SAP faces breakdown in trust over innovation plans

Ever since SAP CEO Christian Klein (pictured) told financial analysts in July that the company would only offer its latest AI and \u201cgreen ledger\u201d innovations to customers running its flagship S\/4HANA ERP platform through its subscription-only, cloud-based Rise with SAP offering, the company has been on the back foot.\n\nThe move may have played well with shareholders, as Klein led them to believe it would drive a shift to Rise, increasing revenue and cutting SAP\u2019s development costs. But for the majority of SAP\u2019s customers, who still run older versions of its software, or run S\/4HANA on premises or in hosted environments, it\u2019s a slap in the face.\n\nAt its annual meeting in September, the German-speaking SAP User Group, DSAG, called on SAP to make green ledger carbon accounting tools a feature of all SAP environments, not just S\/4HANA in the cloud, and pay more attention to customers running its software on premises.\n\nAnd last week, Paul Cooper, chair of the UK and Ireland SAP User Group (UKISUG), made the focus of his opening keynote speech at the organization\u2019s Connect conference about what he called the \u201cbreakdown in trust\u201d resulting from SAP\u2019s treatment of customers.\n\n\u201cThrough our subscriptions, licenses, and maintenance payments, we\u2019ve clearly continued to invest in SAP,\u201d he said. \u201cHowever, that investment has to yield a fair return for customers as well as shareholders.\u201d\n\nSAP should\u2019ve realized that affected customers wouldn\u2019t presume they were a minority and keep quiet. Although the company doesn\u2019t publish details of what proportion of its customers have moved to S\/4HANA in the cloud, user organizations do, and their member surveys reveal little appetite for Rise.\n\nCloud users still in the minority\n\nUKISUG members running S\/4HANA overwhelmingly do so on premises or in hosted environments (running the on-premises version in someone else\u2019s infrastructure), with only 21% of S\/4HANA users running the private or public-cloud edition, Cooper revealed at Connect. Among those still planning their move to S\/4HANA, cloud adoption will be a little higher, with 30% planning to run their ERP system there.\n\nA DSAG survey published in September also revealed that 79% of respondents still used SAP\u2019s legacy ERP systems, ECC and Business Suite, with 41% using S\/4HANA on premises, 8% using it in private clouds, and 3% using it in public clouds. The proportion of S\/4HANA users running it on premises matches that of the UKISUG survey.\n\nThat\u2019s a large proportion of SAP\u2019s user base to upset, and something that will surely come back to bite it when contracts are renegotiated.\n\nAt least one enterprise running the on premises version of S\/4HAHA has already asked for a price cut, but so far, SAP has resisted, Cooper told CIO.com on the second day of the conference.\n\nHe expects such demands to increase over the coming months, though, as CIOs have difficult conversations with CEOs or CFOs wanting to know why they\u2019re paying for something they\u2019re not getting.\n\nCIOs in that position need to tell SAP, \u201cWe invested in this willingly with the understanding that we would be fully supported, and innovation would be frictionless for us, and that\u2019s not now the case,\u201d he said.\n\nIt can take a couple of years from RFP to running S\/4HANA, so companies going live now would have had no idea when they signed up of Klein\u2019s plan to restrict innovations to a happy few. It\u2019s causing them to question plans for future projects with SAP, Cooper added.\n\nA change of leadership\n\nThis is Cooper\u2019s last conference as chair of UKISUG. Next year, he\u2019s handing over to Conor Riordan, currently the organization\u2019s vice-chair.\n\nSpeaking with CIO.com, Riordan also called on SAP to look beyond what\u2019s most profitable, and to deliver innovation wherever it\u2019s technically possible, even to non-Rise customers.\n\nThere are certain innovations that SAP can only deliver to customers running under Rise, where it has access to their production environment and data, \u201cbut the majority of innovations can be delivered to anyone,\u201d he said.\n\nWhen SAP\u2019s Klein spoke at DSAG\u2019s conference in September, he repeated the mantra \u201cWe leave no one behind\u201d several times.\n\nIn reality, though, enterprises are being left behind, Cooper said, adding that he knew of SAP customers who were told that Rise with SAP isn\u2019t appropriate for them because of their scale or the way they\u2019re using S\/4HANA. That means SAP\u2019s current cloud-only strategy for innovation is indeed leaving some customers behind.\n\nLegal recourse\n\nWith both sides holding firm, UKISUG is still looking for a diplomatic way out of the impasse \u2014 although, Cooper said, some CFOs could be looking at their contracts and at emails exchanged during the RFP and purchasing process, and wondering whether they have grounds to take SAP to court.\n\nThat could be bad for SAP and its customers \u2014 although not everyone. \u201cWe know who’ll get richer on that sort of challenge,\u201d he said. \u201cThe lawyers.\u201d