SAP needs to address breakdown in trust

In his opening keynote at the start of the UK and Ireland SAP User Group’s Connect23 annual conference, chairman Paul Cooper spoke about the breakdown in trust with SAP.

Cooper referred to a change in SAP’s maintenance policy, unveiled by SAP CEO Christian Klein, during the company’s second quarterly earnings call, which positioned Rise as the company’s “signature offering”.

Klein claimed this change would help customers move to the cloud and transform their business processes at the same time. In effect, customers would only receive advanced functionality such as a new green ledger, for managing sustainable supply chains and generative AI, if they deployed SAP Rise, the company’s cloud ERP offering.

Cooper said: “On-premise and hosted customers are unhappy, to put it mildly, with the statement from Christian Klein stating that SAP will only be releasing new innovations in the cloud. This isn’t a small minority of customers. Our latest member survey shows 79% of those that have moved to S/4Hana have an on-premise or hosted deployment. Of those that are planning to move to S/4Hana, 70% plan to move to on-premise or hosted versions.”

Cooper discussed a U-turn in SAP’s plans. He added that in 2020, SAP executive board member Thomas Saueressig said customers would be given a choice between cloud and on-premise deployments.

“We were told that SAP believed in a hybrid future. Yet, Mr Saueressig didn’t once say that cloud deployments came with full innovation, while other flavours of S/4HANA didn’t,” Cooper added.

“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. Why did SAP not tell us that new innovation was only going to be available to cloud customers? Did they not think it was important in our decision-making process?

“These are the questions our members are asking. I’ve heard the more cynical among 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.”

Cooper described the situation as leading to an “innovative-less future” for those organisations that continue to pay maintenance for on-premise or hosted versions of S/4Hana. This may lead to some choosing to switch to different software maintenance contracts, such as using a third party provider.

He added: “I’ve already heard on-premise and hosted customers suggest they expect to see large-scale reductions in support and maintenance costs, as 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. Others are asking if SAP intends to refund or part-refund them, as they are not providing the product or service they were told about.”

Some long-standing SAP customers are unable to migrate to the ERP company’s cloud-only offering. AstraZeneca is starting a major roll-out of S/4Hana, as it undergoes a huge business IT transformation programme called Axial.

This will see the company consolidate seven SAP ECC (Enterprise Core Components) finance and manufacturing systems into a single SAP S/4Hana core ERP, combined with three regional SAP warehouse management systems.

Speaking at the opening keynote session at Connect23, Russell Smith, vice-president ERP transformation technology at AstraZeneca, said: “We are not a Rise customer. For regulated industries, SAP is not ready for us yet.”

During the opening presentation at Connect23, incoming SAP UK and Ireland managing director, Ryan Poggi, discussed “the elephant in the room” of SAP’s cloud strategy, which is about ensuring customers are not being left behind. In defence of the strategy, Poggi spoke about the war in Ukraine and other challenges that businesses now face.

He said: “You expect us as a partner to be one step ahead and challenge the status quo when we believe, jointly, that we are not reaching our potential.”

But with finite resources, he stressed that SAP needed to balance support of customers while remaining at the forefront of technology innovation, such as bringing in generative AI, which he said requires cloud resources.

“My commitment is to continue to have transparent communications. Our door is always open,” he added, and called on delegates to have an open discussion with SAP to help to create a foundation of trust.