The Discrepancy Between SAP and DSAG on S/4HANA’s Growth

Executive Summary

  • DSAG, the German-speaking SAP user group’s survey of S/4HANA adoptions showed important distinctions from what SAP has been reporting to Wall Street.
  • We analyze this discrepancy.

Introduction

We have been saying for some time that SAP’s numbers on S/4HANA do not add up. When perusing a survey by DSAG, which is the German-speaking countries user group for SAP, we found interesting discrepancies between what SAP is reporting to Wall Street and what DSAG found.

DSAG on S/4HANA

We will begin by listing the most interesting quotations from the study.

“Just like last year, DSAG members were also asked about the relevance of Business Suite and S/4HANA, both on-premise and in the cloud. The survey found that there has been no further shift towards S/4HANA. In fact, main and mid-size investments in Business Suite fell by around 10 percent (from fall 2017) to 48 percent. However, this did not affect investments in S/4HANA projects, which remained almost constant. But there is a noticeable increase in the use of S/4HANA as a cloud solution (up 4 percent).”

And on the topic of S/4HANA Migration

“The survey also found that DSAG members’ plans on when to migrate to S/4HANA remained unchanged from last year, although 3 percent of members are already using S/4HANA (up 1 percent). 5 percent of those surveyed plan to migrate to S/4HANA this year, and one-third plan to do so in three years. A quarter of survey participants have not yet decided when to migrate and 13 percent plan to stay on Business Suite. For Marco Lenck, this is a noteworthy finding. He says: “The growth of 4 percent migration to S/4HANA that was forecast last year wasn’t realized.” And despite a large of number of projects, the number of migrations hasn’t significantly grown. Marco Lenck continues: “This could be because the transition is more complex than expected, meaning S/4HANA projects couldn’t yet be completed.”

This is as we have stated. S/4HANA is seeing little growth. One should be careful not to take the “planned to…” estimates as hard commitments. Many companies plan to do things, and it in many cases it does not mean that it occurs within that time frame or at all. Notice that the “planned to” numbers are higher than the “currently” numbers.

What SAP Communicates About S/4HANA Adoption to Wall Steet

Now notice how different what SAP tells Wall Street about S/4HANA.

These following quotations are from the Q4 2017 analyst call.

Question 1: Ross MacMillan

“Thank so much. Maybe one for Luka, I think by my math, we’re just over 20% of the core ERP base on S/4HANA and I just wondered if you could maybe remind us, where do you expect as to be in terms of conversion of base as we look out to our 2020 target? And then a follow-up and I don’t know if this is for Bill or Bernd, but your comments on S/4 cloud are obviously bullish.”

Notice the statement. Ross MacMillian has repeated what SAP said that they had converted 20% of their ERP customer base. But here Ross is repeating the language that converts the “sale” of a S/4HANA license with the “conversion” of the customer. This is highly problematic as the vast majority of S/4HANA licenses are shelfware. Many of them either unpaid for or part of an indirect access dispute that resulted in S/4HANA being “purchased.”

Notice Luka Mucic’s answer

Answer 1: Luka Mucic

“Yes. Then just very quickly, I would definitely expect that by 2020, we should be done with half of the customer base and having it converted let’s not forget that with our current S/4 customer count. We also have net new customers on top, not only installed base conversions. So that implies that I expect to see now an acceleration of the migration curve as customers have waited in some cases for the full round out of functional capabilities of S/4HANA as that work is now complete. They are starting their programs. So that will be my indication. We would do something wrong as by 2020. We have not already migrated at least half of our installed base.”

Once again, SAP is referring to licenses sold by SAP. Luka Mucic is, therefore, saying that by 2020 1/2 of SAP ECC customers will hold a license of S/4HANA. That is the actual translation of what Luca Mucic is saying, but this is not what SAP wants the analysts to believe. SAP has adopted the term “conversion” to deliberately blur the distinction between a license purchase and a software implementation.

Conclusion

Ever since SAP introduced S/4HANA its proposals about S/4HANA’s adoption have been misleading. We covered this in several articles, including How SAP Controls Perceptions with Customer Numbers. And SAP is intent on deceiving as many people for as long as possible regarding the uptake of S/4HANA.

SAP’s Inaccurate Messaging on S/4HANA as Communicated in SAP Videos

Fact-Checking SAP Information on S/4HANA

This video is filled with extensive falsehoods. We will address them in the sequence they are stated in this video.

