IoT. However, even in the case where IoT devices are used by a customer, they very rarely connect to the ERP system. In fact, this is one reason why SAP has been unsuccessful in the IoT space with Leonardo, which we cover in the article Why Leonardo Seems so Fake. And SAP has not been able to convince customers that IoT is naturally connected to ERP. SAP would like to use IA to justify pushing customers to Leonardo, or they would be charged more, but not enough customers see SAP as providing an IoT solution or in connecting IoT to ERP for the strategy to work. So here SAP is trying to propose it needs to charge for something that does not even happen in any appreciable way.

A Cross-Team Effort….to Rip Off Customers?

“The team that developed the new model included employees from across the company—from Pricing to Solution Management, Development, Sales, Contracts and Legal, and License Audit. “The best thing about working on this project? Our great cross-functional team!” says Sonya Swann, project lead for Corporate Pricing.  We were able to put all our internal differences aside and truly focus on the best outcome for our customers.””

It should go without saying that not all teams are a good thing. When people prepare to rob a bank, they usually create a team of some sort. Companies like Deloitte and Accenture created teams of consultants to give bad advice to customers, again not a great outcome. Also, what terrible differences were there within corporate pricing? SAP appears unified in their need to extract the most possible money from customers. And yet, while IA is illegal under US antitrust law, according to SAP IA was introduced for customers?

We see….but we are left with more questions.

Introducing IA for SAP’s Credibility

“In order to develop the new model, the team had to address the risks of revenues loss, market readiness, and potential effects on SAP’s credibility. Nevertheless, they were convinced these hurdles could be overcome: “We are not just reacting to our customers’ demands anymore but addressing them head on with an innovative and industry-leading approach,” Swann said.”

Yes, I am not sure that SAP appreciates the irony, but IA has been extremely deleterious for SAP’s credibility. It has shown SAP as utterly contemptuous of their customers that they would think their customers are so stupid that they could be double charged and kept from exploring other software vendor options with the illegal construct of IA.

Is It Paying Off?

“User groups, analysts, and influencers have recognized the efforts. While previous user models were perceived as non-transparent, unpredictable, and inconsistent, the new pricing model makes it easier to use and pay for SAP software licenses. In developing the model, the team reached out to a variety of experts across SAP and collaborated with external stakeholders, including key user groups and industry analysts.”

Oh yes, the efforts have been recognized, but certainly not the way that SAP proposes here. Secondly, the current model used by SAP is still non-transparent, unpredictable and inconsistent. And it was not a perception, it is all of those things. SAP keeps all user pricing secret, there are confusing discounts, products cannot be priced without knowing the overall bundle — the entire pricing is a secret Rube Goldberg Machine that not even the sale reps understand. However, the new IA transaction pricing model is also not transparent. And furthermore, it is just an additional pricing scheme! It does not change the opaque, unpredictable and inconsistent nature of the user license scheme. One has nothing to do with the other. SAP sales reps do not even bring up the topic of IA in the sales process. IA is something they bring up later.

Charging Customers Illegally Has a Good Revenue Impact for SAP

“Since its introduction in April, the new model has generated over €90 million of revenue and 800 transactions with a very strong pipeline. The model also makes daily life easier for SAP colleagues in Sales because the new model replaces individual negotiations by clearly defining what is charged for. “This is not the end of a very long project, it is the beginning,” predicts team member Joseph LaRosa, vice president of Strategic Pricing and Commercialization.”

Yes, if you charge companies that are locked in, you can make money from it.

The Digital Access Model….What???

“The newly created Digital Access Model gives customers the commercial clarity and predictability needed to innovate around digital technologies with SAP ERP and simplifies an extremely important component of their decision-making processes. Based on a defined set of transactions — called ‘documents’ — in the ERP system, SAP no longer charges for the number of parties—humans, devices, etc.—accessing the system. Charges are instead outcome-based, a first-of-its-kind model.”

This quotation slips the reader through the looking glass where up is down and down is up.

Let us take this in stages.

  1. SAP customers already had clarity before IA, because they had already paid for their software. SAP keeps emphasizing the benefits of its pricing model, without acknowledging that indirect access is not a legitimate charge. Using SAP’s logic, there is no reason that customers should not be able to charge SAP for connecting to their internally developed applications.
  2. Sharing all of one’s transactions data with SAP is highly invasive. IA was introduced years after customers already purchased their SAP systems. This was never the agreement before SAP introduced this pricing scheme.
  3. SAP is agreeing to drop all user-based charges? If that is true, why are the clients we are advising being given prices based upon user?

Conclusion

The article by SAP is a not much something real as an attempt to put a positive spin on IA, but the question is brings up is regarding SAP’s messaging that it no longer charges for users, but only per connect system documents. But SAP has several pricing schemes. Secondly, something the article sidesteps is that the price of this scheme is not transparent. If SAP says that it is, then kindly show us where this IA pricing information is published. It is not published, which is called opaque (or non-transparent in SAP’s vocabulary).

Furthermore, we have heard of orders of magnitude of 100x difference from what one customer pays for IA documents versus another, therefore the pricing is simply all over the place. In our view this pricing scheme introduced at SAPPHIRE in 2017, which we critiqued in the article SAP’s Recycled Indirect Access Damage Control for 2018.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

SAP Contact Form

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

References

*https://news.sap.com/2019/01/digital-access-model-hasso-plattner-founders-award-finalist-profile/

Enterprise Software Risk Book

Software RiskRethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Rethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Better Managing Software Risk

The software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’t

In this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation.

Chapters

Chapter 1: Introduction
Chapter 2: Enterprise Software Risk Management
Chapter 3: The Basics of Enterprise Software Risk Management
Chapter 4: Understanding the Enterprise Software Market
Chapter 5: Software Sell-ability versus Implementability
Chapter 6: Selecting the Right IT Consultant
Chapter 7: How to Use the Reports of Analysts Like Gartner
Chapter 8: How to Interpret Vendor-Provided Information to Reduce Project Risk
Chapter 9: Evaluating Implementation Preparedness
Chapter 10: Using TCO for Decision Making
Chapter 11: The Software Decisions’ Risk Component Model

Introducing Brightwork’s Deloitte Coupon for Terrible SAP Advice

Executive Summary

  • The SAP consulting companies charge top rates, but also offer the worst possible advice.
  • With the Brightwork coupon, SAP customers can now get 1/2 on the same horrible advice they have always gotten.

Introduction

At Brightwork, we provide analysis for companies evaluating SAP and Oracle. And in this role, we are exposed to the documentation and information that is provided to our clients by the major consulting firms. And how is the quality of this advice? Horrible! There are so many areas where the SAP consulting firms mislead their “clients” but here is a sample.

How SAP Consulting Firms Mislead Clients

  1. One of the first ways is that they do not declare their financial relationship with SAP. The firms make it seem like they represent their client’s interests when they represent their own and SAP’s interests over the client. SAP consulting firms will not help their clients negotiation against SAP, because that would harm their relationship with SAP.
  2. A second major way is the SAP consulting firm will mindlessly repeat whatever SAP says. No matter how inappropriate the application is for a client, the SAP consulting firms will agree with SAP’s presentation that the client should use the application in question.
  3. A third major way SAP consulting companies conspire against their accounts. The SAP consulting firms share information with SAP about the client, so that it may be leveraged by SAP. And they never tell their clients that they do this.
  4. A fourth major way is they communicate no realistic information about the success of SAP applications at other clients, in each case allowing SAP sales to exaggerate their success ratios. Literally, nothing is questioned,  SAP’s timeline estimates, SAP’s roadmap for products, SAP’s methodologies, SAP’s typical overrun on projects, nothing.

Deloitte and (fill in the blank) consulting companies are good little passive parrots for SAP. They provide heaps of false information to clients and lack any independence. 

Paying Top Rates for the Worst Advice

The advice from the SAP consulting companies creates a curious dynamic where clients pay top rates to get 100% biased information. The only goal of the consulting companies is to bill the maximum number of hours and to strengthen their relationship with SAP. And this is why we created the 50% off Coupon. Yes, with this coupon any SAP customer will get the standard garbage advice that benefits SAP and the consulting company over the client, but with the coupon the get 50%. And that is nothing to sneeze at!

