Last Updated on May 11, 2022 by Shaun Snapp
- Upgrades for cloud ERP applications are not very straightforward.
- Not all vendors are equal in the Cloud.
*Disclaimer. This article makes statements that apply to SAP S/4HANA Cloud and Oracle Cloud ERP. It does not generalize to NetSuite (an acquired cloud ERP by Oracle) or SAP’s acquired cloud applications. Brightwork Research & Analysis categorizes Oracle and SAP’s internally developed cloud applications separately from their acquisitions.
Video Introduction: The Issues with Upgrading SAP and Oracle Cloud
Text Introduction (Skip if You Watched the Video)
This article will describe what is often an overlooked aspect of cloud ERP. Moreover, this is the reality of upgrades for cloud ERP. Investors and cloud vendors see cloud as more money for them. Vendors are incentivized to sell customers cloud ERP because Wall Street assumes that software vendors do not intend to return the efficiency of the cloud they receive at lower costs to customers but instead to keep those as profits. This, far more the benefits of cloud ERP, is why cloud ERP is becoming more prevalent. One topic normally left out of the ERP cloud analysis is the issues with upgrading that cloud ERP faces. On-premises ERP has less of this problem because most ERP customers are on significantly older versions of their ERP system and are not impacted by immediate and constant upgrades, as are cloud ERP customers. You will learn about the reality of upgrading cloud versions of SAP and Oracle Cloud ERP.
Our References for This Article
If you want to see our references for this article and other related Brightwork articles, see this link.
Lack of Financial Bias Notice: The vast majority of content available on the Internet about Oracle is marketing fiddle-faddle published by Oracle, Oracle partners, or media entities paid by Oracle to run their marketing on the media website. Each one of these entities tries to hide its financial bias from readers. The article below is very different.
- First, it is published by a research entity.
- Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department.
A Brief History of Cloud/SaaS Vendors
Cloud/SaaS vendors started up around 15 years ago to leverage the Internet to compete with on-premises vendors with more abundant resources, marketing budgets, sales teams, and other big vendor luxuries. The first SaaS vendors were concentrated in simpler applications (CRM being the defining SaaS application, with Salesforce the defining SaaS vendor) that could allow all or nearly all customers to work off a single database instance. (in many cases). But most importantly, a single application instance. This eventually came to be known as multi-tenancy. SaaS vendors also provided free trial access to their software and easy cancellation terms. The concept was that the system was controlled by pre-sales demo teams rather than following the standard and expensive sales process we’re viewing. The prospects could test out the application often for free. I became enamored by the Arena PLM application in 2008, following this exact process.
Everyone reading this article right now uses some cloud application, be it Gmail, a Cloud invoicing program, Facebook, etc.. We often don’t think of them as cloud/SaaS. We think of them as “websites.” However, they are, in fact, cloud/SaaS applications.
In a rush to embrace the Cloud, application categories have never been historical “cloud” inherited cloud expectations. With its cadre of technically shallow analysts, Wall Street has yet to get the memo that not all enterprise applications are equally straightforward for migration to the Cloud.
One of these non-historically cloud application categories is ERP. And one of the inherited cloud expectations became pushed upgrades.
Upgrading Cloud ERP Applications
Diginomic published the article “Workday Bows to Enterprise, Reins in Release Cycle” in 2013. The following quotations from the co-CEO Aneel Bhusri caught my eye.
“I just want to crank out new functionality but our customer groups said no, we need more time to do these updates,” he explained.
It’s a totemic shift for Workday, which has hitherto made a selling point of the frequency of updates compared to the once-every-three-years-or-worse cycles of its on-premise competitors. Release 23 next August will be the last of the current regime, after which Workday will fall in with the same twice-yearly release schedule and Summer and Winter naming system as cloud CRM giant Salesforce.com.
The shift is a reflection of a paradox that many cloud application vendors face as they win increased adoption among established enterprises. For all the agility that such organizations aspire to, there are limits to the management resources they can devote to supporting new capabilities as they’re introduced. Workday has had to throttle back the frequency of updates to match those constraints.
The irony is that — although Workday presumably intends to maintain the same rate of innovation under its sparser release cycle — those looking on from the faster-moving, consumer-led end of the cloud industry may see it as evidence Workday is becoming more like the traditional enterprise software vendors that it claims to supplant.
