Rise Or Fall With SAP

RISE with SAP could be an interesting offer if it were available to every customer in the SAP community. SAP CEO Christian Klein has failed to create a win-win situation, so the latest initiative from Walldorf is more of a Rise and Fall with SAP for us existing customers. I had statistics compiled on my company’s SAP release versions and presented them to my monthly SAP regulars’ table. To put it simply: My company as well as my friends’ companies only meet the requirements for Rise with just under 20 percent of their operational systems – the rest fail.

Not many have dared to speak the business truth regarding cloud computing: It only pays off if everything is standardized and no one steps out of line. Ultimately, only the public cloud leads to entrepreneurial profit, as is the case with e.g. Workday, Salesforce and Qualtrics. No one knows this better than SAP itself.

Of course, Hana, Linux, and the Business Technology Platform are a reasonable step in terms of technology, but SAP benefits much more on the business side. With S/4 Hana, there is no longer any need to keep a wide variety of system configurations on hand for support. Under R/3 and ECC 6.0, the combinations of hardware, operating system, and databases are almost unmanageable – a Herculean task for the Walldorf support team. With S/4, there is only one operating system and one database, which simplifies support and thus makes it highly profitable. AWS works the same way – no deviations, no special solutions. Better to lose a prospective customer than to compromise the standard.

FALL with SAP?

Those who consistently follow this public cloud concept are rewarded with high scalability, which has an immediate positive impact on the business. However, SAP is anything but standardized – not even consolidated. The incompatibility between SAP cloud offerings, between R/3, ECC 6.0 and S/4, between on-prem and hybrid, private and public cloud, is squeezing SAP’s  margin and costing the ERP market leader big bucks. Both maintenance fees of on-prem licenses and cloud subscriptions can now be planned well, but SAP is far from a standardized ERP system. Hyperscalers want wealthy existing SAP customers in their cloud, but they also know the potential danger of a proliferation of releases and custom code. Accordingly, only SAP systems with the latest release version are accepted.

How SAP intends to escape from this dilemma is completely unclear to us at my SAP regulars’ table. Obviously, CFO Luka Mucic dreams of a profitable RISE with SAP, which means licensing (Full User Equivalent) in the cloud at 20 to 50 percent higher costs compared to existing on-prem installations. This also explains the SAP growth – one might say the rise – he forecasts. However, those who use Full User Equivalent (FUE) to their own advantage can consolidate their on-prem licenses and save up to 20 percent in licensing fees before moving to the cloud. If we all do our homework, SAP will continue to exist, but will have to stay grounded. The effort should be worth it to avoid FALL with SAP.