Conclusions

The worst advice that benefits the consulting company versus the client is available in the open market of SAP consulting. There is a tremendous choice in the market. One can be lied to by Deloitte, Infosys, Accenture, IBM, and many other firms. So while the advice is horrible and entirely self-serving, at least SAP customers can choose who will lie to them. And with the Brightwork coupon, they can now get 1/2 off!

It’s a fantastic time to be an SAP customer!

References

SAP Contact Form

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Enterprise Software Risk

See our free project risk estimators that are available per application. The provide a method of risk analysis that is not available from other sources.

Why You Should Treat SAP Sales Reps As Passive Order Takers

Executive Summary

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

Introduction

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

What Do SAP Sales Reps Know?

SAP sales reps are hired for their ability to sell. Everything else is secondary.

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

  • SAP Sales Reps and Technology: SAP sales reps generally know little about technology. If you spend time interacting with SAP sales reps (as I have), you soon realize that most of them are challenged by personal computing. SAP sales reps are significantly powered up by their solution consultants. Oftentimes when working with a sales rep I was told at a demo “At that point, you need to jump in because I don’t know that area.” 
  • The Tenure at SAP: Many SAP sales reps have short tenures at SAP. In another year or so, they may jump to Oracle. SAP has 309 products as we covered in the article How Many Products Does SAP Have? Most sales come from a much smaller sample of products, but the scope of SAP is overwhelming. I have been working in the SAP space since 1997, and the number of SAP products that have come and gone in that period is astounding. Products are constantly being renamed, even repositioned (Leonardo started off as IoT, but then morphed into predictive analytics and finally into AI). There is no possible way to understand the overall mix if one has worked in the space for a short period of time.
  • SAP’s Unicorn Based Sales Training: SAP sales training is ridiculously inaccurate. The tests cannot be passed by anyone who answers the questions with what actually happens on SAP projects. Passing the tests means agreeing with the test prep, which is a fantasyland creation of what SAP sales and marketing would like to be true.

What Do SAP Sales Reps Know About Your Business?

One of the ideas of a sales rep is that they will know your business and therefore be able to recommend the right thing to you. However, SAP is far too quota oriented for sales reps to fulfill this role even if they wanted to in other respects. With our clients, SAP reps make repeated mistakes around the environments of their customers where they have already had operating SAP systems for 10 or 15 years!

How can this be? It sounds impossible, doesn’t it?

Well, SAP reps frequently turn over, and the knowledge of the customer’s environment dissipates. Everything the SAP rep provides regarding the environment must be checked. It cannot be assumed that they have made the right estimations.

What is the Accuracy of Information from SAP Sales Reps?

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

This is for several reasons.

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

SAP customers and prospects constantly complain about “inconsistencies” from SAP sales reps. We work for clients going through the procurement process and these “inconsistencies” consistently allow the sales rep to make more money. These inconsistencies can be users reclassified as a license they do not need, verbal assurances regarding indirect access that have no legal weight, exaggerations (pick your adjective) regarding product capabilities, overly optimistic roadmaps. The list goes on and on.

Every SAP roadmap makes it appear as if the product will take over the world soon. However, they are not reliable as a guide to what the product will be. They are in a true sense marketing and sales tools. Product managers at SAP know that the roadmaps are highly political documents. SAP also make a habit of stating the milestones on the roadmap as sufficiently vague, that it can be difficult to say for certain if the item was actually added in that release. This can be seen just from reading through this slide on S/4HANA’s roadmap. 

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

SAP sales reps lack the technical expertise or the objectivity to be used to tell you what applications or databases you should purchase from SAP. As an example, S/4HANA still has significant maturity issues, but you won’t hear anything about this from an SAP sales rep. SAP sales reps too consistently mislead clients that we have had to be trusted to provide insight to the prospect.

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

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

Conclusion

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

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

Post Article

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

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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  • Questions About This Area?

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    • If this type of accuracy interests you, tell us your question below.

References

Software Selection Book

SELECTION

Enterprise Software Selection: How to Pinpoint the Perfect Software Solution Using Multiple Information Sources

Mastering Software Selection

Software selection is a form of forecasting, just as any another purchase decision is a forecast of how successfully the purchased item will meet expectations. Forecasting is necessary because it is not feasible to implement each application under consideration before it is purchased to see how it works in the business.

The Importance of Software Selection

Software selection is the most important part of any software implementation because it is the best opportunity to match the software with the business requirements, which is the most important factor in determining the success of the project. This book explains how to get the right information from the right sources to perform software selection correctly.

What You Can Expect from the Book

Essential reading for success in your next software selection and implementation. Software selection is the most important tasks in a software implementation project, as it is your best (if not only) opportunity to make sure that the right software the software that matches the business requirements is being implemented. Choosing the software that is the best fit clears the way for a successful implementation, yet software selection is often fraught with issues, and many companies do not end up with the best software for their needs. However, the process can be greatly simplified by addressing the information sources that influence software selection.

This book is a how-to guide for improving the software selection process and is formulated around the idea that much like purchasing decisions for consumer products the end user and those with the domain expertise must be included. In addition to providing hints for refining the software selection process, this book delves into the often-overlooked topic of how consulting and IT analyst firms influence the purchasing decision and gives the reader an insider’s understanding of the enterprise software market. By reading this book you will:

  • Learn how to apply a scientific approach to the software selection process.
  • Interpret vendor-supplied information to your best advantage.
  • Understand what motivates a software vendor.
  • Learn how the institutional structure and biases of consulting firms affect the advice they give you, and understand how to interpret information from consulting companies correctly.
  • Make vendor demos work to your benefit.
  • Know the right questions to ask on topics such as integration with existing software, cloud versus on-premise vendors, and client references.
  • Differentiate what is important to know about software for improved “implement-ability” versus what the vendor thinks is important for improved “sell-ability.”
  • Better manage your software selection projects to ensure smoother implementations.

Chapters

  • Chapter 1: Introduction to Software Selection
  • Chapter 2: Understanding the Enterprise Software Market
  • Chapter 3: Software Sell-ability versus Implement-ability
  • Chapter 4: How to Use Consulting Advice on Software Selection
  • Chapter 5: How to Use the Reports of Analyst Firms Like Gartner
  • Chapter 6: How to Use Information Provided by Vendors
  • Chapter 7: How to Manage the Software Selection Process
  • Chapter 8: Conclusion
  • Appendix a: How to Use Independent Consultants for Software Selection

Who Wants Honest SAP Advisement Business?

Executive Summary

  • There are plenty of firms that perform SAP advisement, but the advice ends up being rigged due to financial incentives.
  • Large companies use advisement to provide advice that leads to other business.

Introduction

A large number of consulting companies provide advice and perform anything from software selection assistance to supporting various analytical initiatives. However, none of the larger, and very few of the others actually see themselves in the decision support business as a business. In this article, we will describe why this is such a problem.

The Financial Incentives at SAP Consulting Firms

In order to attain and retain a leadership position at an SAP consulting firm one must bring in roughly $2 million in revenues per year. There is no way to attain this quote by performing smaller projects, of which software selection and analytical initiatives would be examples. To attain this yearly quota, one needs to sell implementations. Decision support projects tend to smaller, shorter, and offer less stable consulting revenue. For a company with a significant overhead (offices, support staff, large senior member compensation) smaller projects of this nature are not sustaining.

Secondly, one of the best ways to sell implementations is to position oneself as a “trusted advisor” and then sell out the client’s interests by directing them to implement the most possible software. This means acting to promote SAP software, regardless of the fit with the client requirements, the cost, the maturity of the application, and another other factor related to things that make software a good match for a particular client.

The Implication of How Incentives are Structured

This means that SAP consulting companies are unreliable for providing software selection support as they have a massive financial bias. SAP consulting companies will claim major domain expertise as a reason for using them in an advisement capacity, but even the deepest domain expertise cannot overcome financial bias, and in truth, the decisions are normally filtered through the senior management of the consulting company, with little freedom given to the more junior members of the organization who possess most of the domain expertise.