In another move designed to ease the update cycle further, Workday has added a 4-week preview phase to the release process. As well as having 2-3 weeks for technology testing of a sandbox release instance before rolling out the production instance, customers will in the future have the option of letting users access a preview instance where they can try out new features or test new business processes.”
Facing the Reality of Cloud Updates
The Diginomica article on Workday demonstrates the challenges faced when upgrading an ERP-ish system (I say “ish,” as Workday does not have supply chain functionality) in the Cloud.
If we can all recall, the original idea of SaaS was that the upgrades would be performed in a way that is seamless for the user. Multi-tenancy combined with a single code base for all customers.
Why is this Wall Street analyst so happy? Well, he thinks that all enterprise systems can be as easily migrated to the Cloud as CRM. This makes him see reduced operational expenses for the software vendors he tracks as far as the eye can see.
Does Cloud = Money?
This is why Wall Street bid up the price of cloud companies and promotes SAP and Oracle to overstate their “cloudiness.” This tantalizing prospect is the idea of many customers shared over a far smaller investment than with on-premises software. This profitability for cloud vendors promised by Wall Street has yet to appear. The most profitable vendors continue to be the major monopoly on-premises vendors. (Salesforce has weak profitability, as does Azure. The only impressive profitability of any size comes from AWS.)
While some simple software categories, notably CRM, work like that, ERP systems do not work this way. This Diginomica article back in 2013 on Workday’s upgrade process gave us a hint of these complicating factors. Moreover, all of this is quite common for cloud ERP vendors.
The following quotation is from Rushabh Mehta of ERPNext, who is very upfront about their cloud upgrade process.
“We push minor upgrades seamlessly without the customer knowing, but a major release takes 2-3 months for us to push across the customers… unlike GMail or CRM, ERP has enormous implications on things like finance, payroll, etc., so any change in configuration could be disastrous, so customers are naturally wary of pushing aggressive upgrades.
There needs to be a fine line here. Some customers can get a longer window so they can schedule any potential disruption.” – Rushabh Mehta
This “without the customer” knowing is a positive aspect of a simple application like Gmail or CRM. However, reports have come from S/4HANA and Oracle Cloud ERP customers that they are being caught off guard by major, poorly documented changes. Even if they were documented, the company would have difficulty adjusting to them.
This has put S/4HANA and Oracle Cloud ERP customers in firefighting mode after the updates. Recall that the updates on the cloud are mandatory. Therefore, there is no process through which one decides what to upgrade to and when.
Unequal Cloud Capabilities
SAP internally developed products that don’t “do the cloud” very well. Oracle’s long-term problematic unifying development project, one of the longest in enterprise software history, was called Fusion, Oracle Cloud ERP (in part). However, both of these applications have far less functionality than their on-premises counterparts and come with SAP and Oracle’s Cloud’s negative implication. This is negative because neither Oracle nor SAP offer a competitive cloud. And, neither can accurately be called cloud as the cancellation terms contradict the definition of cloud.
Unfortunately for the major monopoly enterprise software vendors, it is not that easy to be good in the cloud. If all vendors could be, they would be. Furthermore, bringing out a sound cloud CRM system is one thing. It is quite another thing to create a cloud ERP system. It can’t be something a vendor is doing because it is trendy, but this seems to be the case with both SAP and Oracle.
Back when the Cloud was starting, SAP and Oracle did everything they could to undermine it. SAP and Oracle speak of the Cloud now because Wall Street has informed them they have no alternative. SAP and Oracle, however, have zero interest in upsetting their on-premises software business, which has been amazingly profitable for both of them.
Taking a Step Back with SAP and Oracle Cloud
This raises the question of why a company would want to get what amounts to a weak host with S/4HANA Cloud and Oracle Cloud ERP (i.e., choosing SAP or Oracle as your hosting provider) versus just putting the much larger S/4HANA “on-premises” edition on AWS.
The historically on-premises vendors have tried to propose that they are equal to historically cloud vendors. It has become more than apparent at this point that cloud capabilities are a distinct capability. AWS gets it, and Google gets it. SAP and Oracle do not get it.
