Cloud First has become SAP’s Ideology ! but it’s alienating it’s most loyal customers !
Dragon ERP helping CIO’s and CFO’s define their SAP adoption strategy
" Cloud First" has become a disruptive Ideology and its impacting SAPs relationship with its most loyal customers.
Dragon ERP co-founder Alisdair Bach looks at how SAP needs to evolve to fend off the current customer revolt.
Cloud first is the overriding mantra coming out of SAP, its peers and most of the consulting industry, but not all end clients agree, and it causing a schism in SAPs legendary loyal customer base.
So, should SAP reconsider its Cloud product and marketing strategy?
Has the term cloud served its time?
Should we now be talking platforms and business domains?
Let’s be emotive "the customer is always right" and by SAP not recognising this puts them at loggerhead with its loyalist customer base.
There is huge resistance within the traditional "install base" of German #ECC customers to adopting SAP S/4HANA Private or Public cloud and significant resistance to SAPs burgeoning cloud SaaS product range. (see https://www.theregister.com/2023/04/05/sap_s4_hana_cloud_strategy/)
This isn’t the churlish petulant rage of a few legacy CIOs; this is the considered view of some of the largest global companies taking into account a number of regional and global factors.
This resistance will destroy Christian Klein hopes of driving SAPs total predictable cloud revenue to 85% by 2025.
The resistance is delaying the long expected 🌊 tsunami of SAP ECC to S/4 migrations by the Dec 2027 deadline and take up of the SAP RISE offering, which simplifies the SAP Cloud S/4 base licensing model and essentially shifts it to the predictable model. Rise offers a layer of additional services that On-prem customers could, but choose not to adopt and pay for.
Ignoring the intelligent customer could be interpreted as institutional arrogance which SAP’s investors will not tolerate, it’s ideology for ideology's sake.
Why wave goodbye to recurring generational revenue and your core customer base in favour of the mid-tier ?, which SAP don't have a coherent strategy for, "Grow with SAP" based upon S/4HANA Public cloud is a fantastic offering but the mid-tier perceive it as a "Maserati" compared to the NetSuite "Ford Mustang" they prefer.
So, what should SAP do?
Here is my plan and Christian Klein please invite me on to the board, you need my help.
1. Remember where SAP came from, SAP was the original platform, let’s not forget many organisations first email was SAP Mail.
2. Stop fixating about tech, SAP provides a best of breed Industry 4.0 ready target operating model, enabled by Signavio.
3. Stop fixating upon Composable ERP based around interconnected business domains (process core) and delivered by micro services.
The reality is like the cloud, the business really doesn’t care how their ERP service is provided, they just want operational resilience and business operating model excellence which SAP provides.
4. Stop pushing S/4 constantly, because it’s obscuring the adoption of the wider SAP product range.
5. Stop pushing Rise, it’s embarrassing that something which many consider a prerequisite standard is seen as a major reason to adopt SAP, it adds no value to the conversation.
6. And stop fixating on cloud, just as the need for a database is a norm so is the need for some form of hosting, few in the operational business care about tin.
Plan B for SAP
Start talking coherently in language the business understands.
Start talking One SAP as a total plug and play (Composable) constantly evolving Intelligent Target Operating Model with resilience and sustainability built in.
Learn Lessons learnt from the S/4 fit to standard promotion, it might work for the mid-tier but begrudgingly SAP realised less than 20% would adopt a standard process core, a level of pragmatism is required as the customer is always right and will seldom switch to 100% standard, if 20% plus of the customer base don’t want pure cloud then give them what they want.
SAP excels at helping its manufacturing clients offer product variant config, its time SAP reflected on what its customers do well, there is a need for some form of variant to SAP cloud standard.
Why not have a Premium variant SAP produce range for the on-prem client base?
SAP made a shed load of good folk redundant in December, On-Prem and Pseudo-On-prem Private cloud will be with us for a long time to come, give the customer what they want, a premium on prem service, it’s an absolute cash cow.
And extend the RISE model to the entire product portfolio, absolute pricing and service transparency.
The full SAP product range enabled by Signavio is absolutely compelling, the more customers are able to embrace new SAP products, the faster they will move to a hybrid platform enterprise architecture, enabling many of the "Cloud first" benefits.
So why not?
Why not give the customer what they want?
Ideology!
If you need help making sense of SAP, or need help with defining your SAP roadmap then contact a Dragon .
Dragon ERP, A SAP Target Operating model Innovation Integrator “TOMII”, changing the way organisations unlock the value of their SAP investment.
If you want to know more about how SAP is changing and how Dragon ERPs Plug and Play transformation methodology unlocks accelerated benefit realisation then contact a Dragon today.
https://dragonerp.co.uk/contact-us
About the Author:
Alisdair Bach is a SAP mentor and influencer with over
30 years’ experience in shaping the SAP journey for the
global 2,000.