An SAP consulting company may take the advisement or selection project, but only as a means to gain more future work. When they report back to their other senior members, success is measured by how much further business is obtained (at KPMG the catchphrase is “penetrate and radiate.”) The concept of providing objective analysis, and then rolling off of the project is only measured as a failure.

Having discussed this topic with several experienced consultants, we were told that recommending solutions on the basis of financial bias is “the way that it is.” And that further, it is a good thing, because the benefits flow to the consulting firm with the strongest relationship. The trick is not to tell the client that you are doing it. And this is considered perfectly normal in the SAP consulting field.

Conclusion

There is no feasible way for senior members of SAP consulting firms to attain or maintain their positions without putting their financial incentives ahead of their clients. None of the major SAP consulting firms and very few of the smaller SAP consulting firms have a model that allows for anything but grabbing implementation business by any means possible. And one of the best means is to pretend to provide decision support.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

SAP Contact Form

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

References

Enterprise Software Risk Book

Software RiskRethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Rethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Better Managing Software Risk

The software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’t

In this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation.

Chapters

Chapter 1: Introduction
Chapter 2: Enterprise Software Risk Management
Chapter 3: The Basics of Enterprise Software Risk Management
Chapter 4: Understanding the Enterprise Software Market
Chapter 5: Software Sell-ability versus Implementability
Chapter 6: Selecting the Right IT Consultant
Chapter 7: How to Use the Reports of Analysts Like Gartner
Chapter 8: How to Interpret Vendor-Provided Information to Reduce Project Risk
Chapter 9: Evaluating Implementation Preparedness
Chapter 10: Using TCO for Decision Making
Chapter 11: The Software Decisions’ Risk Component Model

How Effective is SAP in its Acquisitions?

Executive Summary

  • Why are SAP’s new acquisitions forecasted without analyzing how SAP’s previous acquisitions fared?
  • Find out how well SAP has done with acquisitions.

Introduction

SAP acquisitions follow a very familiar path. We call this the “acquisition algorithm.”

The Acquisition Algorithm

  • The acquisition target is announced.
  • Top executives to on a full charm offensive selling what a good idea the acquisition will be.
  • IT Analyst, Wall Street analysts, and media entities normally weigh in that the acquisition fills some of the need or provides some “synergy,” or they cover the topic merely announcing the acquisition without any commentary of any kind.

And this algorithm applies to not only SAP but also to the media coverage of non-SAP acquisitions.

The Important of Never Looking Back

In analyzing many articles from major IT media that cover SAP’s acquisitions, one thing that is nearly never done is to analyze the previous history of acquisitions. Once the vendor is acquired, its financials are subsumed into the overall SAP revenues, and it becomes very difficult to check how the vendor grew or did not grow post-acquisition.

In this way, SAP and those that promote the acquisition are never questioned on the accuracy of their projections. SAP does not take out advertisements that say..

“we completely failed in XYZ acquisition,”

…and the IT analysts and IT media entities normally just move on to the next topic.

Our SAP Acquisition History Scoring Method

While researching the Qualtrics acquisition we came across the Wikipedia entry for SAP that shows all of SAP’s acquisitions. According to Wikipedia, Qualtrics is SAP’s 69th acquisition. So the question we wanted to answer is “what is the average score of an SAP acquisition.

In terms of our method, we scored each of the 69 acquisitions on the basis of the degree to which the acquisition became an important component of SAP. The scoring was not based on how good the acquisition was for customers. That would be a completely different scoring and would be lower. Let us take the example of the Business Objects acquisition to explain the logic.

The Business Objects Acquisition

The Business Objects acquisition was very bad for the previous Business Objects customers. Support for Business Objects severely declined not long after SAP made the acquisition and prices increased. Many customers that did not want to work with SAP when they first purchased from Business Objects were now subject to SAP account reps, and SAP’s acquisition of Business Objects lead to Business Objects stagnating as a product, undermining the investment by Business Objects customers in the solution. When Business Objects was purchased it was a frequently discussed vendors in BI circles, now your barely hear about the Business Objects product. Years later, Business Objects is far less important as a product in the BI space that it was in 2007 because SAP has allowed the solution to stagnate.

Secondly, the promised integration with SAP BW, a primary reason given for the acquisition, never came. On one project we tested a new crossover component which was supposed to replace the BEx, and it broke so often we stopped using it. At the time of the acquisition, there was all manner of promises by SAP of how SAP BW and Business Objects would work together. Every year that passes, we hear less about Business Objects.

SAP never changed the name of Business Objects. Yet since the acquisition in 2007, the term Business Objects has declined from (in the US) from a search term popularity of 72 to 8, where it stands now. Is this acquisition a success? It depends upon your perspective. One SAP resource told me that the acquisition was successful because Business Objects was cutting into BW sales, so the acquisition neutralized a competitor. This brings up the question of whether all of the promises made by SAP to make BW work with Business Objects were fake. 

If the rating were based upon how it benefited Business Objects customers we would assign a rating of 1 out of 10. However, SAP did get a temporary bump from acquiring Business Objects, acquired some customers and was able to ruin a competitor, etc..

We assigned a 6.5 out of 10 in that it was leveraged to some degree by SAP. SAP failed to meet any of its promises around Business Objects at the time of acquisition, but from a purely SAP perspective, and without considering the dislocation to Business Objects customers, and how it undermined their investment, the acquisition was still mildly beneficial to SAP.

SuccessFactors

SuccessFactors was another of the most successful of SAP’s acquisitions. Notice the increase in popularity as tracked by Google Trends.

Just prior to the acquisition in 2011, SuccessFactors had a popularity of 32, however recently they have had a popularity/interest over time of 52. SuccessFactors along with Ariba, have been two of the most heavily promoted acquisitions in SAP’s history, with the joke being that when Bill McDermott wakes up in the middle of the night from a deep slumber, he often screams “SuccessFactors.” 

However, any increase in SuccessFactors has not come from the originally intended place, which is migrating SAP HCM customers to SuccessFactors. According to Jarrett Pazahanick, our goto resource for all things SuccessFactors, SAP has only successfully converted roughly 7 percent of pre-existing HCM customers to SuccessFactors Employee Central.

SAP has kept SuccessFactors on the front burner in its marketing for seven years, and that by itself would have helped SuccessFactors’ market presence. SuccessFactors has also been pivotal for SAP in presenting itself as a cloud vendor to Wall Street. The acquisitions of both Ariba and SuccessFactors have been highly successful in giving the cloud SAP a cloud “halo” and helping to keep its multiple high.

SAP’s High Number of Acquisitions with a Score of One out of Ten

Many of the acquired vendor products (or renamed products) have disappeared from SAP’s focus, and the specialties they occupied are still not at all important to SAP. In fact, the promiscuous acquisitions are one reason why such a high percentage of SAP’s product list is filled with dead products (which we covered in the article How Many Products Does SAP Have?)

Perhaps VW should “unpimp” SAP’s acquisition strategy because so many of SAP’s acquisitions “get an F.” VW’s headquarters is in Wolfsburg, Gemany, which is only 275 miles from SAP’s headquarters in Waldorf, Germany, so it would be a reasonably short distance to travel. 

This means that these acquisitions (for which there are many) received a 1 out of 10 for acquisition effectiveness. If an acquisition is made, and then years later the specialty is either barely known and or SAP receives very little revenue from the category, clearly this cannot be considered a successful acquisition. Many of these acquisitions just seem to disappear a few years after the initial marketing push. One prominent example is SAP’s acquisitions in the 2005 to 2008 timeframe when SAP acquired multiple manufacturing execution related vendors. Today SAP is not known for this software category in any way, even though they made three acquisitions in this space (Lighthammer, Factory Logic, and Visiprise).

Exclusions to the Scoring

The most recent acquisitions were excluded from the analysis. Qualtrics is an acquisition which has as close as possible to zero chance to be effective, but we did not want to mix up the future with the present. Because the last seven SAP acquisitions are within a year or so old, it is not yet possible to evaluate if they have been successful. Therefore the most recent acquisitions are listed as “TBD” and not scored. Several other acquisitions were more of a consulting company than a software vendor, so we marked those as “N/A” and they were also not scored.