It’s the difference between doing something because it is trendy versus doing something. After all, you believe in it.
What SAP Has Been Telling Customers About S/4HANA Cloud Development/Upgrades
SAP warned the audience in several S/4HANA Cloud presentations given at SAPPHIRE 2018 that S/4HANA Cloud has so much “innovation” that customers need to accept the risk of having what SAP calls,
“20% more S/4HANA Cloud functionality every quarter.”
SAP presenters in S/4HANA Cloud told audience members to only focus on S/4HANA Cloud for their business’s most innovative areas.
This is a euphemism for “get ready for instability.”
Is S/4HANA Cloud-Ready for Production?
It’s difficult not to interpret S/4HANA Cloud as a development box. All one has to do is review the number of changes/improvements and the frequency of enhancements. It sounds like a curious statement as S/4HANA Cloud + S/4HANA on-premises is touted by SAP as being used by more than 1,500 customers (SAP combined the numbers of S/4HANA Cloud and S/4HANA on-premises because it would be embarrassing if it reported the S/4HANA Cloud customers by themselves.). Moreover, the application has been out for several years. But, if we strip away the name for a moment and all of the SAP marketing literature to look at the underlying facts, it is not a troublesome determination to make.
A Question for IT Directors
If one were to approach an IT director with the following question…
“How do you feel about going live and running the business with a system that will have an automated push every quarter with a large amount of untested functionality by a development team trying to create product that was released too early?”
Simply by the nature of the releases, they would designate the S/4HANA Cloud as a development environment.
All of this brings up the question, who could live with S/4HANA Cloud?
SAP has several slick S/4HANA Cloud videos, none of which correspond to the actual S/4HANA Cloud product. If you want to find out what is not true about S/4HANA Cloud, and if you want important things to be left out, be sure to listen to Sven Deneken, who has lied like all SAP product managers way into his position. There is no falsehood about S/4HANA Cloud that Sven Deneken is unprepared to tell. I can’t be sure, but Sven may moonlight as a standup comedian.
I would not recommend S/4HANA Cloud, in its current state, out until 2019, for production environments.
Because there is no way such a system can be relied upon, and the overhead of dealing with pushed updates is too high. Even if the small functionality footprint is ignored momentarily, the system’s costs will put a company’s business at risk.
Could there be some reason almost every company on this slide of S/4HANA Cloud implementations is an SAP consulting partner? How many of these companies would claim to have gone live with S/4HANA Cloud for marketing purposes while using something else to run their business?
Do I have to say it?
Notice Anything Odd About the S/4HANA Cloud Customers?
This is one reason why so many S/4HANA Cloud customers are small and why there are so few of them. Nearly every S/4HANA Cloud customer can either be traced to an SAP consulting partner or an insubstantial entity that implemented the application to raise its marketing profile somehow. (The overall exaggerated nature of S/4HANA implementations (on-premises + Cloud) was covered in our research, A Study into S/4HANA Implementations.)
What SAP calls innovation with S/4HANA Cloud is just a euphemism for development. This development is so extensive because the application was announced far too early (to impress Wall Street), and it’s still going through its primary development phase.
This means that, according to SAP, all development is innovation. This would mean that even bad or completely incompetent development is also innovation. SAP now produces innovation not by any output but by the simple act of writing code.
Are Companies Aware They Are Buying a Ticket on the S/4HANA Cloud Rollercoaster?
SAP is projected a high degree of disruption for S/4HANA Cloud, going out at least until 2019.
However, this disruption, as well as Oracle Cloud ERP disruption, has continued into 2020. S/4HANA Cloud and Workday and SuccessFactors’ distinction is that S/4HANA Cloud has few customers using the production system. For this reason, you don’t hear very much about customers running into problems with S/4HANA Cloud upgrades. Moreover, this brings up an important question.
Reviewing SAP’s Statements on S/4HANA
To see why let us start with several of SAP’s statements:
- SAP proposes a lot of changes to S/4HANA Cloud every quarter.
- SAP proposes that there are over hundreds of S/4HANA Cloud customers.
If you search, you cannot find complaints about upgrade issues with S/4HANA Cloud (on SAP message boards, articles (even if sanitized), etc.).
