Expanding Section: What is the Definition of a Software Customer?

Unknown to many who follow software vendors, being a “customer” only means that the customer is in possession of a license for S/4HANA. Now in many cases, the number of customers that have a license of something means more than what it does with S/4HANA. However, with S/4HANA SAP has engineered these numbers in order to exaggerate the impression of adoptions for S/4HANA. This topic is covered in detail in How SAP Controls Perceptions with Customer Numbers.

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. Yet this is an important distinction between software companies and companies that make physical products. For companies that make physical products, they incur a far higher cost to exaggerate sales. If for instance, 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. The software has a very low incremental cost, therefore software companies don’t incur these same costs.

Important things to know about these licenses are the following:

• Many of these licenses were transitioned from SAP to customers at no cost. S4 was free from February 3, 2015, to December 31, 2015. End 2015 SAP claimed 2,700 S4 customers that obviously signed because it was free. In the promotion customers only need to buy HANA for 15% of the S4 modules.
• SAP has offered S/4HANA at a very reduced price to SAP consulting partners. Several of these SAP consulting partners are profiled as case studies in this paper.
• When S4 was announced in Feb 2015, SAP stops disclosing the number of customers of Business Suite on HANA, at the end 2014 the number was 1,850 customers. Then just once on April 6, 2016, SAP said, 2,500 customers, Business Suite on HANA. What happened with those customers? How many went live?
• SAP has been bringing what Brightwork refers to as Type 2 indirect access claims against its customers. In order to negotiate away an indirect access claim, S/4HANA is one of the most preferred applications put in front of customers to purchase.
• 2,700 is 50% of the number of S/4HANA licenses claimed end of 2016 = 5,400, so half were free. One can fairly say the promotion motivated to sign not necessarily having the intention to implement anytime soon.

The final bullet is supported by the Brightwork article How SAP Controls Perceptions with Customer Numbers.