Having gone through these clarifying topics, we have included the following acquisition table.

The SAP Acquisition History Table

The columns in blue are directly from Wikipedia. The orange column is the Brightwork Research & Analysis score. Items in Orange text were adjusted after input from Mark Chalfen.

The average score for all of the acquisitions that were rated is a 2.2 out of 10. 

The first thing to notice is the high number of scores of 1 in history. This is applied when SAP does not have very much business in that software category or when we have first-hand knowledge that the acquisition did not do anything for SAP. The logic for acquisitions is often that the acquired vendor will grow because they will have access to SAP’s account base. But it is extremely difficult to find a small acquisition by SAP that did that. This means that the proposal that SAP makes sales increase because of account exposure is a myth. Interestingly, SAP has been able to force extremely weak products into customers. Applications ranging from PLM to BW. However, SAP is far better in pushing internally developed applications into customers than acquired applications.

Many of the acquisitions were in categories that are never discussed in SAP circles or on SAP projects. In fact, if you told many people that worked with SAP that SAP had an application that covered the area, they would not know.

The Acquisition Outlier of Top Tier

There is one very prominent exception to this pattern of failing to grow acquisitions, and that is the acquisition of Top Tier. Tom Tier is one of the only acquisitions we could find that actually grew in a way it could not have without being acquired.

Top Tier  is one of SAP’s most successful acquisitions, and we gave it a score of 7 out of 10. Top Tier may be a particularly controversial scoring. SAP acquired Top Tier to obtain what a small ERP system named Menahel or Top Tier, which would be renamed to BusinessOne. BusinessOne became a popular SMB ERP system and one with a fertile ecosystem that developed industry-focused extensions to the core ERP system. However, BusinessOne was never very profitable for SAP, and it also served to distract SAP by putting into a market for which it is a poor fit.

Secondly, customers that buy BusinessOne are not good customers for other SAP products, and BusinessOne integrates to few other SAP applications. Therefore BusinessOne customers have little follow-on purchases of other SAP products, primarily because they can’t afford them, and they are not designed to work with BusinessOne. Therefore while Menahel/Top Manage/BusinessOne did grow, it did not necessarily have a positive impact on SAP, and one could argue it simply distracted SAP. BusinessOne helped SAP get into the SMB market, but the SMB market is a very bad fit for SAP.

  • SAP’s bread and butter are extremely high-cost projects for large companies that can endure constant run rates of billing hours. This is not the SMB market. (See our TCO estimator for SAP ECC, and observe the difference in the TCO estimate for ECC versus BusinessOne).
  • Consultants that work on BusinessOne projects, don’t work on ECC projects. There is little overlap between BusinessOne and the rest of SAP. The term “red-headed stepchild” comes to mind.

The Top Tier acquisition also had negative side effects in that it brought in Shai Agassi into the company, which lead to problematic implications when he later headed up the Netweaver initiative. Netweaver was a failed program to modernize the integration and infrastructure of SAP. Many years after Netweaver, SAP continues to be as difficult to integrate to SAP and non-SAP applications as it was in the mid-1990s, a subject covered in the article How Non Programming Integration Hurts SAP Projects.

Netweaver left SAP with components that it continues to try to use but which handicap anything connected to them. Everything that is part of Netweaver has a better open source offering.

Knowing what is known today, it is an interesting question to ask whether SAP would acquire Top Tier again.

An Incomplete Acquisition List

After we reviewed the list, we realized that this list is not a complete listing of SAP’s acquisitions. We covered in the article Did Hasso Plattner and His Ph.D. Students Invent HANA?, that SAP suppressed acquisitions that it made that made up what eventually became HANA. This is because SAP contributed very little to HANA.

SAP purchased both Trek and P*TIME, but likes to pretend that they didn’t. This was to do to try to create a false storyline that attributed innovation specifically to Hasso Plattner that he had nothing to do with. Therefore, SAP’s policy with respect to publicizing an acquisition varies. If they want to pretend that they created something new, then they keep the acquisition secret.

I have not included a score for Trek and P*Time. However, their scoring would be complicated. HANA became a moderately popular database, but it has also been an enormous distraction, they are being sued by Teradata in what looks to be an expensive lawsuit to defend, and has alienated customers and vendors in a way that will cost SAP for years to come.

IT Analyst, Wall Street Analysts, and Media Coverage

Throughout the years, IT analysts, Wall Street analysts and media entities have normally framed SAP acquisitions in a positive light. There is a strong tendency of media coverage to put a positive spin on an acquisition, even though the history of acquisitions is quite poor. However, the evaluation of SAP’s history with acquisitions demonstrates that IT analysts, Wall Street analysts and media entities repeatedly provide inaccurate information on SAP acquisitions.

From a policy perspective, there is sufficient evidence for governments to deny acquisitions out of hand, and to only allow them on exceptional grounds. This subject broaches topics related to how to maintain competitive markets. Topics which IT media entities and Wall Street analysts have opposing interests. Media entities obtain advertising from large corporations that tend to make acquisitions, and Wall Street itself makes money from mergers and acquisitions and prefers monopolies. The perfect investment vehicle for Wall Street is a company whose customers have no options in the marketplace and are locked into a particular supplier. This is the final end state that Wall Street would prefer for each industry as it leads to the highest possible profits.

For these reasons, they both have undeclared financial biases when they make projections or otherwise comment on acquisitions. This brings up the question of when IT analysts, Wall Street analysts and media entities cast a provide views on a new SAP acquisition, are they offering an honest appraisal, or merely singing from their wallets?

The Implications of the Score in Forecasting Future SAP Acquisitions

An average effectiveness rating of 2.2 out of 10 is obviously a very poor score. It should be used to evaluate future SAP acquisitions to observe that SAP is not generally effective at performing acquisitions. And therefore, future acquisitions are also most likely to not be successful.

Motivation

It should be stated, we don’t care one way or another what is the final score for SAP’s acquisition effectiveness. This is our best estimate of SAP’s acquisition effectiveness. The curious thing is that no SAP partner or IT analyst would want to publish an analysis of SAP’s acquisition as they would fear the response from SAP. This fear of SAP prevents any analysis of SAP that might come up with “the wrong answer.”

If someone were to reach out and make a compelling case that a score should be changed, we would consider doing so if the argument were compelling. We can’t have specific knowledge of every single acquisition. However, even if several acquisitions scores were increased or decreased, the overall tendency is quite clear.

Conclusion

History shows that SAP is ineffective in its acquisitions. Wall Street analysts and media entities have far more resources to do this simple checking that does Brightwork Research & Analysis, however, apparently, they have no interest in doing it. The reason I think this is cannot remember ever reading an article that analyzed SAP’s acquisition history, yet, analysts are quite willing to discuss the synergies that await SAP after each successive acquisition.

Secondly, this analysis underestimates the problems that acquisitions create for SAP. SAP suffers from a distinct problem in accomplishing things that it sets out to do internally. Each new acquisition puts SAP as the overseer into a new vendor, which are frequently in software categories that SAP has no experience in managing. SAP repeatedly finds itself out of its depth in trying to manage an increasingly unwieldy software empire. As SAP has continued to make acquisitions, it has blurred its focus that much more than it was already blurred and reduced their ability to execute.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

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Does SAP’s Acquisition of Qualtrics Make Any Sense?

Executive Summary

  • SAP acquired the vendor called Qualtrics, a vendor that most people in SAP has never heard of.
  • Learn the likelihood that Qualtrics will be a successful acquisition for SAP.

Introduction

I research SAP nearly full time, yet SAP continually educates me as to “strategy.” Is survey software critical to SAP’s future?

I thought the Concur acquisition was off the beaten path with travel and expense software; now we are completely off the reservation.

The Need for Acquiring a Survey and Survey Analytics Firm?

SAP has one product that they use to open accounts and to sell other applications. This is their ERP system (currently ECC, the new version being S/4HANA). Every acquisition SAP makes needs to be interpreted by how its sales can be enhanced through association with SAP ERP. Both Qualtrics CEO Ryan Smith and Billy McDermott stated that:

“Qualtrics has completely transformed the experience management category.”