Given the instability of the S/4HANA Cloud, we should see complaints. That lack of these complaints would give us a clue about the S/4HANA Cloud uptake/usage, even if I had not performed the detailed research into the subject to already know.
Oracle’s Cloud Updates and Upgrades Have the Same Problem
Oracle’s Cloud ERP is very similar to SAP’s Cloud ERP in many respects.
Like SAP, Oracle Cloud ERP is a small percentage of Oracle’s overall ERP business, but it is growing. Still, Oracle Cloud ERP has been around much longer than S/4HANA Cloud, and it has quite a few more live customers.
Let’s review Oracle’s Cloud ERP upgrade policies.
- Oracle Cloud ERP has upgrades every other quarter.
- Oracle Cloud ERP also has monthly patching.
- Oracle Cloud ERP is tested and cutover like any on-premises application.
Experienced Oracle Cloud ERP consultants know that changes to the application to meet new business requirements are different than on-premises, with which the upgrades are generally less frequent. Therefore the system is more stable and controllable. Oracle keeps funneling money into Oracle Cloud ERP, as noted by the following quotation from Rimini Street.
“Currently Oracle is pouring vast funds into Cloud ERP with little innovation being built for EBS. It’s unlikely that there will be a new feature in a release in the next 5 years beyond 12.2 that will be critical for your business. If EBS 12.2 has some important new functionality you want, upgrade on your own timeline and when there is a real business need.”
However, this is not translating into that much benefit to the application or its ease of upgrading. From a marketing perspective, Oracle has been fighting this reality.
Asserting the Opposite of What is True with Against Type Marketing
In June 2018, Oracle introduced “Soar,” which is ostensibly a way of automating Oracle applications’ upgrade process, including Oracle Cloud ERP. Oracle and Ellison began making very similar claims around their database and moved to make the same claims around their SaaS applications.
As was covered in the article, How Real is Oracle’s Automated Database, I determined Oracle’s automated database claims to be not only inaccurate but impossible. This is due to the number of Oracle databases that customers want on previous versions of the Oracle database and have dropped Oracle support.
It is also curious how automation impacted both Oracle’s applications and databases in such close timing to one another, mainly because the technology for automating database and application upgrades (only one aspect of automation) is not the same. This is referred to as “against-type” marketing. It is where you take a known weakness and assert the opposite.
SAP did this with its “Run Simple” marketing program. Before the Run Simple campaign, SAP was, for decades, the most complex software to implement with the highest TCO. Therefore, SAP’s Run Simple program asserted the opposite (as did every SAP consulting partner, aka “Team Parrot”). Oldsmobile did the same thing with their “Not Your Father’s Oldsmobile” to try to dispel the fact that Oldsmobiles were boring.
Against type marketing programs do not have much of a history of success. They are most often attempts by marketing to change perception without incorporated it into the actual product. The campaigns usually boil down to sales reps being tired of hearing something about the truth and marketing product deciding to assert the opposite.
Oracle Puts in the Effort to Improve and “Automate” Updates (Through its Marketing)
Oracle puts most of its emphasis on improved updates and automation in marketing rather than anything real. And I had heard several times that Oracle does not auto-push updates to customers. The reality from the field is that Oracle Cloud products have historically been difficult to upgrade but have substantial downtime, as explained by Mark Dalton of AutoDeploy.
“Every Oracle Cloud customer has to deal with a maintenance window that starts out as 1 hour and runs into multiple days. If their systems are autonomous, why all this manual work? And why would any customer want this disruption to their business?”
While Larry Ellison is putting batteries in his presentation “reality distortion field generator” and making ludicrous statements to please Wall Street (which is easy, as Wall Street analysts don’t work with the actual software), AWS and Google Cloud Services are making true strides in upgrading and downtime reduction. Having read all of the documents from these parties, I can say that the level of documentation on upgrades and downtime available at AWS and GCP is far beyond anything that either SAP or Oracle has available. I would give the top score to GCP. They consistently have writers who can explain things in the most understandable way versus the other vendors.
Reviewing a Sample of Oracle’s Change Notes
Here is a sample of the update notes from Oracle on Oracle Cloud ERP.
