How to Best Deal with SAP Audits

What This Article Covers

  • SAP Audits
  • SAP Audit Management
  • Audit Software Vendors that are Also SAP Partners?

Introduction

SAP audits are when the SAP comes to a customer and determines if the customer is out of compliance on SAP licensing. In the recent years,

In the recent years, SAP has increasingly come to rely upon software audits to drive revenue. Secondly, SAP’s licensing rules are some of the most complex in software (along with Oracle, another company that is known to heavily audit its customers). Generally, the largest software vendors (which includes SAP, Oracle, IBM and Microsoft) tend to perform the most software audits, and tend to have the most stiff penalties for being out of compliance.

What this means is that software purchased from the largest vendors tends to have the greatest liability associated with them.

SAP Audit Management

SAP audit management is actually the name of a SAP product that speeds the non-software internal audit process (according to SAP). This product runs on SAP HANA, which is a fast database. There is actually free trial of SAP Audit Management available. SAP Audit Management is an app offered by SAP. But it has nothing at all to do with software audits.

The term “SAP audit management” generally refers to the activities necessary to prepare for and manage a SAP audit.

One of the approaches to a software audit is for the customer to purchase audit software and perform the audit themselves.

  • Making Changes: Doing so can mean adjusting behavior which moves away from violating SAP licensing, as well as changing the roles within SAP so that the company is not out of compliance.
  • Simulation: It allows what if scenarios to be tested in terms of changing the usage of SAP. Some of the software vendors propose being able to determine the scenarios both the SAP licensing and support costs, however, that is not entirely knowable because of things like the discounts that are offered by SAP.
  • Purchase Proactively: It also allows the customer to approach SAP to purchase licenses before the fact. For example, users may have SAP user licenses assigned to them that they no longer use because of a job change or some other reason.

Another major liability that can be caught during an SAP audit is indirect access. Indirect access is covered in this article. But indirect access is a complicated topic which SAP is increasingly the enforcement of, and which increased the complexity of dealing with an SAP audit.

Audit Software Vendors that are Also SAP Partners?

Unfortunately, in order for a software company to build audit software for SAP, it must be an SAP partner. This means that it has restrictions by SAP on what it can say and what it can publish. I am in constant contact with many software vendors, and the complaints about SAP interference in what they can say and what the can do are unremitting. In fact, I am surprised that SAP would allow software vendors to offer an audit product as it states clearly, for instance in the promotional video from one of the software vendors that their product.

It ensures that you know more about your SAP system than anyone else, giving you the upper hand in any negotiation or audit.

Why would SAP want that? SAP wants the upper hand clearly. Snow software states that they can

..save 20 to 30% savings on their SAP costs typically within weeks alone.

But again, this is money coming out of SAP’s pockets, and they have the right to decertify Snow or any other software vendor at anytime. So if the audit vendors statements are true, how are they still certified partners of SAP. What this means is that SAP has a say as to how the software vendor’s software actually works. SAP can and will threaten the software vendor with a removal of their SAP Certification, which would impact that software vendor’s ability to exist.

If I compare how the SAP partnership agreement is used with other vendors, SAP will use it to neuter the marketing of the vendor so that everything the third party vendor releases is consistent with the needs of SAP.

Conclusion

There is something fishing going on with the market for SAP audit software.

One cannot both be an SAP certified partner and have free reign to provide whatever information you want to, to your customer. And unfortunately, audit software companies have to be SAP certified partners to have their software connect properly to SAP. This brings up questions regarding how much any audit software company can actually work for customer’s interests, which means working against SAP’s interests, without compromising their SAP certified partnership arrangement with SAP.

If you have questions or comments about our coverage of SAP audits and SAP audit software, reach out to us.

References

Protected: The HANA Police and SAP Indirect Access Charges

Should You Trade In Unused Licenses for S/4HANA and HANA?

Executive Summary

  • Snow Software explained how to trade in unused SAP licenses for S/4 HANA.
  • However, Snow’s article makes a lot of unfounded assumptions regarding the readiness of S/4HANA while approaching the question from the perspective of only the licensing implications.

Introduction

In this article, we will evaluate a strategy that is proposed by Snow Software on their website. Snow Software makes software that is used for auditing SAP software. The article by Snow Software is quite interesting and is very specific in what it proposes, and it provides specific recommendations.

