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Survey Indicates SAP Customers are Not Yet Committed to S/4 HANA


Today’s theme is Cloud ERP and the tendencies among technology customers towards adoption or conversion to the Cloud. In addition to this week’s update on Oracle financial performance indicating building momentum, noted enterprise blogger and friend Vinnie Mirchandani tweeted our attention to a recent survey among SAP ERP customers.

Rimini Street, a provider of enterprise software products and services, and a support services provider for Oracle and SAP applications, released the findings from a recent global survey of SAP licensees to better understand SAP ERP application strategies and future needs.

The report, “Rimini Street Survey: 2017 SAP Applications Strategy Findings,” was based on responses from CIOs, CTOs, IT VPs, directors, and managers from a broad range of industries and company sizes across North America, Europe, Latin America, and Asia-Pacific.

A key finding, according to the authors, indicated that 65 percent of the survey respondents have no plans to, or are currently not committed to, migrate to SAP S/4 HANA, with the number one reason for not committing cited as “no strong business case and unclear ROI.”  Further indicated by 89 percent of respondents, was to continue running their proven SAP ERP releases, given that the rich functionality met existing business needs and further formed the foundation of a preferred hybrid IT model. Regarding the latter, 30 percent indicated that they are already adopting a hybrid IT strategy to maximize the value of their core SAP system as a system of record, while freeing up funds and resources that can be used to drive innovation through systems of engagement more quickly and flexibly. According to the authors, a hybrid IT strategy offers the best of both worlds – providing the ability to reliably run the business on a robust core ERP application, and at the same time enabling an organization to more quickly adopt new innovative applications and services, including cloud, mobile and analytics.

What we found as a rather important technology buyer indicator, was the following statements:

In addition to citing “no strong business case and unclear ROI,” for the low commitment to S/4 HANA, another top reason by survey participants for the low commitment to S/4 HANA is the “high migration and reimplementation costs.” Of those respondents who have committed to S/4 HANA, 56% estimated the total cost of reimplementation for a move to S/4 HANA to be between $10 and $100 million, an expensive undertaking which makes it difficult to build a positive business case for the move and is financially untenable for many organizations.”

No enterprise Cloud software provider wants to read or hear such statements from existing customers. If not already, this should be a clear call-to-action to both fully understand what a strong business case needs to be to prove to customers that such applications are flexible and robust enough to support needs for business and process innovation. For the specific area of existing SAP applications supporting supply chain management, manufacturing and product lifecycle process needs, we believe that the business case for upgrade is reflective of a perception in lack of understanding in various applications and technology roadmaps, coupled with functional and line-of-business uneasiness on the disruption, cost-of-ownership and/or performance tradeoffs of adopting SAP HANA as a backbone database. Instead, customers are indeed turning toward select supply chain edge systems for such needs.

At the recent annual SAP Sapphire and ASUG customer conference, there was a special emphasis on communicating the existence of product roadmaps and in declaring that the bulk of ERP innovation was completed. Kudos to SAP for at least listening and processing customer feedback. However, from the feedback and discussions we have had, more work remains in any compelling business case for upgrade adoption. Meanwhile, market introduction of added innovation of edge systems is increasing every week.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

A Commentary on Innovative Technology Provider No Longer

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Supply Chain Matters provides an additional update regarding our commentary related to this year’s SAP Sapphire customer conference, one that is candidly disappointing.

SAP Ariba and IBM jointly announced a new joint partnership that essentially states that IBM is sun-setting its prior procurement technology presence in the form of Emptoris.  The announcement indicates that both organizations will work to bring new and existing IBM customers, including those using IBM Emptoris applications, to the SAP Ariba platform.

IBM acquired Emptoris in 2011 after this provider had achieved a noteworthy track regard in the procurement applications technology market, provide a decent amount of technology innovation and at-times, a keen direct competitor to Ariba before it was acquired by SAP.  With this new announcement, IBM is now declaring a strategic decision that it is better to partner with SAP than to continue its own presence in this area.

We purposely elected the word disappointing because this is yet another throwing in the towel of a previous set of acquisitions that IBM made to make-up the termed ‘Smarter Commerce” suite of commerce and supply-chain-wide technology support. The prior acquisition of supply chain optimization and business rules provider ILOG in 2009, included supply chain network design software provider LogicTools.  The latter was subsequently sold to supply chain technology provider LLamasoft in 2015, which has since integrated network design technology into the Supply Chain Guru suite.

Now, IBM has apparently elected to leverage its Watson Supply Chain capabilities into other platforms.

The obvious impact is on existing Emptoris customers, whom either lobbied for this change, or were surprised by the announcement.  An open question is of-course, ongoing support, as well as conversion costs to on-board to an entirely new platform. We will reserve judgement on these aspects pending more definitive information.

