IG SAP CH Study: We Did Buy SAP, But…

At the beginning of May 2021, Peter Hartmann, who represents IG SAP Switzerland (IG SAP CH), published the results of a Swiss SAP community survey. The findings from the IG SAP CH association carry weight, as its members pay SAP licensing fees of over 600 million Swiss francs, resulting in combined maintenance costs of around 120 million francs per year. This interest group is thus an important voice in the German-speaking SAP community. IG SAP was founded in 2008 by the members of the Eastern Switzerland CIO Circle and currently consists of C-level management, SAP CC leaders, SAP specialists, and legal and licensing experts. The survey was conducted by IG SAP among its members from March to April 2021.

Loyal, but not satisfied

The results of the Swiss survey show a clear commitment to SAP as an ERP software supplier, but less enthusiasm for cloud and new SAP topics. The subjective assessment of the E-3 editorial team based on the survey: There are still too many old (licensing) construction sites. Until SAP provides answers in this area, existing customers cannot focus on new topics.

Last year, support of ERP/ECC 6.0 was extended until 2027 and even 2030. This is likely to have led to some relaxation in S/4 migration projects, suspects Peter Hartmann based on the available responses. S/4 Hana has now been on the market since 2015. According to SAP, only 8100 S/4 users out of a total of 440,000 were productive in 2020. A look at the survey shows that existing SAP customers are still having a hard time concerning the migration. Peter Hartmann cites the following reasons: Additional costs, poor integration, lack of a business case, and the pressure to move toward cloud solutions. All in all, this is preventing many SAP ERP customers from converting to S/4 because they are satisfied with their current system, SAP Business Suite 7. Digital transformation is also possible using older systems – as the German-speaking SAP user group DSAG has also noted many years ago.

According to Peter Hartmann, this creates dissatisfaction among existing customers because the majority of maintenance costs are invested by SAP in S/4 Hana. This quickly led to a demand among Swiss SAP users to reduce the maintenance rate for the system that is being phased out. In the current transformation phase, there seems to be not only dissatisfaction, but also a lack of orientation. One of the study participants commented as follows, “At SAP, almost everything is changing for good at the moment: Technology, products, designations, licensing models, prices, conditions, SAP representatives. And many things have not improved in the past twelve years. It has become an especially exhausting problem to find competent contact persons.”

RISE with SAP

The feedback from SAP’s existing Swiss customers speaks a clear language: 97 percent are critical of the current SAP strategy. Cloud Only has not been well received, recognizes Peter Hartmann, because many users continue to rely on their proven and more cost-effective on-prem systems. One could conclude that SAP is not taking customers’ needs for more transparency, commitment, and orientation seriously.

In IG SAP’s view, the RISE initiative has created even more uncertainty. In addition, existing customers are skeptical about whether SAP can also be a partner for business transformation. Cloud First or Cloud Only do not seem to be a success in the SAP community, as one survey participant put it, “SAP’s cloud solutions have a limited scope and are very expensive. Speaking from experience, this does not make sense for us. We are also not further aligning ourselves with the standard, which speaks against a cloud variant. Unfortunately, the big jolt through the company to move towards S/4 has yet to happen – everyone is pretty satisfied with the options available.”

S/4 conversion has stalled. Digital transformation can also be tackled with ECC 6.0 and an on-prem architecture – which naturally does not exclude hybrid infrastructures. According to another study participant, “New SAP management is pushing integration at all levels. We hope that it will be possible to meet the ambitious schedule and that significant improvements in the implementation of additional products will quickly become visible. We take a rather critical view of whether SAP already has the capacity to deliver RISE comprehensively. How the relationship between on-premises and cloud S/4 Hana will develop remains to be seen.”

Value or dependency?

For IG SAP CH, the fact is that the holistic view of business processes, data, and technologies that RISE with SAP promises has already been established in many IT departments. In this respect, an integrated interaction with SAP can certainly be viewed positively, as can a simplification of the complex set of contracts through the single point of contact. However, SAP users have major reservations about this because of increasing dependence on SAP through RISE. According to IG SAP’s assessment, a shift from on prem to the cloud does not bring any advantages in terms of price. SAP is not seen as a holistic digital service provider in Switzerland – also because of the even greater dependency on one provider.

Peter Hartmann summarizes the opinion of the Swiss SAP community, “The integration of different solutions is not SAP’s strength. The way we perceive SAP, it is not organized in such a way that it could act as a unified service provider. For example, there are account managers for on-prem licenses, for cloud solutions, for service and consulting, but they all come from other areas. We don’t believe in this 20 percent TCO reduction, either; I don’t know of any SAP approach that goes in this direction. SAP would have to significantly reduce license, maintenance, and SaaS fees for us as customers to achieve greater savings. A more flexible licensing model for on-prem licenses would also help. The barriers to part with licenses you no longer need are far too high.”

SAP customers are facing a dilemma: Should they wait for a real business case or simply move to S/4 regardless? Should they move away from on-prem systems and only use cloud solutions in the future? Should they accept (even) more dependency on SAP if it means participating in the innovations increasingly focused on S/4? The fact is that SAP’s strategy and the expectations of customers diverge. Although the number of S/4 users has risen slightly over the past two years, much remains unclear: Product roadmaps are missing and there is a lack of integration and consistency among S/4 products, inadequate value for money in maintenance models, and deficiencies in service quality.

The results of the survey show a high proportion of customers leveraging hosting and outsourcing services but, as mentioned above, little willingness to switch to cloud computing. Apparently, the market wants on-premises models with outsourced data centers. Ultimately, it’s not a bad idea to keep the reigns on your own licenses: You never know what’s coming, right?