Customers slam SAP’s public cloud and S/4HANA migration technique

SAP is angering customers in its German-speaking heartland as its push emigrate very important ERP programs to the cloud is hampered by confusion over the instruments used to develop and handle programs within the new setting.

European manufacturing has lengthy been a stronghold for SAP as industrial giants like Airbus, EADS, Siemens and Volkswagen Group all depend on the ERP specialist. For the reason that firm started its overt push to speed up customers’ cloud adoption in response to a 23 % fall in its valuation in October 2020, very important questions stay unanswered, customers argue.

Two years after the launch of RISE with SAP – its lift-shift-and-transform industrial supply with bundled SI, hyperscale and consultancy offers – the seller’s highly effective German-speaking person group DSAG, which represents customers in Germany, Austria and Switzerland, issued a strongly worded assertion demanding the identical options for the on-prem model of the newest S/4HANA in-memory ERP platform that SAP releases within the cloud – so customers might safe returns on the investments they’ve already made in customizing on-prem programs.

The Register caught up with DSAG board member Sebastian Westphal to hammer out the main points.

To get one factor clear, many giant prospects wouldn’t have a transfer to the general public cloud of their plans in any respect, he advised us.

“SAP ought to pay attention as a result of not all the large prospects will transfer to the general public cloud as a result of they do not have the sort of standardization that SAP tends to supply there,” he stated.

Westphal stated there was a difficulty with CEO Christian Klein’s communication in public as a result of it creates the notion that the general public cloud was the one choice for patrons.

“When you hearken to Christian Klein, and plenty of official bulletins from the SAP administration, it is all the time public cloud. I do know that is the challenge they want to see as a result of everyone knows what huge software program corporations are planning on doing after they have the vast majority of the shoppers on a public cloud platform, particularly by way of licences and pricing,” he stated.

Nonetheless, the general public messaging didn’t account for the funding prospects adopting S/4HANA on-prem had made to customise it to their processes within the final eight years since its launch.

“When you’re a buyer that moved to S/4HANA, on-prem or within the non-public cloud, a few years in the past you are more likely to have spent thousands and thousands on it, and now you are listening to SAP, it seems like, effectively, you are fortunate that you simply transfer to S/4HANA as a result of you should use it till 2040. However all improvements and all new enhancements and processes can be launched in public cloud version. And that is not acceptable as a result of we went to S/4HANA to get all of the improvements till 2040. It is high-quality in the event that they launched on the general public cloud on a weekly or month-to-month foundation – a lot quicker than on-prem – however we want them for on-premises and personal cloud version as effectively,” he stated.

S/4HANA integration with Microsoft Groups and OpenAI had been two examples of improvements set to be provided solely within the public cloud, Westphal stated, with no equal announcement for on-premises or non-public cloud variations.

“That is our core concern as a result of in any other case, you narrow off lots of the shoppers, particularly the massive corporations, from improvements,” he stated.

Extra broadly, customers had been involved how SAP’s three or four-stage setting for releasing software program transfers to the cloud. Established for many years in ECC – the model earlier than S/4HANA – it governs how software program is developed and launched, and is especially necessary for regulated industries and others requiring tightly managed governance.

“Once we’re trying into the cloud, it is simply not there,” Westphal stated.

“There’s a hole between the traditional merchandise… and particularly [Business Technology Platform, SAP’s cloud-based development environment] and its providers the place we see simply two environments… and that is a spot that we will not bridge as a result of there’s only one layer lacking. And that is one thing SAP must [address] urgently as a result of in any other case, hybrid situations will not work correctly.”

Though SAP had launched an answer for the general public cloud, customers had been struggling to see how it will work throughout hybrid public-private cloud or public cloud-to-on-prem implementations, he stated.

Customers additionally lacked readability on the way forward for Resolution Supervisor, or SolMan, a software IT departments have relied on to handle their SAP implementations for greater than 20 years. Like ECC, the present street for Resolution Supervisor is to assist till 2027, with prolonged assist accessible till 2030.

“Once we have a look at the platform, there may be lots of performance lacking, particularly after we’re speaking about the entire administration processes, from requirement to deployment. That is a core subject as a result of if SAP will not be delivering this rapidly, we will be unable to proceed our IT processes and governance [required as] a part of our annual audit. There isn’t a various until we attempt to use third-party merchandise,” Westphal stated.

The rest of 2023 is ready to be crucial for SAP’s relationship with its prospects. October is ready to see the final launch of S/4HANA that customers migrating from ECC will have the ability to undertake earlier than mainstream assist runs out – permitting a two-year implementation window. Customers can be eager to see the options accessible within the core product and what customization they could need to recreate within the new product.

SAP would favor customers to undertake standardized processes. In late 2020, Oliver Betz, SVP head of product administration for SAP S/4HANA, advised UK customers they needed to agree on standardized processes to maneuver to S/4HANA within the cloud. “You can’t have these modifications that you simply had within the on-premises world; that is not how the cloud works,” he stated.

However Westphal argued that giant worldwide companies had such entrenched processes that they’d both keep away from shifting to the cloud or attempt replicating them within the cloud utilizing SAP’s improvement setting. Final 12 months SAP relaunched its developer platform, Embedded Steampunk or SAP S/4HANA Cloud ABAP Atmosphere, as ABAP Cloud. Prospects should begin with a “clear core,” including any modifications as “extensions” within the new setting.

