It’s been the longest research phase of any of my 7 books but I hope to deliver the first draft of the manuscript for SAP Nation 3.0 to my editor in early January. As I work my way through over a thousand pages of transcripts of conversations with customers, executives, fellow analysts, competitors and my notes from several events, the diversity of SAP’s acquisitions and newly developed products and related customer bases is starting to sink in.
The customers can roughly be classified into four categories
Innovators and Transformers
Brand name companies and startups using some SAP tool like HANA or Data Hub as they leverage wearables, satellites, sensors, machine learning and blockchains. Wide range of industries from retail to sports, wide range of countries, wide range of business processes in my sample. Others are attempting large transformations with S/4HANA as a backbone, but phasing operational areas out several years to time with S/4’s gradual evolution. With my innovation focus, this has been the most fun part of the book. Many of these projects are one-off and it is still too early to tell if SAP will be able to broadly commercialize these experiences.
Modernizers
I am profiling several customers who are implementing portions of S/4, components of C/4 and other cloud products like SuccessFactors. They are moving to more contemporary technology but not always rethinking business processes or business models. What’s striking is the variety of technologies and architectures in this tapestry. The acquisitions have been difficult to homogenize. SAP’s SI partners are contributing to the diversity by proposing a wide range of private cloud, application management and other services. This group gave me a bit of déjà vu of the out-of-control ecosystem I wrote about in volume one of SAP Nation
Diversifiers
These are customers who have implemented Salesforce, Workday, Plex and other cloud solutions in certain business processes, or NetSuite or Microsoft in two tier mode, and others who have moved to third party maintenance to vendors like Rimini. From SAP’s POV, the really good news is this group has not grown dramatically since I wrote volume 1. Couple of reasons for that. The functional footprint of the cloud vendors has grown only at snail’s pace so customers cannot lift and shift much more to them. If Rimini or other 3PM providers supported Industry Solutions you would see a lot more movement to them. Today they mostly support the horizontal ECC modules and some of the core platform. In reverse, SAP continues to make headway in some of these vendor’s customers as they look to expand in countries where SAP offers better compliance and presence . To me this is a major missed opportunity for the cloud vendors – they could have delivered a knock out punch to SAP if they had verticalized and expanded globally in the last few years. Now SAP may turn the tables on them. Cloud vendors have also tarnished what used to be a significant economic value proposition with their own aggressive behavior during renewals.
Prudent
This is a group I still have not decided what to label. Some of my friends call them laggards or sleeping dogs but I see them as pragmatic customers who continue to see payback from their previous investment in ECC, IS, Business Objects, BYD and other earlier products. They are in no hurry to move to more modern products. This is especially true of SAP’s customer base in Europe which is just not that sold on the cloud model and wants assurances against SAP’s Indirect Access charges. The cloud vendors have been successful mostly in N America – another missed opportunity. BTW Oracle and Infor are finding similar resistance in their on-prem customer bases. They have tried with migration packages called SOAR and Upgrade X with limited success. I have interviewed several analysts about this lack of movement. Some feel the muscle memory of the last ERP project is still unpleasant. And the same set of SIs are still hanging around. One compared ERP to email – as un-sexy and as unattractive to replace. Another talked about lack of functional equivalence in the new generation of products, especially when it comes to industry processes. This group continues to write maintenance checks to SAP but there is not much passion for the company and many could still tilt into the diversifier category.
In volume 2 of SAP I had pointed out “SAP's runaway success in the '90s came about because its R/3 product dramatically reduced enterprise sprawl.”. Then I asked “Can history repeat itself? Will S/4 replace today's sprawl, this time caused by SAP itself?”
The answer 3 years later is No, the sprawl is actually much worse. If you look at databases, cloud flavors, programming languages, UX, application code bases in SAP World there is no shortage of choices in each segment. That’s a clear reason to be concerned.
But after talking to customers in Category 1 and 2, seeing a new set of executives rise within SAP, and the relative lethargy in the competition I feel better about the company than I did when I wrote Volume 1.
An SAP executive asked me “how do we work more with innovative customers?” I told him “You already have the most innovative customer base in the world. You don’t always associate with the most innovative segments of those customers.”
Most vendors would happily trade places with SAP.