Related Value Sets provide a new way to define dependencies between two segments in a chart of accounts to ensure only valid combinations are used during data entry. You can define these relationships immediately for new or existing charts of accounts. If you use Cross-Validation Rules to validate values for a segment based on another segment, you may consider converting them to Related Value Set rules to improve journal processing performance.
A related value set is an Independent type value set whose values are related to another Independent type value set. Use this feature to automatically display a list of related values in a segment value choice list, based on what value was selected in a preceding segment in your chart of accounts. For example, if you have Company and Division segments in your chart of accounts, and the company US East has transactions in only the Car and Truck divisions, while the company US West deals with only the Motorcycle and Car divisions, you can define relationships between the Company and Division segments to enforce the relationships between their segment values. – Oracle
You can get a rough idea of the change/improvement from reading this, but it requires exposure to the system and testing to really understand the update. When a change adds new functionality (so not adjustments to old functionality), the customer can test it and decide whether they want to activate this functionality. The problems come when the change is to existing functionality.
This is how Oracle describes its update process.
Oracle Cloud Applications delivers new updates every quarter. This means every three months you’ll receive new functionality to help you efficiently and effectively manage your business. Some features are delivered Enabled meaning they are immediately available to end users. Other features are delivered Disabled meaning you have to take action to make available. Features delivered Disabled can be activated for end users by stepping through the following instructions using the following privileges:
- Review Applications Offering (ASM_REVIEW_APPLICATIONS_OFFERINGS_PRIV)
- Configure Oracle Fusion Applications Offering (ASM_CONFIGURE_OFFERING_PRIV)
Here’s how you opt in to new features:
- Click Navigator > My Enterprise > New Features.
- On the Features Overview page, select your offering to review new features specific to it. Or, you can leave the default selection All Enabled Offerings to review new features for all offerings.
- On the New Features tab, review the new features and check the opt-in status of the feature in the Enabled column. If a feature has already been enabled, you will see a check mark. Otherwise, you will see an icon to enable the feature.
- Click the icon in the Enabled column and complete the steps to enable the feature.
For more information and detailed instructions on opting in to new features for your offering, see Offering Configuration.
Opt In Expiration
Occasionally, features delivered Disabled via Opt In may be enabled automatically in a future update. This is known as an Opt In Expiration. If your cloud service has any Opt In Expirations in this update, you will see a related tab in this document. Click on that tab to see when the feature was originally delivered Disabled, and when the Opt In will expire, potentially automatically enabling the feature. You can also click here to see features with current Opt In Expirations across all Oracle Cloud Applications. Beyond the current update, the Financials forums on Cloud Customer Connect have details of Opt In Expirations upcoming in future updates. – Oracle
This sounds very rational and structured.
However, Oracle customers’ feedback is that the actual Oracle Cloud ERP upgrade process causes significant disruption to their business. That is, changes come that put them into fire fighting mode because of the update.
- This means that most Oracle Cloud ERP customers have a permanent state of instability due to its implementation.
- It is almost as curious how much this is a topic of conversation in Oracle Cloud ERP customers but how little this is a topic of articles on Oracle Cloud ERP. Hmmmmm, it makes one wonder whether Oracle or any companies that make money from Oracle implementations have any interest in hiding this from customers and prospects?
I can’t recall coming across any articles on this topic. However, out of curiosity, I typed the following terms into Google.
oracle erp cloud update instability
And found very few articles related to this topic. In fact, this article (which has been published for a while but has been updated several times since its initial publication) came up on the first page as the only article to address Oracle updates. An article in Forbes (which is a website that does not have journalists anymore since its purchase by a Chinese construction conglomerate and is where you go to publish marketing drivel under the title of “Contributor” or “Brand Voice”) titled, The Oracle Fusion Cloud is the Real Deal, and that’s Bad News for SAP — had the to following to say on Oracle Cloud ERP.
The Fusion Cloud ERP, meanwhile, is gaining quite a handful of new features. Intelligent Code Defaulting utilizes machine learning to provide businesses with recommendations for account codes for processing payables transactions. This should make the process more efficient and accurate, as the algorithm iteratively learns and adapts from past actions. Oracle’s ERP also has a new Intelligent Document Recognition capability, which employs machine learning in the automated extraction of financial information from PDF and other file formats. This promises to cut down on the amount (and maybe in some cases, eliminate) manual invoice entry, a major time suck for financial teams. This algorithm also learns iteratively over time, so that it can acquaint itself with and adapt to any new unfamiliar invoice formats that it comes across. Seriously, where were these tools when I worked for F100 companies? – Forbes
The article mentioned nothing about any limitations of Oracle Cloud ERP but was 100% promotional. The claim above is also false.