In the meantime, Supply Chain Matters shares the sentiment of Spend Matters in its recent tribute to Emptoris, and in all that this vendor stood for in market innovation, customer care and of-course, the people who made Emptoris what it was as an independent entity.

The technology world provides many success stories, and then again some disappointments.  The success story of Emptoris is the past legacy of an insightful and innovative tech provider that is no longer.

Bob Ferrari

© 2017 The Ferrari Consulting and Research Group and the Supply chain Matters® blog. All rights reserved.

Initial Supply Chain Matters Perspectives on SAP Sapphire Customer Conference

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SAP SE conducted its annual ASUG and Sapphire customer conference this week with the usual fanfare and series of product and strategy announcements. Attendance was announced as over 30,000, not to include virtual attendees tuning-in on the live broadcasts.

There were several overall themes, but a consistent one was that of the continuance of last year’s theme of listening more to customers. In that vein, the enterprise technology provider indicated that individual Solution Roadmaps have been published for all application areas including supply chain management. Two further results from the overall listening effort were SAP Cloud Trust Center and SAP Transformation Navigator.

SAP Cloud Trust Center is described as a public website that offers real-time information on SAP’s Cloud operations and applications, as well as efforts directed at security and privacy of SAP Cloud data. The site is noted as an effort to promote higher transparency standards with customers. Given the latest news of global-wide coordinated cyber-attacks, this effort is obviously timely and should be well received. We encourage other Cloud technology vendors to initiate similar transparency efforts.

SAP Transformation Navigator is a self-service tool to allow SAP customers guidance on the upgrade roadmaps to the new SAP S4-HANA applications suite.  The application provides an inventory of all existing SAP applications and technology, including those directly related to supply chain management, and makes recommendations for likely upgrade paths or on-ramp entry to various SAP S4-HANA applications and technology. As an example, one on-stage keynote showed an example of a likely upgrade of SAP APO supply chain planning applications to SCM elements SAP Integrated Business Planning.

One other area of customer transparency addressed directly by CEO Bill McDermott was that of indirect pricing transparency. Some background, first. In the case of SAP UK Ltd. Vs. Diageo Great Britain, SAP claimed more than £54 million in additional license fees based on API access to its software from a Salesforce application utilizing SAP PI Integrator software. In this case, a judge ruled in favor of SAP and on the right to collect additional license fees based on the wording of the existing contract with Diageo. However, the final amount owed is still to be determined. In his keynote, McDermott pledged that SAP would address and make clearer, its indirect pricing policies. The two areas to be directly addressed for pricing modification were noted as Procure-to-Pay and Order-to-Cash processes supported by SAP. Obviously, this is an area for SAP customers to further monitor.

Two rather significant other product announcements were made at Sapphire, each of which has implications for the SAP extended supply chain management technology community.

The announcement of SAP Cloud Platform offers customers options for a multi-Cloud deployment environment to develop and run applications utilizing their choice of infrastructure providers. Announced providers included SAP itself, Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform— all to be managed in a new SAP Cloud Platform cockpit. That is a far broader deployment option strategy than the prior SAP alone strategy, and an obvious acknowledgement that customers likely demanded broader choice options for deployment. Noticeably missing from the listing was IBM Cloud and Oracle Cloud. Regarding the latter, in the news conference held with the SAP Executive Board, CTO Bernd Leukert indicated emphatically that Oracle will be ignored (For obvious reasons).

Further announced was the expansion of SAP Leonardo, that adds what was noted as machine learning, Internet of Things (IoT), Big Data, analytics and Blockchain capabilities on SAP Cloud Platform. SAP executives painted the picture that Leonardo would eventually become the System of Innovation for customers. In Tuesday’s keynote, SAP founder and Supervisory Board chair Hasso Plattner noted that SAP Leonardo should be viewed not as a “system” but rather a set of powerful tools that will sit inside of SAP applications to bring higher levels of automation and information intelligence.

Before we close this initial 2017 Sapphire blog commentary related to SAP, we want to highlight another observation that was articulated this week. That strategy amounts to a new design approach that moves analytics capabilities to the actual data within SAP’s S4-HANA applications. The premise is a good one- analytics performed directly on the backbone system where data resides. The implication however, is one that SAP communities who have bolder strategies reflecting data lakes or streaming data need to be aware of. SAP can potentially be making such actions more difficult with an ERP-myopic data and analytics approach.

By this analyst’s view, that strategy could cut-off options for all-important extended supply chain data lakes. Obviously, more specifics are needed, and we will strive in the coming days to provide added clarity and perspectives.