That seems like an odd statement. What is that category?

Here is the pitch.

SAP seems to think this is a logical breakdown of how data works or should be viewed.  

“Operational Data (O-Data™) tells you what is happening. Experience Data (X-Data™) tells you why.”

Bill McDermott addressed this concept as a distinct separation between X and O data in the following quote.

“In that context, he saw the deal as transformative. “By combining this experience data with operations, we can combine this through Qualtrics and SAP in a way that the world has never done before, and I fundamentally believe it will change this world as we know it today,” McDermott told TechCrunch on Monday.”

The problem with this construct is that SAP has very few forward facing applications. SAP primarily makes internal enterprise software. Surveys can be added to these, but companies normally don’t care what their employees want, so there is little overlap with what SAP has to offer. This makes the acquisition a problematic fit, particularly given the valuation.

SAP Cares What Users Think?

I have been telling companies for years that SAP’s solutions leave their employees less able to do their jobs, but the response that I normally get is that “the decision has been made” to go in XYZ direction with SAP. So as far as I can ascertain, companies normally don’t care about employee satisfaction or feedback on the software they acquired. SAP plays into this by force-feeding media entities to write complimentary things about their software and by “going over the heads” of the users and selling to the “C-suite.” SAP’s overall strategy is to disregard the input from users. And in fact, if SAP brought users into the decision-making process during the sales process, SAP would lose a lot of deals.

This is the type of survey SAP is used to giving the users to its customers. There is only one acceptable answers. 

Normally SAP likes to push the user feedback as far as possible after the software acquisition, and when users complain, they have a series of explanations that help the company’s management divert the dissatisfaction back on the users themselves. A common approach is to state that the users..

“are not ready for digital transformation,”

or the users are..

“pushing back on best practices, and on a strategic decision that has already been made.” 

Faux Experience Management Dovetails with User Experience

Bill McDermott stated that Qualtrics is “not surveys,” no, “its experience management.”

This seems like some combination of surveys and analytics. Why use the term “experience management?” Because if Qualtrics is called what it is, which is survey and survey analytics, it won’t sell for as much money.

This fits into the trend of SAP using glamorized terms for what is already established terms. Some time ago SAP stopped using the term UI or user interface, and modified it to “user experience.” A bit like the use of the term “Digital Transformation,” nothing changed except the word. The term “experience management” is essentially similar. The reason for this terminology churn is at its essence deception. SAP keeps customers off balance by taking the “high ground” with respect to terminology. It sets up SAP as superior because it is using terminology that others are not familiar with (as SAP made it up) and creates the implication that SAP knows something that the receiver of the message does not know.

In this video, Bill McDermott batted down the comparison between Qualtrics and the company Survey Monkey. However, in fact, these two companies are quite similar. But one big difference is that Survey Monkey publishes its pricing, and does not use the same type of high-pressure sales tactics used by Qualtrics. 

Another reason that Bill McDermott does not want the comparison made between Qualtrics and Survey Monkey is Survey Monkey publishes their prices. That would make it even more apparent that Qualtrics is not in a category that makes it worth anywhere near its $8 billion acquisition price. This is explained in the following quotation.

“Qualtrics is a premium product, it is often difficult to sell against similar freemium services”Glassdoor

Qualtrics pricing is a premium to Survey Monkey, but those that know both offerings state that Qualtrics is not worth the premium. Survey Monkey is around the same size as Qualtrics, but significantly more profitable.

Something else undiscussed is why does this type of software — which is a textbook case of the type of software that would follow a cloud sales model, have hidden pricing and a push/call center model?

Do Surveys Work?

Something that surfaced after this article was initially written was the question of whether online surveys work. This was brought up by the following quotation from Ahmed Azmi.

“Surveys have been scientifically proven to be a failed method of capturing customer and employee sentiment. In fact, the scientific evidence is overwhelming. Google “survey bias” to learn why you should never make important business decisions based on customer or employee satisfaction surveys.”

SAP would never care if the foundational principle of the vendor was true. Still, it is curious to find that research seems to counter the benefits claimed by Qualtrics. We do not have a background in surveys, and the analysis in this article is from other dimensions, but Ahmed Azmi is normally right when he makes proposals. It should be observed that whether online surveys work is not even a topic brought up in any of the media coverage or other comments surrounding the Qualtrics acquisition. Apparently the question of whether software actually works as promoted is a level of depth far too extreme for the major media outlets.

SAP’s “Experience” Acquisition Repeat

It was long-term ABAP and development resource Rolf Paulsen who brought up the fact that SAP already purchased a…

“Real-time behavioral marketing company that optimizes each website vistor’s path to purchase.”

…that was called SeeWhy. The current SeeWhy.com website defaults to this page.

This acquisition seems quite similar to Qualtrics. It was made back in 2014. Why was SAP not able to do much with it in the 4 years since the acquisition? Why does it need to acquire other vendors instead of figuring out what to do with SeeWhy?

The Financial Side

Qualtrics has not been a profitable company. According to Wikipedia, their recent revenue history has been the following:

  • Qualtrics reported revenue of $190.6 million in 2016
  • $289.9 million in 2017.
  • In 2016, Qualtrics reported an overall net loss of $12 million.
  • In 2017, Qualtrics reported a $2.6 million net profit.

If we take total profits for 2016 + 2017 and divide by total profits for 2016 and 2017 we end up with -9.4/480.5 or a -2 percent profit. How does losing a combined $9.4 million over the past two years translate to an $8 billion valuation? Let us put this in context. SAP could put $8 billion into a bond and receive a return of 5% and receive $320 million per year. $320 million is more than Qualtrics 2017 revenues, much less Qualtrics’ profits. Consider for a moment how long it will take Qualtrics to grow to the point where it provides $320 million in yearly profits, and one can see what a bad investment SAP just made.

The interpretation of this acquisition is very simple — SAP was bamboozled by Qualtrics. SAP got into a bidding war with Qualtrics planning an IPO. Notice the following quotation.

“Utah-founded cloud unicorn Qualtrics was set to have one of tech’s most hotly-anticipated initial public offerings this week. Then SAP swooped in.”

With Qualtrics good but rather generic functionality, why was the IPO hotly anticipated?

This brings up questions about SAP’s acquisition competence as well as the analytical capability and or financial bias of those entities that underwrite and bring tech companies public. How lipstick was put on the investment opportunity “pig” of Qualtrics has to lead one to scratch their head. If we look at historical acquisitions by SAP, Qualtrics is ridiculously expensive. Ariba was purchased in 2012 for 4.3 billion. That is roughly 1/2 what tiny unprofitable and unsustainable Qualitrics was purchased for. That tells us how big this current bubble is.

How Reliable are Qualtrics’s Financials?

In 2018 Qualtrics’s revenue will be higher than in 2017, but as they were preparing for an IPO before they were acquired, sales deals are pulled forward. This means that it is less likely Qualtrics will be able to reproduce that performance in the upcoming years.

This quotation was found from the Glassdoor website, and it is concerning.

“Almost cult-like. It is a great company and they should be proud of it, but it is weird how highly they think of themselves.
Most of the money is for enterprise reps. They seem to all hit their numbers, but the lower level AE’s hit their numbers at a MUCH smaller percentage – less than 5 reps in 2017 in Dallas office were at 100% of quota – only 1 of which was fully ramped quota. Management skews data by talking about people who hit quota, but only because they use ramping reps with smaller quotas to make their numbers look better. Or they use quarterly numbers but dig into the data – most reps do not hit their numbers in consecutive quarters or on any kind of consistent basis, but then they will spike. They say they hire the best of the best (only 3% of applicants get hired) but they pay very low. This defies logic. Why would you be so picky about who you hire, but then not pay them well enough to keep them? Arrogance – which runs rampant in this company. Upper management who have been here for a long time thinks they can do things in 2018 the way they did them in 2010. Qualtrics is now a consultative sale for large dollars, it is NOT (most of the time) a 3k solution where you can hit your numbers if you make enough dials. The sales are bigger, so the cycles are longer, but upper management has not changed how they approach the sales cycle. Instead, they focus on an antiquated quadrant (which most everyone fakes their data) and tell people to make more and more dials, rather than be strategic. Speaking of management – just because someone did well in sales, does not mean they are a good manager. Really need to focus on improving the leadership of the management team. Speaking of the role specifically, you will be overpromised A LOT of things in the interview process. Be careful. You will not make nearly what they say you will unless you get a whale. That is basically the only way people hit their annual numbers is if they are fortunate to get 1 huge sale every 9 months or a year.”