I want to set the table properly before we get into Snow Software’s article. I don’t have anything against Snow Software. I happen to like a lot of the articles on their website, and several weeks ago I read every one of their articles related to SAP and quite a few others not related to SAP. Snow Software has a blog that brings in some authors with different license domain expertise.

I don’t happen to agree with the recommendations in this article, and I invite a representative from Snow Software to comment on this article and to have a collegial discussion. These are involved topics, and even people who are knowledgeable in the area can disagree, and that is quite reasonable.

Understanding Snow Software’s Logic for S/4HANA

The logic for Snow Software’s proposal is laid out in their article Use S/4HANA to Get Rid of your SAP Shelfware?

In that article they layout the following logic for purchasing S/4HANA. Let us get into their quotations.

“SAP Business Suite 4 SAP HANA. S/4HANA, for short, is SAP’s latest technology. But it’s also much more than that. S/4HANA represents a fundamental shift in how the mega vendor will generate long-term revenue streams. What is often less-discussed is what S/4HANA means for you, the customer. Not only in terms of technology; but in terms of an opportunity to reshape your relationship with SAP. Without over-dramatizing things, it’s a once-in-a-lifetime opportunity. Why? Because SAP needs S/4HANA to be a success. It needs to demonstrate to investors that it has a business model that is not stuck in the era of on-premise perpetual software licensing. And because it needs to sell S/4HANA licenses, it is offering excellent deals to existing SAP customers to move fast.”

So, what can be seen as left out is that S/4HANA has not been a success and it has had plenty of time to become one. It has a massive installed base (with ECC/Business All in One).

Now, while it is true that SAP has a strong desire to show that its business model is not suck in an on-premises state, SAP really has Wall Street fooled already on this topic. SAP has successfully adopted cloud speak, and is constantly cloud washing their products. The more you cloud wash, the more Wall Street rewards you. So we have yet another example of an industry that is driven by the opinions of people who don’t have any expertise in the area.

S/4HANA to be Delivered as SaaS?

Secondly, (and don’t tell Wall Street or they will be very very sad) S/4HANA is unlikely to be delivered by SaaS. In research that I am currently performing into S/4HANA to determine what has occurred on S/4HANA implementations, it turns out that very few of the implementations have been in the cloud. And in the few that I can find that are stated to be in the cloud or SaaS, they are not cloud or SaaS at all. Instead, they are non-multi-tenant or simply hosted solutions. Customers can expect none of the traditional benefits of SaaS from S/4HANA when delivered this way.

Finally, S/4HANA has nothing to do with the cloud or SaaS.

The quoted paragraph from Snow Software continues:

“And therein lies a huge opportunity for those existing SAP customers, who have typically seen their investments in SAP license increase year-on-year over quite significant periods of time. This is an opportunity to reverse that trend and focus in driving deals with hungry SAP account managers on the licenses and technologies you really need, not the ones you’ve been force-fed over recent years. To understand the scale and opportunity of this shift, we must first look to the past.”

Customers Need S/4HANA?

It is very difficult to argue that anyone “needs” S/4HANA at this point. S4HANA comes with all types of implementation costs and maintenance costs. These costs are far higher than any potential license cost benefit from moving to S/4HANA. In fact, the majority of costs associated with SAP come in maintaining SAP systems, not purchasing SAP systems. I cover this topic in detail in my book on TCO, Enterprise Software TCO: Calculating and Using Total Cost of Ownership for Decision Making.

The quoted paragraph from Snow Software continues:

“The fundamental change is that the open architecture of R/3, with the ability to employ third-party databases within the system, is giving way to a more specific database that you’ll require as part of the platform – SAP’s HANA. This is all being done with the promise of improved performance and scalability through in-memory databases.”

Well, the promise of the performance improvement is not analyzed by Snow Software’s article. But as HANA is an analytics database primarily, there is no evidence that an ERP system will run much faster on HANA due to software. Here it is important to draw a distinction between the software side and the hardware side of HANA.

Hardware Improvement?

HANA combines a changed database with SSD memory (instead of a spinning disk) so the performance will automatically increase because of the hardware change (SSD), but not necessarily due to the software.