We plan to add a further commentary on SAP product direction and implications in the coming days, with emphasis on Hasso Plattner’s remarks at Sapphire.

Stay tuned.


Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

SAP Announces Key Executive Leadership Changes

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Last week, SAP SE announced changes to its high-level Executive Board which from our lens, provides evidence of changing strategies, business focus and possible succession planning in the months to come. An important insight to the meaning of these moves is likely the title of the press release: “SAP Promotes Proven Leaders to Strengthen the Company.” (our bolding)

According to the announcement, two existing senior executives, Robert Enslin and Bernd Leukert now have expanded leadership portfolios and likely additional oversight over the integration of SAP’s Cloud-based technology strategies. In addition, the Supervisory Board of SAP has named two other executives to be new members of the Executive Board.

Enslin, the head of Global Customer Operations, was designated to be president of the new Cloud Business Group which will oversee SAP Ariba, SAP Fieldglass, Concur, SAP SuccessFactors, SAP Hybris and the SAP SMB Solutions Group organizations.  That obviously implies singular leadership and accountability of all of SAP’s prior Cloud-based acquisitions in addition to the SMB business. Enslin has consistently been a rising executive star in the SAP sales organization and a long-time confidant of CEO Bill McDermott who also rose from the field leadership ranks. By our lens, the move most likely implies more consistent and focused go-to-market and selling strategies across the entire SAP Cloud portfolio as well as stepped-up efforts for strategic integration of technology components.

Leukert, a 23-year veteran of SAP and prior CTO and head of Products and Innovation now has an expanded leadership portfolio to accelerate “SAP’s platform and digital transformation strategy.” SAP describes Leukert’s responsibilities to include the entire technological foundation of all of SAP’s products as well as application development for lines of business. In addition, Leukert heads strategic innovation and new growth opportunities in areas such as Internet of Things (IoT), Industry 4.0, and SAP S/4HANA. He is also responsible for leading design and user experience for all SAP applications. Our readers might be interested to know that Leukert once had SAP supply chain development experience serving as vice president for installed base development in supply chain management, including in-memory database technologies in 2011. Since 2011, he has been responsible for development of SAP Business Suite and the SAP Business One application. In other words, he has been the go-to executive for addressing and coalescing technical development strategies during his tenure.

In conjunction with these latest technical leadership moves, SAP Cloud Platform executive Bjoern Goerke was appointed to be CTO for SAP, reporting to Leukert. According to the announcement, Goerke will be tasked with advancing the company’s technology strategy and serve as a key external spokesperson.

The fill the void created by Enslin’s singular leadership of the Cloud Business unit, SAP named two female senior executives, Adaire Fox-Martin, and Jennifer Morgan, to the Executive Board. From our lens, these are long overdue moves to balance out a traditionally male-dominated leadership body. However, the Executive Board’s prior track record with female co-leaders has not been all that stellar, and we trust that will change with these latest moves. Both executives are noted in co-presidency roles of Global Customer Operations, overseeing all SAP regions. Fox-Martin will oversee EMEA and Greater China while Morgan will oversee the Americas and Asia-Pacific-Japan regions.

Those that are familiar with SAP sales organizations probably know that it can at times, be a stressful and competitive environment, thus two female executives rising to the Executive Board is a good sign. Consider that McDermott originally cut his teeth in leading SAP’s North America and then Americas field groups.

An additional move was current EMEA President Franck Cohen appointed to the role of Chief Commercial Officer to lead SAP’s channel business

Steve Singh, president of Business Networks and Applications, who came to SAP with the Concur Technologies acquisition will leave SAP at the end of this month. Singh will reportedly return to his start-up roots outside of SAP.

These executive changes come just prior to SAP’s report of Q1 financial performance and of annual SAP Sapphire and ASUG customer conference held in May.

Similar to last year, SAP customers can likely anticipate another round of unifying messages centered on more cohesive technology adoption strategies, easier means to adopt SAP applications and technology, and perhaps a clearer articulation of business and technology strategy moving forward, especially concerning SAP S4/HANA.

The key for customers and supply chain technology teams is to key-in on these two specific executives with the broadest portfolios as to their stated goals and actions now and in the months to come.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

Supply Chain Matters Highlights of Connected Things 2017 Conference

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This supply chain management industry analyst recently had the opportunity to attend the Connected Things 2017- Accelerating the Adoption & impact of IoT for People, Places & Things conference, sponsored by the MIT Enterprise Forum of Cambridge.  This Supply Chain Matters posting shares key highlights, observations, and insights this author gained from the various sessions.