This means that Qualtrics is an aggressive sales culture where implementation is secondary and that normally means that problematic sales will come back to bite Qualtrics. And it gets worse. Qualtrics has a number of short-term oriented sales reps at the company.

This is explained in the following quotation.

“PAY your senior reps. Again, why do you have such strict requirements in hiring but then do not pay them accordingly? Attrition will be high, especially after we IPO.”

Short-term oriented sales reps trying to meet their quota long enough to get past the IPO (what turned out to be an acquisition) sign even worse deals.

“Joined the Sales team as an AE and didn’t expect it to be run like a call center. I’ve never seen a company treat experienced account executives this way. I’m pretty sure not all of the offices are run this way, but the one that I work at the managers walk around the sales floor pushing you to make more dials–they hover over you and micro manage like crazy. It would be nice to get some coaching instead of getting hounded on metrics all day. All they do is refresh the dashboards all day and push us for more dials dials dials. If you don’t hit your metrics or “points” you can’t leave the office, you literally will be forced to work 10 hours.”

Well, that sounds like a boiler room operation, similar to the one run by Gartner in Fort Myers. Qualtrics has demonstrated a pattern of misleading nearly everyone they come into contact with. The includes customers, employees, investors. I was not able to determine if they mislead suppliers, but given their behavior in other areas, it is likely that they do. Bill McDermott stated that he was attracted to Qualtrics’ culture, but it is a culture of lying. What does that say about Bill McDermott that he finds this “culture” appealing?

Conclusion

Qualtrics is a multidimensional case study. It just depends upon what aspect one wants to analyze. We started off only mildly interested in this acquisition, but as this article length demonstrates, we kept finding different aspects to explore and we ended the process quite interested in this acquisition. It is amazing that a company with these types of characteristics and these type of reviews (see below for more details) would still be a Unicorn or “venture darling.” This shows the degree of the bubble currently in technology. This is one of the worst software acquisitions I have ever analyzed, and it has all the signs of a “high water mark” acquisition that one will look back on to observe the height of the bubble.

Let us review the logical criteria for an acquisition for SAP.

  1. Does the Vendor Have Tantalizing Technology?: Is the software itself impressive?
    1. Our estimation is (Yes)
  2. Is the Vendor Financially Strong?: Does the vendor have a reasonable history of profitability?
    1. The obvious answer here is (No)
  3. The Degree of Overlap With SAP ERP?: That is can SAP entice/coerce companies into buying Qualtrics because they are already SAP customers.
    1. Our estimated rating here is (Low)
  4. Can SAP Leverage Qualtrics?: Can SAP specifically leverage Qualtrics for its other SAP applications?
    1. Our estimated rating here is (Low)
  5. Will SAP Have a Natural Ability to Manage the Aquistions?: SAP has demonstrated a weak ability to manage acquisitions, how likely is it that the story with this acquisition will be different?
    1. Qualtrics is so far afield from anything SAP has experience in managing our estimate here is (Low)

Media Coverage of the Acquisition

With such an obviously bad acquisition, we wanted to see what the media coverage would be. The insane nature of the acquisition is a good test for media independence.

  • Forbes, Fortune, and ZDNet were generally positive on the acquisition. This was expected as all of these media entities are large SAP customers.
  • The New York Times, which should be more objective as SAP is not a major advertiser, but was written by an editor at Reuters, which is normally quite compliant to SAP. The New York Times/Reuters article was complimentary.
  • SeekingAlpha proposed that the price paid was a “nosebleed” level, but seemed to state that it was warranted given how the enterprise software market is so overheated. The article proposed the deal would not generate meaningful “catalyst” for 12 to 24 months, but did not critique the acquisition.
  • TechCrunch did virtually no analysis in their coverage in their article on the topic.
  • The Register where we expected criticism, as The Register as proven to the be the most independent of websites, had no criticism in its article and mostly repeated SAP’s talking points.

The FinancialTimes covered the acquisition superficially but did quote a dissenting analyst at Mirabaub who questioned the reason for the acquisition and stated..

“It is an extremely high multiple which ever way you look at it,” he wrote in a note. “Is SAP trying to mask slowing organic growth in the core business? Is SAP trying to bolster a cloud business that is struggling to get significant scale, growth and margin leverage?”

But the FinancialTimes was careful to not critique the acquisition itself.

The overall review of the media coverage makes one wonder where non-SAP biased coverage at major media outlets can be found.

Something else important to note. I did the math to see the valuation. Notice that while the media coverage stated it was expensive, they did not (by in large) show the exact math. The math is ridiculous…it is beyond nosebleed. I think that was premeditated. If you do the math, you can’t write the article the same way. The story goes south. So you just say “it was expensive.”

Every writer is operating under the editorial control knowing that SAP is a major advertiser.

You want to keep your job…….don’t make waves.

SAP Increasingly Becomes a Software Conglomerate with Generalized Acquisitions

What Qualtrics does, has little to do with SAP. The Qualtrics acquisition is another example of SAP’s shotgun approach to acquisition. Most of SAP’s profits come from on-premises applications and very high margin support. Over the past ten years, their strategy is to use these profits and the market capitalization they engender to purchase (mostly) cloud companies. However, none of these companies have the profitability of their on-premises software, much of it only purchased by companies because of the consulting company recommendations, that are made because consulting companies make the most money from SAP consulting.

The result is that increasingly own a number of cloud vendors that don’t have much to do with each other. And for which they pay high valuations, but which do not contribute in proportion to their acquisition cost to revenues or profits. Secondly, SAP has a very poor record of managing acquisitions, so outside of Ariba, the point of acquisition is the high point of the vendor, and the vendor’s application becomes less and less prominent the longer it is owned by SAP. SAP has some acquisitions like Sybase, that have drastically declined since they were acquired.

 

SAP produces graphics like this, that are meant to make sense of SAP’s stable of acquisitions. Very few SAP customers use many of the items on this list. And the integration story is inaccurate. Due to SAP’s development inefficiency and lack of focus, it takes years for the adapters to acquisitions to be developed.   

Qualtrics Did Not Sell Out to SAP For Money? – But to Create a Category

Ryan Smith is the CEO of Qualtrics, he told this massive whopper.

“I feel more at peace about this than going public,” Smith says. “We didn’t need to go public. We had no investor pressure, no financial pressure, and we had no employee pressure. We were going public for the sole reason of creating the category. And nothing is bigger for that than this combination. It would take ten years to do what we are going to do tomorrow.”

It’s difficult to see how that can be read without falling down laughing. This is a company with no profits that is being bought for $8 billion. Ryan Smith and other members of the Smith family at Qualtrics will make $3.3 billion. Yet Ryan Smith appears to be saying that the only reason for taking the $8 billion is to “create a category.” That is curious because it makes sound like the money was a non-factor. SAP massively overpaid, where is Ryan Smith going to get a better deal than the one just made with SAP?

That is clearly a massive lie, and it along with other things I learned about Qualtrics, it makes it difficult to believe other things the company says. As the quotes below demonstrate, Qualtrics had a very pressing need to issue an IPO (or be acquired, either one will do), and a primary reason is that Qualtrics had fished out its potential prospect base. It must access a new customer base, and SAP is a potential fit to help them do this. Although it remains to be been how comfortable large consulting firms will be in emphasizing Qualtrics. It is difficult to see consulting companies training up resources to implement Qualtrics, which is probably too simple of an application to bill a sufficient number of hours, and is too niche to justify the investment. SAP consulting firms only recommend complex applications (like S/4HANA, BW, APO, etc…) for which they can keep consultants on projects for many months.