The quoted paragraph from Snow Software continues:

“The faster it migrates everyone, the quicker it can stop focusing its investment in resourcing and maintaining R/3. So, in a perfect world, SAP would spend nothing on R/2 today and, 10 years from now, it won’t spend any money on R/3.

Moreover, S/4HANA revenue is heavily scrutinized by investors in SAP. The faster they see adoption of this new platform, the quicker that is reflected in the share price for SAP. SAP as a stock needs a growth leg to the story despite its strong position and cash flow.

The transition to S/4HANA requires the replacement of third-party database systems with HANA and there is a monetary uplift from doing this.”

Ok, so this is a strange way of saying that the cost will be higher. The cost of HANA is quite high, and the expensive software is just the beginning. The following quotation will focus on support costs, but the support costs are based upon the license cost. Let us continue with the quotation to see how this is a problem.

Lower Cost for HANA?

The quoted paragraph from Snow Software continues:

“SAP Enterprise support customers currently pay (by default) 22% of license costs in annual maintenance for the use of third-party databases within the architecture of their systems. SAP has steadily over the past few years increased this amount from the 15% level in advance of its migration mandate. In lieu of paying an annual 22% of license costs for your database (typically Oracle), you will pay 15% of license costs for HANA*. Additionally, as an incentive to move to S/4HANA, SAP’s extension policies may enable you to apply unused SAP licenses against a credit for the new purchase. A reduction in the software application value means reduction in overall maintenance to be paid on HANA. *Note that individual circumstances may vary.”

The problem is that Snow Software is making a case for the lower cost of the annual license cost for HANA. However, HANA is the most expensive database on the market. So if you decline from 22% to 15% maintenance, the maintenance is lower, but the base is much higher than the database that HANA replaces.

Secondly, HANA comes with other liabilities, such as indirect access liability, that impact the costs of other software, which are a whole other can of worms and which I have covered in part in other articles.

Conclusion

I find the strategy presented by Snow Software to be problematic. Here is a synopsis.

  1. Total Cost of Ownership: It is far too focused on the simple license math. It leaves out the all-important aspect of implement ability of S/4HANA. And these issues are far more cost impactful. These costs are far higher than any potential license cost benefit from moving to S/4. In fact, the majority of costs associated with SAP come in maintaining SAP systems, and Snow Software’s article is not observant of this point. This true even if the unused software is traded in for HANA or S/4 HANA and if the maintenance on HANA is reduced to 15%.
  2. S/4HANA Maturity Issues: It is difficult to see how any company could have taken S/4HANA live at this point. That will not be true at some point in the future, but it is true now. I will elaborate on this point in my research which is due out in around five weeks from now. But most of the S/4HANA implementations that have “gone live” at this point are not what we would typically consider real implementations. And below that statement resides quite a lot of very interesting detail.

Therefore, applying the strategy above will simply result in having the license for S/4HANA that cannot be taken live for some time. Snow Software is not taking into account that S/4 HANA will most likely sit unused or in a partial demo state for this time. This would not be a problem as S/4HANA will normally be purchased at a discounted rate. Not HANA, which is required to run S/4HANA will not be purchased at a discount.

Therefore every year maintenance will be required to be paid on a very expensive database, albeit it at a reduced rate. And that is just one of the limitations of the strategy.

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References

[Use S/4HANA to get rid of your SAP shelf ware | Snow Software](https://www.snowsoftware.com/int/blog/2016/09/20/use-s4hana-get-rid-sap-shelfware-pt-1#.WBzBfY_XJ-Y)

TCO Book

TCO3

Enterprise Software TCO: Calculating and Using Total Cost of Ownership for Decision Making

Getting to the Detail of TCO

One aspect of making a software purchasing decision is to compare the Total Cost of Ownership, or TCO, of the applications under consideration: what will the software cost you over its lifespan? But most companies don’t understand what dollar amounts to include in the TCO analysis or where to source these figures, or, if using TCO studies produced by consulting and IT analyst firms, how the TCO amounts were calculated and how to compare TCO across applications.