This was a one-day conference designed to exchange the latest thought leadership and information exchange regarding the current state of Internet of Things (IoT) technology strategy and deployment. The conference, as noted in the dedicated conference web page, included a format of keynote presentations from senior technology executives and market influencers along with seven different panel discussions directed at key IoT challenges and topics. MIT Connect Things 2017 2 300x169 Supply Chain Matters Highlights of Connected Things 2017 Conference

From this author’s lens, the content was outstanding and very timely, and brought forward consistent themes related to this growing area of technology interest. Judging from the overflow crowd of conference attendees traveling from different regions and just before a forecasted major snowstorm across the New England region, IoT is obviously a top-of-mind topic within many an industry setting, including industry supply chains.

The opening keynote delivered by Harel Kodesh, Vice President, Predix and CTO, GE Digital provided a very timely context for how a manufacturing company such as General Electric is aggressively moving toward a journey to be an Industrial Internet and digital transformation company. This blog has provided several prior commentaries related to GE Digital and its development and rollout of the Predix operating system, and Kadesh’s keynote brought this all together. As an example, GE declares that it will have upwards of 68,000 of its jet engines and 10,000 turbines connected by Predix in three years. Another GE Digital initiative looks to railway locomotives serving as a “data center on wheels” in areas of data sharing not only on equipment and train operation but on the sensing and reporting of rail right of way data, such as the condition of agricultural farms and fields. An important key message reinforced by GE is that upwards of up to 40 percent of operational performance data generated by equipment is spurious, subject to cleansing or deletion. That reinforces the need for the Edge level, or as GE refers to the Digital Twin system, to serve as an actual data rationalization compute mode. We view this as a very important consideration for any form of supply chain or service management focused IoT digital transformation initiative.

The keynote from David Friend, CEO of BlueArchive, and former founder of Cloud storage provider Carbonite, provided clear reinforcement that Cloud based data storage will indeed transform to a utility model in the not too distance future. The current impediment is a generally accepted standard data exchange API for IoT driven processes to integrate with.  Friend’s remarks further reinforced the need for operational data cleansing at the Edge layer, along with today’s overriding concerns for increased data security standards as well as increased data speeds across all the levels involved in an IoT deployment. As an example, Carbonite today manages 500 million storage requests daily.

SAP executive Alan Southall, Vice President and Head of SAP IoT Predictive Maintenance, reinforced that engineers currently do not trust raw data emanating from an asset, and that SAP recently launched SAP Leonardo to be an IoT platform data management system to manage and mitigate semantic data flows from the physical asset to actual business applications. (This analyst recently received an SAP briefing regarding SAP Leonardo design and capabilities) SAP is further working with pilot customers on areas such as machine learning, as well as automated analytics. Southhall also reinforced the message that Edge systems require military grade data security.

We managed to sit-in on three separate panel discussions including one focused on IoT Analytics, Industry 4.0 impacts on legacy industries and the all-important, physical, and cyber security viewpoints.

Regarding an IoT analytics framework, we sensed a consensus viewpoint outlining a tiered analytics strategy, with smart assets and connected devices managing local processing and Cloud-based platforms serving as additional data aggregators and insights engine at high levels of more predictive event context. Regarding the long-term impact of analytics, panelists concurred that industry transitions are already underway but additional challenges need to be addressed in how to better automate data consolidation and aggregation, and yes, the need for more comprehensive network-wide data security practices and standards. Noted was that a lot of industry development right now is focused on Edge systems, namely decisions needing to be made at the machine or manufacturing layer, an initial step in helping organizations to be prepared for later enterprise-wide, IoT digital transformation efforts. A reality remains that most machine-level data resides in industrial environments primarily protected behind-the-firewall.

We were very pleased to hear one panelist declare: “Don’t give me more data- give me smarter data.”

One other theme expressed on this blog in multiple prior commentaries, is the belief that, like other data-focused technology automation transformations of the past such as RFID adoption, ultimate ownership of data remains a big challenge yet to be sorted out. For instance, original equipment manufacturers or digital services providers are positioning strategies based on aggregation and ownership of equipment data for business process management or digital transformation business model needs, while data generators of the equipment declare that actual customers already own such data.  One example mentioned by a panelist is within agriculture settings, where seed providers have been collecting vast amounts of data to provide managed services related to crop yields, while not making such data available to the same specific farms without a bundled service.  In our blog commentaries, we have portended similar conflicts yet to play out in industries such as commercial aircraft, where airlines will claim ownership of their own operational performance data.  Obviously, a period of transition and sorting out must evolve.

Again, this was a beneficial and informative conference addressing a transformative but still young technology with more iterations to come.  Conferences such as these helps in cutting through some of the hype, focusing on key challenges and needs, while providing learning from those in multiple roles of moving such transformation forward.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

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