Another $1 billion will go to the venture capital firms Accel, Insight Venture Partners and Sequoia Captial. This means that SAP will be paying out a total of $4.3 billion just to the Smith family and to venture capital firms.

Our Proposed Outcome to the Qualtrics Acquisition

The most likely outcome of the acquisition is that SAP will attempt to work Qualtrics into their C/4HANA solution. (Qualtrics will need to be worked in with Hybris and the recent acquisitions CalladiusCloud and Gigya) C/4HANA is the only forward facing set of applications that SAP has. The impact will be minimal, but Qualtrics revenues and profits will be hidden from this point forward as they will be part of SAP’s cloud revenues. After clashing with the SAP culture, the founders of Qualtrics will leave in a few years.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

SAP Contact Form

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

References

https://en.wikipedia.org/wiki/Qualtrics

https://www.glassdoor.com/Reviews/Qualtrics-Reviews-E323717_P3.htm

*https://techcrunch.com/2018/11/12/analysts-weighing-in-on-8b-sap-qualtrics-deal-dont-see-a-game-changer/

https://www.forbes.com/sites/alexkonrad/2018/11/11/sap-swoops-in-to-acquire-qualtrics-for-8-billion-just-before-its-ipo/#43606b76be15

https://www.zdnet.com/article/sap-buys-qualtrics-for-8-billion-aims-to-combine-experience-operations-data/

*https://www.nytimes.com/2018/11/12/business/dealbook/sal-qualtrics-acquisition.html

*https://techcrunch.com/2018/11/11/sap-agrees-to-buy-qualtrics-for-8b-in-cash-just-before-the-survey-software-companys-ipo/

https://www.ft.com/content/3ecfff5e-e613-11e8-8a85-04b8afea6ea3

https://seekingalpha.com/article/4221391-sap-acquire-qualtrics-8-billion-cash-deal

https://www.theregister.co.uk/2018/11/12/sap_qualtrics_acquisition_user_group_2018/

More Amazing Qualtrics Review Quotes from Glassdoor

The comments show a very interesting window into Qualtrics. The positive comments seem to frequently center around the environment being “fast-paced” as if that is a natural virtue. The building also gets high marks. Other positive comments about their being free soda or lunch come across as quite narrow. And it seems odd that one of the most references positive aspects at Qualtrics is the buffet at the Provo office.

The Provo Qualtrics building checks out! Apparently, you can bring you dog to work. Isn’t having a dog at work a bit co-dependent? Doe the dogs come to the meetings also? If so, do they have input? Who wants to have to accept recommendations from someone’s dog? Also what is Qualtrics’ position on parrots and other pet birds? 

This quote is not particularly relevant, but it is amusing, so we included it.

“So many dogs running around the office. It’s like a zoo now. If you are allergic, stay clear of this office.”

The negative comments are in some cases responded to by quite ridiculous damage control comments from Qualtrics HR, which appears to have picked up a vibe of propaganda from the old Soviet Union. Qualtrics’ HR comments are not remotely convincing but do provide insight into the mindset of HR and the apparent disdain that HR has for their employees. The Qualtrics HR department lies so much, that its difficult to take anything they say seriously.

Comments of particular note, along with analysis are listed below.

Misleading Employees

“Management lies to show more positive numbers to their investors, clients, employees, and public. Sub 16% of reps actually hit their quotas each quarter.

They are actively firing reps, because they over-hired for a product that is misplaced in the market and has no realistic quantifiable value impact for customers. They still need to show growth for their investors in order to IPO, so they’ll still hire college kids to throw into the meat grinder, but you’ll notice they’ve slowed their hiring for the Provo office. Recruiters lie to candidates. The money potential and opportunities are not actually there. You could be the smartest, hardest, best sales person out there – but unless you’re part of the aforementioned, you will only spin your wheels.”

“Management uses scare tactics to keep their employees. They parade around companies nearby who have failed to let people know the grass is not greener. When people leave for better jobs, they slander them – even their best employees. Definitely not how a company should operate.”

Qualtrics is constantly critiqued for how it treats employees.

“Since day 3 on the job, I hated if for the 20 or so months that I was there. In Opportunity Development, all you do is cold call. 
-Transparency: In the interview and recruiting process, they proudly say that all employees are owners and have restricted stock units. In reality, those units aren’t worth anything. Only the founders and some top executives have shares that are actually worth anything. If you are looking at Qualtrics, don’t even think about the potential stock options, because it’s of no value, and definitely not worth taking a 20% pay cut for. The CMO and VP of Engineering all left suddenly while I was there, and we were told bogus reasons explaining why they left. If they really want to be as transparent as they say they are, talk about why the VP of Engineering left in the middle of the biggest product launch in the company’s history.”

Falls into the common criticism that Qualtrics premeditatively misleads new employees as to non-salary compensation.

“Here’s the deal, if you aren’t concerned about getting paid well and only care about cool “perks” and showing your workspace off to friends/family, Qualtrics is great. They distract you from how bad your salary is with cheap perks, like microwavable food and swag. Salaries are hidden very well and odds are someone who came in after you with less qualifications is getting paid more. Management isn’t looking out for … “

Product Quality and Value

Its difficult to find individuals that have experience with the software who think the software is a good value.

Product sucks – SurveyMonkey and other products have caught up to it, and are far cheaper.

Others have proposed that any lead Qualtrics had has dissipated.

“Constant state of transition/repair in products”

There are a number of comments about the instability of Qualtrics’s offerings.

“Products are unusually buggy. Much of life at Qualtrics is spent managing fires. Upper management has little apparent vision for its teams. Occasionally, the supreme executive wand waves to divert all attention to the latest hot topic and disrupt all momentum. A huge productivity drain and short-sited.”

Sales Management

“Heavy politics. If you’re not Mormon, in “the boys club,” or suck up to your boss, you won’t get ahead.

“Really bad SFDC data. Lots of territory changes. Rules of engagement (how leads, accounts, or half-baked deals are distributed) are murky and ill-enforced.”

Bad and unethical sales management is a constant critique.

“I get it, you sold your soul to the devil and finally took VC funding. now you’ve got investors that are demanding a return, but you need to stop putting the cart before the horse! develop an operating model that is scalable first, then start ramping revenue. the pushing sales first and figuring out how to operate it later approach is killing your workforce”

This contradicts Ryan Smith’s statement that there was no pressure to do the IPO.

“As an Account Executive at Qualtrics, I was treated like absolute garbage. There is zero training. Management ruled through fear, constantly making me feel that I’d be fired at any moment. I also had 12 territory changes in 12 months. As soon as I’d start to develop a territory and make some headway they would take it from me and give it to someone else. I would then get to see someone else close my deals and collect my commission. The one time I brought the problem up to management that person ripped into me and said if I didn’t like things I could try my luck somewhere else.”

Lack of training is another common theme from sales comments.

“Since day 3 on the job, I hated it for the 20 or so months that I was there. In Opportunity Development, all you do is cold call. Bonuses depend on how many set meetings get accepted by your Account Executive, so some OpDev reps will have AE’s who cheat and accept meeting that aren’t good or even happened. Those OpDev reps are praised and quotas for everyone are in turn raised. When you become an AE yourself, you will have zip code territories with mostly very small businesses who 1) can’t afford Qualtrics, 2) have no or little need for it, and 3) have no idea how to do research (e.g., it’s an onion farm). It’s extremely hard to sell as a new AE and most fail. There is a huge retention problem regarding AE’s, but the leadership insists that’s it’s not a problem.”

This gets to several issues, but one is that Qualtrics potential market is clearly fished out. With the SAP acquisition they will have an enhanced ability to access SAP accounts, but Qualtrics clearly needed to do something because they have exploited the customers they have access to without some type of large vendor association.

Fear-Based Management Style and Employee Turnover

The fear-based management style in addition to arbitrary treatment of employees is common as a theme in comments about Qualtrics. The changing territories fits into the narrative of disorganized and political sales management.

“Extremely high turnover. Don’t expect this to be a permanent position. You will not get the compensation that they promise when you are recruited. Culture attempts to be bro, tech-y, entrepreneurial and laid back on the surface, but in reality, it couldn’t be anything but.”

