My new book is now available to buy here in print version, and in the Kindle eBook version. As with my earlier books, I am excerpting roughly 10% of the 400 page book in a series of posts on my two blogs.
In chapter 8, I covered the final category in the four customer types in the book - Risk-takers, Modernizers, Diversifiers and Bystanders.
"So, it is not surprising that only a small fraction of SAP’s 400,000+ customers have migrated from ECC, Business One,BusinessObjects and other products to its more modern S/4, SuccessFactors, ByD, HANA and SCP.
In fairness, Oracle, Infor, Microsoft, IFS, Unit4 and other vendors have the same issue with their legacy customer bases. You also have to ask why after 20 years Salesforce, NetSuite and other SaaS vendors have still not converted millions of customers from the on-premise world."
I interviewed several analysts about these Bystanders
Holger Mueller of Constellation
"Now they’re in a similar situation. I think SAP pulled a fast one, saying, ’Oh, don’t worry. We copied all the code. S/4 is not a new system. S/4 is just a new implementation where we simplify things and get rid of old things.’ To some extent, it was a technical argument as you got rid of these non relevant tables. The simplification ran the system better, and you got better business intelligence because there was no need for a data warehouse.
However, for SAP, just copying the code wasn’t that easy. Technically, you had to examine the code and truly simplify it to make it work. Besides, the public cloud is not offering the dramatic TCO advantages that R/3 did relative to R/2.
Importantly, I don’t see the functional equivalency. When SAP was started, Hasso has said, he went to ICI, the launch customer, and met a person in the finance department. ‘He showed me how he worked, and I rebuilt that in software. It took us a few months, and then we had that.’
Today, you cannot go to a finance department and ask, ‘How do you use machine learning? What do you do with data science? How do you use the cloud? What are your FP&A best practices?’ These practices are still being distilled. We’re in the era of experimentation."
"To be fair to many of the European CIOs, the vendors also have not done a good job bringing data centers across the ocean. Germany is the largest European economy. Where else should your data center be? There have been so many ones opened in the UK, which makes sense for banking and financial services vendors, but Paris and Frankfurt are much bigger than London. That’s not even an argument."
Cindy Jutras of Mint Jutras
"Anecdotally, the biggest thing that stops them is the perception that they need all their previous customizations. I would argue they probably don’t, partly because new solutions today do more than they did back when they implemented. Plus, they have more ability to con- figure without invasive custom code changes. Partly, it’s because they just didn’t need those customizations. They did it because that’s the way they always did it, and they weren’t willing to bite the bullet and do something even better or different.
I was at a Unit4 conference last year, and I was in a session meant to collect information from customers to help them move to cloud. It was almost like a focus group with product management. The big resistance to moving to cloud is customization, because for so many years Unit4 had the BLINC message — an acronym for “Businesses Living IN Change.” With their SDKs, they actually encouraged code changes, but code changes that would move with upgrades. Now, in a multitenant SaaS solution, even those kinds of code changes are discouraged. But those customers are all sitting on those kinds of code changes, which is making them very resistant to moving into the cloud. I have asked Steve Miranda at Oracle a similar question. Basically, what he said was, ‘I strongly encourage customers not to inventory their customizations and to move forward.’
But I really think it is inertia. People have bad tastes in their mouths from having gone through the blood, sweat and tears of an ERP implementation years ago. I don’t think it needs to be like that today, but that’s the perception."
Frank Scavo of Strativa
"Vendors like Infor and Oracle have tried to move legacy customers to the cloud with initiatives called UpgradeX and SOAR, respectively. The reason you don’t have very many SOAR and Upgrade X customers to talk to is because there are not that many of them. Existing customers do not make that cloud conversion routinely."
"Some of these companies are running on operating systems that aren’t even supported anymore, so they’re running patched versions. They’re not getting vendor support, and they are running in emulation mode. A “last legs” kind of thing — and still, they will try not to make a conversion.
What are the kinds of events that finally force a company to go to a new ERP? There are several:
- We did an acquisition and we’re now on two ERP systems and this is just not tenable for the long term. We’ve got to standardize on one.
- We expanded our business into Asia and this ERP system is not double-byte or doesn’t support localizations.
- We went into a new line of business that has subscription billing. The [current] system doesn’t do this."