The Mechanics of TCO

Not only will this book help you appreciate the mechanics of TCO, but you will also gain insight as to the importance of TCO and understand how to strip away the biases and outside influences to make a real TCO comparison between applications.
By reading this book you will:
  • Understand why you need to look at TCO and not just ROI when making your purchasing decision.
  • Discover how an application, which at first glance may seem inexpensive when compared to its competition, could end up being more costly in the long run.
  • Gain an in-depth understanding of the cost, categories to include in an accurate and complete TCO analysis.
  • Learn why ERP systems are not a significant investment, based on their TCO.
  • Find out how to recognize and avoid superficial, incomplete or incorrect TCO analyses that could negatively impact your software purchase decision.
  • Appreciate the importance and cost-effectiveness of a TCO audit.
  • Learn how SCM Focus can provide you with unbiased and well-researched TCO analyses to assist you in your software selection.
Chapters
  • Chapter 1:  Introduction
  • Chapter 2:  The Basics of TCO
  • Chapter 3:  The State of Enterprise TCO
  • Chapter 4:  ERP: The Multi-Billion Dollar TCO Analysis Failure
  • Chapter 5:  The TCO Method Used by Software Decisions
  • Chapter 6:  Using TCO for Better Decision Making

How to Best Understand SAP Licensing Costs and Contract Complexity

Executive Summary

  • The pricing of SAP or price of SAP is kept secret.
  • They provide complex discounts which make it impossible to specifically know the price of SAP software.
  • SAP contracts have become increasingly complex. This is consistent with increased overhead for buying and using SAP.
  • We cover the need for clause clarification in SAP contracts.

Introduction

SAP pricing is a mysterious topic that is hidden from public view, making purchasing from SAP a convoluted process. You will learn important details of how SAP manages pricing that you can use in negotiations with SAP.

Facts About the SAP Price List

SAP follows the on-premises model of keeping its pricing secret. In fact, when reviewing SAP’s price list, it states that the price list is public and cannot be published.

Right on the first tab of the SAP price list, it states the following:

“All rights reserved. The contents of this work are confidential and proprietary information of SAP AG. Improper and/or unauthorized reproduction in whole or in part of the information contained in this work is a violation of SAP’s proprietary rights and could cause irreparable damage. No part of this work may be reproduced or copied in whole or in part in any form or by any means (including without limitation graphic, electronic, or mechanical, including photocopying, recording, taping or information storage and retrieval systems) without the prior written permission of the publisher.”

That is false. SAP is selling a public product. Therefore the price and the pricing list cannot be protected in that manner.

The SAP Software Cost

The cost of SAP should never be confused with the price of SAP software.

The cost of SAP gets into the topic of TCO or total cost of ownership. When people say the cost of SAP, they don’t necessarily mean the TCO, but they may. TCO means making a model that accounts for the different cost categories. I have written the only book on enterprise software TCO. Many software vendors propose TCO, but when you review their models, they demure.

TCO means making a model that accounts for the different cost categories. I have written the only book on enterprise software TCO. Many software vendors propose TCO, but when you review their models, they leave many costs out. In my view, software vendors cannot help customers come to a TCO because they have a conflict of interest on this topic.

I have written the only book on enterprise software TCO and performed thorough research on the topic. My conclusion is that most of the entities that talk about TCO, like software vendors and consulting companies don’t want their customers to know the TCO. In fact, while many software vendors propose TCO, when you review their models they leave many costs out.

In my book Enterprise Software TCO, I break the costs of enterprise software into:

  • Acquisition Costs
  • Implementation Costs
  • Hardware Costs
  • Maintenance Costs

The Price of SAP and Pricing SAP

SAP is priced in some different ways, and the price of course changes depending upon the specific application, and the number of different ways that SAP can be priced is surprising to most customers.

The different ways the price of SAP or pricing SAP can be arrived at include the following:

