SAP customers 'feel misled' by cloud-first push
Delegates and leadership of the UK and Ireland SAP Users' Group (UKISUG) spoke of their unease at the German software giant’s apparent side-lining of customers who prefer on-premises and hosted options over SAP’s S/4HANA cloud.
In his opening keynote at the membership organisation's 35th annual Connect conference in Birmingham this week, UKISUG chair Paul Cooper said that after several years of improved relationships, friction between SAP and its customers had increased over this issue.
The on-prem majority
According to a survey completed by 123 out of UKISUG's 600 or so members, 79% of current S/4HANA users have on-premise or hosted deployments, while 21% are on S/4HANA Cloud or RISE (SAP's managed offering to help customers move from on-premises ERP to S/4HANA Cloud). Furthermore, a clear majority (70%) of those planning to move to S/4HANA favour on-premise or hosted versions. UKISUG believes these figures are representative of SAP users overall.
However, said Cooper, SAP appears to be backing away from earlier commitments to support customers whatever their choice of deployment options.
In May this year, SAP CEO Christian Klein indicated that future innovations will be restricted to cloud-users only, an apparent reversal of the previous position. If this is indeed the case, the majority of S/4HANA users could soon find themselves second-class citizens.
"The bottom line is customers that have moved to on-premise or hosted implementations of S/4HANA feel misled," said Cooper. "From a UKISUG perspective, this is a significant percentage of our membership."
He continued: "We were also told that S/4HANA would be supported until 2040. There were no caveats that major innovation would only be delivered to public and private cloud customers using RISE or GROW [a RISE equivalent for mid-market customers]."
"Why did SAP not tell us that new innovation was only going to be available to cloud customers? Did they not think it was an important in our decision-making process?"
A large ERP implementation or migration is a multi-year process. Speakers at the event spoke of spending two years on the planning and specifications stage alone. Therefore, advanced warning of any change of direction is essential, and the lack of clarity from the vendor is causing unease.
"I've heard the more cynical amongst us suggest that SAP didn't disclose this strategy before, because customers choosing to stay on-premise might not have made the move to S/4HANA at all," said Cooper.
The clock, or perhaps time-bomb, ticking in the background is the scheduled 31st December 2027 end of life for SAP's longstanding ECC ERP series and related systems, with extended support ceasing in 2030. SAP has shifted the deadline before, and many hope it will do so again.
Speaking to Computing, Nikki Morris, head of finance systems at the AA, described the situation as "worrying". The insurer is contemplating a move from a 30-year-old SAP ECC ERP to a modern S/4HANA system, and wants to keep its deployment options open. "It's the thought that if we go for on prem or hosted on prem could mean we have issues with support."
Meanwhile, pharma giant AstraZeneca has commenced a seven-year consolidation of seven ECC systems onto a central S/4HANA core ERP. "We're not a RISE customer," said Russell Smith, VP ERP transformation technology. "For a regulated industry of our size and scale, we don't think they're ready for us yet."
Elephant in the room
It's no secret that SAP, like other enterprise software vendors, is very keen for its customers to move to a cloud environment. Supporting ancient and highly customised software is burdensome, and there are plenty of advantages to the cloud model for vendor and many customers alike, particularly those with the greenfield option. SAP's recent AI announcements, for example, were very cloud-centric, and for good reason. However, ERP systems are among the most complex of all applications, often spanning multiple geographies, with bespoke configurations and holding data that goes back decades. Lift and shift is generally not an option, and regulatory requirements complicate matters even further.
SAP's new UK and Ireland managing director, Ryan Poggi, addressed "the elephant in the room, our cloud-first innovation strategy." He explained that the company is targeting opportunities in the cloud, such as AI applications, and that the company was having to prioritise its resources based on where it saw the market heading. But, he conceded, it needs to spend more time explaining "the why". However, he omitted to address directly the question of whether new innovations will be cloud-only.
It's a question that urgently requires a clear answer from SAP's board, said Cooper. On-premises customers will demand significant rebates on support and maintenance costs if it turns out they are running an "inferior version" of S/4HANA. "I can see their point - surely a less feature rich product costs less to support and maintain?"
An alternative course, for those wishing to maintain existing systems would be to turn to a third-party support provider such as Rimini Street. But that doesn't seem to be happening to any great extent in UK/I at least, because most SAP customers are reliant on multiple SAP services, according to Cooper. "That is your end game with SAP. People wouldn't necessarily want them to lock themselves out," he told Computing.
The only way is up?
But people don't necessarily want to lock themselves into the cloud either. RISE, which started as a way to assist customers with their cloud journeys has become less of a product and more of an individualised consultancy service with no clear end-point, said incoming UKISUG chair Conor Riordan.
"Essentially you're giving away control of your SAP system to SAP rather than a hyperscaler or managing it yourself. That's a big leap of faith. You go RISE and you're all-in with SAP. So what happens in three years time if you say, OK I don't want to be in RISE or with SAP. How do I get out of it? There's no strategy for that."
Asked to sum up what UKISUG is currently looking for from SAP, Cooper said he wanted to see a continuation of engagement with user groups, but with more transparency and clarity to help customers understand the company's decisions and what impact they might have.
"SAP's leadership needs to be clear about how they are communicating these things and explaining the reasons behind it," he said.