SAP Video Accuracy Mesurement

Appleby's StatementAccuracy % of the CommentExplanationLink to Analysis Article
S/4HANA is what allows key processes to be digitized.
0%
ECC was already fully digitized and digitized across key business functions.The Problem with Using the Term Digital Transformation on IT Projects
HANA is a Platform
0%
HANA is not a platform, it is a database.How to Deflect You Were Wrong About HANA
Fiori is a major advantage for S/4HANA.
10%
In S/4HANA implementations Fiori is infrequently used when S/4HANA. How Accurate Was SAP on the Number of Fiori Apps?
Fiori is far more efficient than what came before.
10%
In testing Fiori and S/4HANA, Sven Deneken's statements did not hold up. There was a particular weakness in actually making changes after noticing something needed to be changed, and we found the efficiency below that of ECC with of course SAPGUI.
S/4HANA is innovative as it brings "real time inventory."
0%
Sven Deneken brings up the topic of "real-time capabilities," however there is nothing particularly real-time or different in terms of a reaction than ECC. Whenever you make a change in ECC or any other ERP systems for that matter, the entry is real-time. Sven Deneken states that "the physical inventory is the same as the digital inventory." However, under what system would this not be true?What Happened to the Term Perpetual Inventory?
S/4HANA is innovative because it allows access to supplier information.
0%
Sven Deneken states that information about the supplier is "just a fingertip away." Sven Deneken may be familiar with ECC, where supplier data is also a fingertip, or say mouse click away. It called the Vendor Master in ECC.
Sven Deneken says that the cycle could be changed to daily or sub-daily.
0%
Why would that occur? This is a very strange scenario that is being laid out.
S/4HANA is innovative because it allows MRP to be rerun interactively for a product location.
0%
Sven Deneken is extremely confused when he states that S/4HANA allows a fresh MRP run to be performed for a specific product location and that this is a differentiator for S/4HANA. For a single product location, there is no ERP system that cannot run MRP for a single location. Secondly re-running MRP does not remove uncertainties. MRP can be re-run when something changes. For example, when the forecast changes.Performance Problems with HANA and MRP
Sven Deneken states this demo shows SAP has reimagined inventory management.
0%
However, all of this functionality, save for several of the graphics shown in the video have already been available in ECC for many years, in fact, decades.

The Problem: A Lack of Fact-Checking of S/4HANA

There are two fundamental problems around S/4HANA. The first is the exaggeration of S/4HANA, which means that companies that purchased S/4HANA end up getting far less than they were promised. The second is that the SAP consulting companies simply repeat whatever SAP says. This means that on virtually all accounts there is no independent entity that can contradict statements by SAP.

Being Part of the Solution: What to Do About S/4HANA

We can provide feedback from multiple HANA accounts that provide realistic information around S/4HANA — and this reduces the dependence on biased entities like SAP and all of the large SAP consulting firms that parrot what SAP says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. SAP and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. This is how companies end up paying for a database which is exorbitantly priced, exorbitantly expensive to implement and exorbitantly expensive to maintain. When SAP or their consulting firm are asked to explain these discrepancies, we have found that they further lie to the customer/client and often turn the issue around on the account, as we covered in the article How SAP Will Gaslight You When Their Software Does Not Work as Promised.

If you need independent advice and fact-checking that is outside of the SAP and SAP consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

Financial Disclosure

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S/4HANA Implementation Research

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References

https://www.sap.com/documents/2018/02/de1db6cd-ee7c-0010-82c7-eda71af511fa.html

https://www.dsag.de/pressemitteilungen/budgets-feel-impact-digitalization

https://seekingalpha.com/article/4141369-saps-sap-ceo-william-mcdermott-q4-2017-results-earnings-call-transcript

DSAG Survey scope
“In total, 334 CIOs and company representatives from DSAG member firms in German-speaking countries took part in the online survey between November 2017 and January 2018. One contact was surveyed per company. Nearly 60 percent of those surveyed come from companies with between 1,000 and 4,999 employees, and nearly 30 percent come from companies with over 5,000 employees. 52 companies in Switzerland took part and 37 in Austria.”

The Real Story on ERP Book

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

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

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

Break the Bank for ERP?

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

By reading this book you will:

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

Chapters

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