The same search returned an article in Diginomica titled Ellison offers on-prem ERP customers “the last upgrade you’ll ever do.”
The most applicable quote I have included is below.
The other big win, as sold by Oracle, is that you never have to do another upgrade again – which is of course a message we’ve heard for many years from Software as a Service providers, such as Salesforce and Workday. Ellison said:
It’s now actually an easier upgrade to go from Oracle E-Business Suite to the cloud than from one version of Oracle E-Business Suite to another. Once you’re in the cloud, that’s the last upgrade you’ll ever do.
With Oracle’s announcement it’s highly likely that it will capture more of its legacy customers as cloud customers on Oracle infrastructure. This could be bad news for businesses that are primarily engaged in cloud infrastructure hoping to attract E-Business Suite customers. – Diginomica
This is also completely false. But it is a falsehood that relates to the E-Business Suite, not Oracle Cloud ERP.
Upon reviewing the results, I found no articles other than the one you are reading referring to this issue. The results are dominated by Oracle and Oracle associated entities like Deloitte, which will not write articles about limitations or complications with any Oracle product.
How Lock-In Differs from On Premises ERP to Cloud ERP
On-premises software is the traditional enterprise software model where the software is taken by the implementing company after purchase and installed on its servers, rather than the model where the software is “rented” and the software vendor hosts it. The on-premises model is presently the dominant form of ERP software and of course, has been since ERP was first introduced. However, many vendors provide SaaS or cloud-based ERP, and they use the term ERP even though their solutions are more limited in scope than on-premises ERP. This is not necessarily a bad thing, but it does confuse the issue somewhat when I want to use the term ERP; any number of SaaS-based ERP vendors could say that the conclusions in this book do not apply to them, and they would be right.
How the Lock-In Level Differs
SaaS vendors don’t have the same ability to lock in customers as do on-premises vendors. They are still relatively new and do not have the same history as on-premises ERP solutions, so it cannot be expected that the research I will quote will apply to them. Also, my project experience is 100 percent with on-premises solutions, so when it comes to SaaS ERP, I do not have the same personal experience upon which to draw. SaaS solutions currently represent about 4 percent of all enterprise software sales. But because the software is less expensive, this represents a higher percentage of “seats” served than this 4 percent value would indicate.
S/4HANA Cloud is a glorified development box with a quarterly push of changes that cannot be relied upon for a company interested in doing something other than using the implementation to sell implementation services to other companies. S/4HANA Cloud contains a shadow of the functionality of S/4HANA on-premises, which is itself a shadow of the functionality in ECC.
As for Oracle, it is misleading customers as to the upgrading required for the Oracle Cloud ERP. Ellison believes he can market his way around Oracle Cloud ERP’s limitations, using monopolistic profits to shovel money at Gartner to obtain an outrageous score above that of Workday.
Oracle and SAP are examples of vendors that have historically offered on-premises ERP but are now pushing Cloud ERP. The Cloud concept is that the lock-in is less, but many on-premises vendors only have experience locking in customers. And if one looks at the ERP offerings of many vendors, they do not match the Cloud. Secondly, ERP systems are far more sticky than other types of applications like CRM. Therefore, the Cloud receives far fewer of the benefits from the supposed lower lock-in of cloud systems.
Not all vendors are equal in the Cloud. Cloud ERP works better with companies like Workday or ERPNext, which started in the Cloud and have a long history of providing updates while minimizing disruption for their customers. This makes both SAP’s and Oracle’s cloud ERP a liability for current and potential customers. SAP and Oracle’s Cloud ERP is a great story for Wall Street, but not much of a story for customers.
How We Do Things Differently
Our ERP cloud analysis focuses on what the company is ready for and is not designed to simply onramp people to a cloud ERP system. And unlike all the ERP advisors, we are a true research entity. Being dedicated to research means focusing on what is true and using evidence to draw conclusions.