  • By User
  • By Revenue and Expenses
  • By Revenues
  • By Flat Fee
  • By Weights: (For things like commodity and agricultural products)
  • By Orders: (For things like sales orders)
  • By Contracts: (For things like CRM Marketing)
  • By Cores: (For things like SAP Hybris)
  • By Transactions: (Also SAP Hybris)
  • By Employees: (For SAP HR solutions)
  • By Cost of Goods Sold: (For SAP Collaboration SNC)
  • By Freight Spend: (For SAP TM)
  • By Plant: (For SAP Manufacturing Integration)
  • By Resources: (For SAP Manufacturing Scheduling)
  • By Rental Unit: (For SAP Real Estate Management)
  • By Spend Value: (For SAP Supplier Management & Ariba)
  • By Product: (SAP Vehicle Management for Auto)
  • By Outpatient Days: (SAP Patient Management for HC)
  • By Business Partners: (SAP Tax, Benefits and Payment Processing for Public Sector)
  • By Points of Delivery: (SAP Energy Data Management for Energy Utilities)
  • By Learners (SAP Enterprise Learning Environment)
  • By Concurrent Sessions (SAP BusObjects Knowl Acc Bundle f BI Suite (CS))
  • By Virtual Users: (SAP LoadRunner by HP, 100 VU bundle)
  • By Connected Systems: (ProductivityPak adapter for SAP Solution Manager)
  • By GB of Memory (SAP IT Operations Analytics or SAP Predictive Analytics Suite for Full Use HANA)
  • By HSVA: (SAP HANA, Runtime edition for Applications & SAP BW – Install Base)
  • By Recipients: (SAP NetWeaver BeXBroadcaster)
  • By LVM Instances (SAP NetWeaver Landscape Virtualization Mgmt enterprise)
  • By Annual Subscriptions (United States National Directory (1 server))

And that is not the comprehensive list. However, it should also be recognized that many of SAP’s applications are not widely sold. Therefore the pricing SAP the way that is shown above is often rarely applied.

Pricing SAP can be determined (before discount) by estimating the number of “things” that the pricing is based upon. And that by itself can be challenging.

SAP Licensing Cost

SAP licensing cost and refer to the price of the SAP license, which is the right to use SAP software. The SAP licensing cost is simply the more technical terms for the price of SAP. The SAP licensing cost is stated in the software contract, and it is defined by the end user licensing agreement.

The SAP Price List and the SAP Software Cost

The SAP price list is not so much a list — as in an SAP price list printed out as a Word document as it is a spreadsheet which provides the SAP software cost under different conditions. The actual SAP price list (spreadsheet) is quite limited, and the people at SAP did a rather poor job of automating it. SAP also offers an interactive price to determine the SAP software cost, but it also has limitations.

The SAP price list is restricted to SAP account executives and salespeople at SAP partners. However, it is a good idea to verify the SAP software cost provided by SAP or an SAP partner with a third party.

Negotiation on SAP Software Cost

The final piece of the sap price puzzle is the discount. The discount applies to all SAP products, except for a few. The discount applied to a price is its subject area, and also differs by region and many other factors.

How to Understand The Rising Complexity of SAP Contracts

SAP talks a lot about simplification, but SAP’s contracts are becoming more complex and more limiting regarding what customers can do with SAP’s software. In this article, we will get into this little topic for which there is so little published information.

Example of the Cloud Connector

SAP has the following to say about its Cloud Connector.

An analysis by a commenter stated the following:

It is supported to run S/4 HANA on AWS as IaaS provider, the same for SCP (fka HCP). But it really seems not wanted to use more from AWS than the virtual OS. You even have to solve basics like connectivity yourself when you leave the SAP world. “Must not” – a license restriction?

Publicly Supporting Open Connections, While In Reality Offering Control?

Once again, SAP restricts the usage of its products to other SAP products. This is done even after SAP proposing that it is in favor of open standards. It should be remembered that middleware companies never limit the usage of their adapters. However, SAP does.

This type of language is littered all through SAP’s contract documentation. It is an orientation to control things, so they maximally benefit SAP. So that SAP controls how the software is used. This is a growing problem and liability with using SAP. Actually, by upgrading to newer versions of SAP, the customer ends up with more restrictions than in older versions, so the restrictions are being ratcheted up.

Control and the Cloud

SAP talks a good game about partnering with Azure, but the control they want to be combined with public IaaS like Azure or AWS means things get super weird. You are making me think about another article Rolf! That is the second time in a week!

Recently I spent time trying to figure out what a contract restriction means or S/4HANA with the person at an SAP customer.

The SAP account executive has no idea what the clause means. It actually took them three weeks to come back with a clarification that did not seem to clarify anything.

Conclusion

SAP pricing is quite complex. Brightwork Research & Analysis, we perform SAP pricing for quite reasonable rates. We have access to all SAP pricing information as well as access to discount information.