The approaches listed in the comments would naturally lead to high turnover. This connects to the need to show appealing numbers to maximize the IPO value by any means necessary.

Sales Rep to Opportunity Ratios

“Do not join this company as an AE 1-3. Honestly even some AE 4’s struggle because the original 400 reps have locked down any good account. As an AE 1 you will have a quota of 300k selling to companies that at most can afford 1k-5k licenses. Your days will consist of calling and mining all day every day.”

As with a number of companies, Qualtrics hires too many sales reps given the number of actual opportunities. This leads to heavy sales rep competition and sales rep turnover. This is emphasized in the following quotation.

“Overall, the best sales opportunities are taken and the quality of the work/jobs are not very good. They’ve grown the sales team way too big, leaving low quality accounts for the rest. This makes it difficult to perform against a steeply increasing quota, so expectations are unrealistic given the accounts you typically have. Only 30% of reps are hitting quota each quarter, and a very few hit OTE. As a sales rep, you have to generate your own business with zero to very little help from supporting reps and marketing. (aka A LOT of cold calling and cold emails. If you’re doing it as they expect, you’ll prospect for several hours a day.) You sell highly priced enterprise-level products, so it’s hard to win deals against companies that have a better SMB offering. Turnover is extremely high because sales reps are dissatisfied. Qualtrics is largely unwilling to change many of its problems, so it continues to deal with high levels of dissatisfaction and turnover.”

Marketing Support

This is extremely consistent with other comments but stated in different ways.

“Marketing- you will have no support from them. It’s the black hole of Qualtrics. There is incompetence and an unwillingness to spend (except for on events, where they spend insane amounts of money). Inbound leads are almost unheard of. The coordination between marketing and sales is practically non-existent. Marketing doesn’t know how to do effective lead and demand gen and the results show.”

“No Marketing at all: a cold call strategy. You have the feeling to be paid to harass people. US leads mentioned once: ” We are a cold call organization.”

Amazon and Tesla Work Practices?

This comment about the ineffectiveness of marketing is also a theme. The entire philosophy appears to be outbound.

“Among the worst corporate culture in tech. From top to bottom, the Seattle office is filled with ex-Amazon managers. They brought over the toxic culture rewarding backstabbing engineers, management driven by short-term metrics, and abysmal work-life balance”

It is curious how Amazon has developed such a poor reputation as a place of work. This is of course not an analysis of Amazon, but these comments about Amazon keep coming up on different comments on various technology companies.

“Very few processes in place (It’s a young startup), lots of competition and credit-grabbing, and politics. The open floor plan became distracting at times, and it felt like I couldn’t get promotions without working 80 hour weeks.”

This constant higher number of hours per week is similar to stories from Amazon and Tesla. With the stock option compensation entirely overrated, once has to wonder what the hourly rate of employees at Qualtrics actually workers out to. This is emphasized by the following quotation.

“Working at Qualtrics was the worst year of my life. First, in the interview, I was told to not worry about the very low salary because I would be making more than triple that in bonuses if I performed. I performed over and over and no such bonus came. Management will lie to you, and this wasn’t the only time it occurred. I was told “Qualtrics is like Google in the 90’s”, and what’s crazy is this is there sales pitch to get employees to continue to work near minimum wage jobs. I was constantly harassed by my manager to the point where I almost took action. Whatever you do, avoid this place at all costs. The sole purpose of the cool building and free food is to disguise you from what’s really going on, which is practically indentured servitude. Ask them what their turnover is and this company will speak for itself.”

Overlap with MLM Tactics?

International readers would ordinarily not know this, but Utah, where Qualtrics is based is known for multi-level marketing MLM scams. This is where people are recruited to be salespeople for home-based businesses that don’t work out for most of the participants, but where people in early can make a lot of money. There is even material on websites that explain what a problem MLM schemes are in the Mormon community (most people that in Utah are Mormon) and why Mormons are particularly susceptible to them. Therefore it was curious to read this comment…..that sounded very similar to the pitch of MLM schemes.

“Qualtrics attracts young, high energy, and entrepreneurial people. Unfortunately, these people typically lack experience and therefore the savvy necessary to know when they’ve been taken for a ride. Leadership will tell you my attitude is poor. They will talk about how difficult it was for them to get to where they are and promise similar opportunities for you in the future. The problem with that line of thinking is that their struggle resulted in major share percentages with massively high salaries. Very few, if any, people hired after the basement or “across from the practice field” days, will ascend to that level. Can you become a Regional Lead? You bet. But if you think you’ll be allowed into the inner circle, you’ll be sorely disappointed.”

This argument obscures the fact that most of the employees will never make it into the inner circle, therefore they should not be expected to put out the way those who made it into the inner circle did. This is the exact logic presented by upstream MLM individuals to their downstream.

“Don’t put yourself in the same category as your employees. Most of them will never be worth hundreds of millions of dollars. They will, however, work just as hard as you. Yes, they will and do. I don’t care how many private jets you take. And no, you didn’t take a massive risk by starting this company. “Bootstrapping” for the Q equates to having a lot of family money that could be independently invested without real risk. When you start working a 60+ hour work week for a company that pays you a 36K salary and who tells you to “invest in yourself” to make a livable wage – when you do that for several years and simultaneously start a billion dollar company, then you can give yourself a pat on the back.”

If true, this is quite despicable behavior. And while not stated in this exact way, this is stated generally on many reviews. For it to be inaccurate, it would mean that multiple people would have to log in and report what amounts to the same thing.

 

How SAP and Oracle Broke the Rules of Commercial Software

Executive Summary

  • SAP and Oracle take advantage of the standard rules of commercial software.
  • How did they do it and what has it means for the software industry?

How Oracle and SAP Broke the Agreed Upon Rules of Commercial Software

It is common to propose that SAP and Oracle are merely following the normally accepted rules of commercial software. It is difficult to see how this is true. The original idea of compensated software was that work in creating and maintaining software required compensation. That is certainly fair. However, SAP and Oracle have moved the goal posts. Moreover, they use licensing rules to extract far above the value of their software. They spend far more on sales and marketing than they do on development and maintenance. The licensing agreements SAP and Oracle give customers are like credit card contracts. The complexity of the terms and conditions places Oracle and SAP in a dominant position versus the customer. Oracle and SAP have their customers so restricted by rules and restrictions that the goal of the software is often a secondary concern.

Furthermore, Oracle and SAP have been using this position to coerce their customers into things they don’t want to buy.

Promises Made to Wall Street

Unfortunately for customers with substantial investments in Oracle and SAP, because of the promises made to Wall Street by these companies, we see these abuses only getting worse in the future. Oracle and SAP have been ratcheting up coercive tactics to obtain revenues to hide the fact that these companies are not growing in the new areas where they tell Wall Street they are growing, but instead they are merely extracting more income from their old areas. Is the fastest growing part of SAP or Oracle is cloud business? Is it SAP’s “hot new IoT” solution called Leonardo? Is it Oracle’s Automated Database? No. Every year, support grows as a higher percentage of both of these company’s revenues.

If you listen to Oracle sales reps they put themselves in the position of being there to help. They want to “help” their customers, but if one analyzes how they are helping, it is from Oracle’s own coercive policies! If you create a coercive scenario, but then appear to “fix” that scenario, that is called racketeering. The standard approach came from protection rackets. Where a mobster would approach a store owner and declare..

“If you pay me protection money, your store will be protected from the mob.”

However, then, the same mob is the only entity that would damage or destroy the store! Wouldn’t it be a terrible thing if something happened to that store? Yes. So in a way, those that negotiate terms on protection rackets are also “helping” their “customers.”

Conclusions

We know many Oracle sales reps, and this logic of helping customers from punitive actions by SAP is one of the primary ways that they justify the often dirty business of what they do. Oracle has an internal sales culture that it is best to steer clear of which we categorize as the worst sales culture in enterprise software in the article. The Oracle Software Sales Model. There is no doubt that Oracle has developed the worst reputation for business practices in the software industry.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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