The issue is prospects would then need to pay once more for customizations that they had already constructed on-prem, Westphal claimed.

“From a industrial perspective, it isn’t acceptable that SAP is now charging for each bit and piece and we’ve got 25 or so contracts for one course of. If it is purchased-to-pay, it is one course of. It is one industrial mannequin… for the shoppers, [the commercial model] is an enormous deal,” he stated.

Possibly the considerations could possibly be disregarded because the outpourings of disgruntled customers, however final 12 months Jens Hungershausen, chairman of DSAG, praised the seller for having a superb working relationship with them.

In the meantime, consultants, third-party distributors, and analysts share comparable criticisms to these of DSAG.

Christian Hestermann, Gartner senior director and analyst, advised The Register that whereas it was onerous to rule out all prospects finally shifting to the cloud, many corporations with advanced environments struggled to see the profit within the transition.

“The concept everyone can be shifting there, extra prior to later: that’s definitely unsuitable,” he stated.

SAP is pushing the cloud as a result of traders just like the predictability of the income mannequin. However subscription licenses can assist on-prem deployments so that isn’t the one cause.

Technically, having extra prospects within the cloud signifies that distributors need to assist fewer variations of the software program so it reduces their prices. Thirdly, it additionally helpes with “lock-in” and management. If a person owns a perpetual license, they’ll merely cease paying assist charges and assist it themselves, however for software-as-a-service within the cloud, they can’t, Hestermann stated.

He additionally stated Gartner has heard prospects voice considerations concerning the multi-stage environments for releasing software program within the cloud, however that could be one thing customers need to turn out to be accustomed to.

“The cloud remains to be pretty new in comparison with 30 years or so with SAP’s multi-stage setting on-prem. There are some teething pains and a few classes to be realized within the IT departments of the top customers. It requires a brand new set of expertise and a unique mind-set. And the identical is true for the distributors,” he stated.

He additionally noticed prospects having to pay once more for customizations they construct on-prem, solely to deploy them within the cloud.

“All of that flows into the upper industrial [value] for the distributors. Think about you got an condo 20 years in the past and paid it off. Now the identical vendor comes round and says, ‘You recognize tomorrow, you are going to begin paying hire once more.’ Is that enticing? Possibly not. After which they are saying, ‘By the way in which, if I determine to extend the hire, you may need to pay me in any other case I am going to put you beneath the bridge. And by the way in which, you’ll now not be allowed to vary the setup of your condo and the furnishings: we are going to present that for you. And each 4 weeks we are going to substitute your couch and your TV as a result of there is a new mannequin, when you prefer it or not, when you want it, I do not care. You get the brand new mannequin and also you pay me extra hire for it.’ That is kind of the fundamental mannequin: you are renting a totally furnished condo and your landlord controls each facet of it,” Hestermann stated.

To increase Hestermann’s metaphor, it is virtually unattainable to maneuver out as a result of only a few prospects are going to contemplate a root-and-branch transition to a different vendor. “There isn’t a various, let’s face it. SAP has achieved a market place there which is admirable on the one facet, however it creates lots of dependency on the shopper facet,” he stated.

Whereas DSAG and different customers teams world wide have historically had a powerful relationship with the seller, there’s a feeling that SAP is “listening much less and fewer and has executed so over the previous couple of years,” Hestermann stated.

And but SAP will not be in a powerful place so far as its want to appease traders goes. Not solely is it struggling to get prospects onto the cloud, it’s struggling to the them off variations of its core ERP system older than S/4HANA. Figures from Gartner present that as of This autumn 2022, solely 32 % of ECC prospects had licensed S/4HANA in any means, and solely 23 per cent had gone stay with implementation of some elements.

“In my thoughts, this may be known as a serious catastrophe by way of adoption. That appears to set off lots of ‘despair’ on the SAP facet, and it tries to push even more durable, and their prospects are pushing again. They simply sit again and say, ‘You recognize what? I cannot comply with your steering. I’ve completely different plans.’ Would they go to the cloud? Effectively, they do not even go to the newest model of the software program, even when they’ll apply it to premises. They’re even much less keen to comply with that push in direction of any kind of a public cloud deployment past cloud internet hosting,” Hestermann stated.

Bernd Engist, CTO of third-party software program vendor Avantra, agreed that some SAP customers, particularly within the manufacturing sector, could be nearly sure by no means to maneuver to the general public cloud.

“Some purchasers won’t ever transfer to the general public cloud for information safety causes. And with manufacturing purchasers, automotive for instance, there’s a want for programs to be near the manufacturing plant; there’s a worry of latency. The variety of companies who need to keep on-prem is increased than SAP need individuals to consider,” he stated.

Whereas SAP CTO Jürgen Müller was given the chance to reply to customers’ considerations on the DSAG convention final week, one guide listening stated he would solely discuss at a excessive stage and appeared he was “finger pointing” at prospects for not having began or accomplished their S/4HANA migrations.

SAP has declined the chance to reply to the factors raised on this article, a minimum of to The Register.

DSAG’s Westphal stated that whereas customers anticipate extra bulletins from SAP all through 2023, for the time being, there may be “no clear assertion, particularly not from prime administration” on the problems they raised. The dearth of readability is angering prospects who worry investments in SAP programs they made prior to now “might not repay in the long run.” ®