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

TCO Book

TCO3

Enterprise Software TCO: Calculating and Using Total Cost of Ownership for Decision Making

Getting to the Detail of TCO

One aspect of making a software purchasing decision is to compare the Total Cost of Ownership, or TCO, of the applications under consideration: what will the software cost you over its lifespan? But most companies don’t understand what dollar amounts to include in the TCO analysis or where to source these figures, or, if using TCO studies produced by consulting and IT analyst firms, how the TCO amounts were calculated and how to compare TCO across applications.

The Mechanics of TCO

Not only will this book help you appreciate the mechanics of TCO, but you will also gain insight as to the importance of TCO and understand how to strip away the biases and outside influences to make a real TCO comparison between applications.
By reading this book you will:
  • Understand why you need to look at TCO and not just ROI when making your purchasing decision.
  • Discover how an application, which at first glance may seem inexpensive when compared to its competition, could end up being more costly in the long run.
  • Gain an in-depth understanding of the cost, categories to include in an accurate and complete TCO analysis.
  • Learn why ERP systems are not a significant investment, based on their TCO.
  • Find out how to recognize and avoid superficial, incomplete or incorrect TCO analyses that could negatively impact your software purchase decision.
  • Appreciate the importance and cost-effectiveness of a TCO audit.
  • Learn how SCM Focus can provide you with unbiased and well-researched TCO analyses to assist you in your software selection.
Chapters
  • Chapter 1:  Introduction
  • Chapter 2:  The Basics of TCO
  • Chapter 3:  The State of Enterprise TCO
  • Chapter 4:  ERP: The Multi-Billion Dollar TCO Analysis Failure
  • Chapter 5:  The TCO Method Used by Software Decisions
  • Chapter 6:  Using TCO for Better Decision Making

https://help.sap.com/viewer/cca91383641e40ffbe03bdc78f00f681/Cloud/en-US/e6c7616abb5710148cfcf3e75d96d596.html

How SAP Controls Perceptions with Customer Numbers

Executive Summary

  • SAP has created press releases and related media coverage of customer SAP usage numbers.
  • How customers, prospects, media outlets and Wall Street tend to interpret SAP usage numbers.
  • How faulty SAP usage numbers contradict reality

Introduction

  • Many announcements on the part of SAP include the release of the number of customers that a particular SAP application has acquired in the most recent quarter.
  • If you use these numbers from SAP, you will come to inaccurate conclusions about what is happening with SAP.
  • This is an important topic to address because many people then quote SAP usage numbers under the assumption that these numbers are accurate.

Press Releases and Related Media Coverage of Customer SAP Usage Numbers

SAP likes to make splashes with big press releases. They go something like this..

  1. Frequently the claim will use a statistic regarding the successfulness of an application. SAP will often have the word number of customers that it has. SAP has done this with HANA and S/4. They announced around 500 new “customers” every quarter for S/4. They often follow the statement about the customer numbers with something rather non-sensical about how the software is completely transforming the way their customers are doing XYZ.
  2. SAP then swiftly move to propose that this is evidence that the marketplace is very enthusiastic about whatever they are offering.
  3. Provide statements that are unsubstantiated as to what the usage numbers mean.

The SAP Customer Numbers for S/4HANA

There are many examples of SAP doing this. But I will bring up an excellent recent example of this was when SAP placed S/4HANA (the ERP system not the database) on a promotion and placed it into contracts when it sold other applications one quarter. This lead to a significant uptick in SAP customers that now had S/4. But almost none of those customers had any foreseeable plans to implement S/4HANA. What few people who read the S/4HANA press release knew was that S/4 was not and is still not a completed product. It is a partially completed set of modules that only parts of which can be used.

This makes it impossible for anything close to the number of customers listed by SAP to have implemented and be using S/4HANA.

When an Uptick Equals Enormous Growth

Nevertheless, Hasso Plattner then stated that the uptick in S/4HANA customers demonstrated enormous growth in the acceptance of S/4HANA. I was hired to estimate the actual number of S/4HANA implementations by a company, and using a variety of sources I came up with a very low number of S/4HANA implementations.

You can see this estimate at this link.

The estimate is far off of the number of customers determined by SAP. And really, no one what SAP knows the actual number of clients that are live with some part of S/4HANA. And SAP won’t provide an honest accounting of this because they would see their stock price decline. SAP’s S/4HANA has been very lightly implemented. This is illuminated in the following quotation from the book SAP Nation 2.0.

“Rob Enslin…would later confirm “Yes, all of the [more than 900 S/4] deals are all on-premise. Our cloud piece for S/4, we’re talking it step-by-step for now“”

“Many of the early adopters like Shell are trying out multiple projects — so the “137 running projects” Enslin mentions are at a small fraction of the 900 plus customers who are supposed to have bought S/4.”

The translation of the first part of the was that they did not have any S/4HANA cloud customers. The second part of the quote shows how SAP exaggerates the number of projects by counting multiple projects, again to exaggerate the number.

How SAP Customers Interpret SAP Usage Numbers

If we look at SAP customers, they receive some exposure to what other companies are doing as they may talk to people they know in other SAP clients and attend SAP events like ASUG. But it does not give them the comprehensive view to know how far SAP’s number is off.

The audience for the fake customer number quoted by SAP is usually not in a position to check the claim.

How Wall Street Interprets SAP Usage Numbers

If we think of Wall Street analysts, they don’t work in software implementation, and they don’t visit SAP customers.

How Media Outlets Interpret SAP Usage Numbers

If we consider media sources, they most often only repeat whatever SAP says. Most the media sources take some money from SAP in the form of advertising or other funding and therefore don’t have any incentive to check SAP’s numbers. Plus repeating what SAP’s press release states are accessible. On the other hand, researching what the right numbers are would take a little work, and publishing anything to the contrary will lead to a confrontation with ad sales. Bad for your career. As long as the journalist has a credible source, and SAP is a reliable source, then the writer is considered to have done his job. And if we think of the journalist’s work week, he or she may be able to be considered to be working for the entire week by just adding 500 words to a story where SAP provided almost all of the content. Combine that with no static with the ad sales team, and that is a pretty good week of work.

How Faulty SAP Usage Numbers Undermine Reality

They form the basis of faulty arguments. I recently had a commenter on one of my LinkedIn articles states that the acceptance of an SAP application was good, and he then quotes SAP’s numbers from their press release. I responded with my detailed research into the values and proposed that there is no way the numbers could be correct. In fact, they are, after a lot of research, just a small fraction of the officially stated SAP numbers.

In response, he changed the subject.

However, what if you don’t research SAP for a living? Many SAP supporters have some false arguments. They will present any number of them that will work on the majority of listeners. If they find someone who knows what they say is untrue, they simply move on to talk to someone who they can trick. They are looking for people with buying power to use these false constructs against, much like a computer hacker looking for websites with weak security to penetrate.

This is how SAP’s numbers are continuously recycled — from Hasso Plattner and Bill McDermott, all the way down to discussions on websites and repeated by SAP account managers. It is a cascading series of false claims.

What is “a Customer”?

Whenever SAP quotes some customers that are using its applications, those numbers are nearly always exaggerated. This cannot be considered wholly false. This is because the definition of a customer is

This cannot be considered entirely false. This is because the definition of a customer is so poorly defined. A customer only means that a license is owned by a company.

A customer only means that a license is owned by a company. In this way, software companies can, if they choose, exaggerate this number in the way that a company that produces a physical product cannot. Companies have always employed techniques to seem more successful than they are. End of quarter pushes, which provide promotions and incentives are quite common. However, for companies that make physical products, these companies incur a cost. If General Motors were to attempt to inflate its customer numbers this way, it would have to ship more cars to customers for free — incurring a large loss for every car is “sold” this way.

But software companies don’t work that way. Software companies can transfer a license to a client at close to no cost to itself.

Conclusion

  • Everyone at SAP who is part of these announcements knows the numbers customers that come exclusively from sales with no input from consulting or implementation are false the moment they utter them.
  • They do this to create the impression that the market acceptance of whatever SAP is pushing is working.
  • These numbers are used to do everything from influence other companies to “get on board” and perhaps purchase the software themselves, to influence Wall Street into more highly valuing the stock of SAP.
  • If you are at the top of SAP, you only have to maintain your position for a few years, creating the rosiest impression possible, and given your options, you and your entire family will never have to work again after that. It is quite an enticement to say whatever you need to say. This is just one in a long list of ways that the stock market system promotes people to provide false information to the market.

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References

*https://www.amazon.com/SAP-Nation-2-0-empire-disarray-ebook/dp/B013F5BKJQ

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