It’s Cloudy Business….the second in a series for UKISUG – Musings on SAP

“I’ve got the answer to our IT challenges! Let’s move everything to the Cloud.” Sounds simple doesn’t it? Overnight, the challenges of keeping my data centres secure and operating, patching the servers, and ensuring hardware and software is updated, become a thing of the past. Oh, and my internal customers can have everything they want really quickly and cheaply as well.

I’ve heard this so many times from software and service salespeople, but also from the non-technical people within the businesses (who have been talking to a salesperson!).

So, is the Cloud ‘fake news’? Well, no…and yes. Without a doubt, Cloud should offer:

  1. Distinct advantages of scale – utilising the bigger is ‘better and cheaper’ principle.
  2. Increased focus on the business – you no longer have to worry about the technical side.
  3. Scalability and flexibility – the ability to easily ramp up and down to meet demand.
  4. Connectivity – operating in the Cloud should allow you to easily connect with others.

Sounds good so far? It really does, doesn’t it?

So, if you have decided Cloud is for you. How do you get there and what do you need to do? There are some really important questions that need to be asked in the following three areas:

Migration

Which of your existing solutions can you move, and when? Can all your essential functionality and also customised set-up be reproduced in the Cloud? Do you have to keep technical elements in-house for whatever reason? Can you go Public Cloud or do you need Private Cloud?

Cost

Is it really cheaper? Do you understand the costs of your operation now and in the future? What are the transition costs? Is there a business transformation (change) exercise to undertake as well? How are you moving the data? How much conversion needs to take place? What are your hardware asset write down costs? Is your existing on-premise solution fully depreciated? What are your staff reduction plan costs? Does your business model require a phased move or a big-bang? What’s the cost of connecting to other software solutions (especially ones not owned by your primary provider)?

Contracts

There are a number of questions you should ask when it comes your software contracts, and with Cloud it is no different – in fact, you should be asking more questions! Is there an exit clause allowing you to terminate in a controlled way and what is the cost? Are there data migration tools, both in and out? Who owns the data? What happens if the provider becomes insolvent? What is the uptime and downtime of the software (remember global time differences)? When and how are software updates released? Is the service you are buying guaranteed irrespective of the provider’s software changes? Where is the software housed? What are the penalties for service failure (a moot point because no service in this case is no business for you at all)? What is the licencing model and can it go up and down (and by that I mean all the way down)? How are price increases managed (you need to reflect this in your model)? Can you have any custom development and who owns the IP for this? What is the turnaround time for custom development and how is it charged both for development but also for licencing? What are the security warranties for the service? What’s the dispute process (don’t forget in this case the supplier literally holds the cards – they can just stop supply, and your business)? Make sure you have a procurement professional involved from the outset and prepare to bolster that person with good legal support.

This is just a list of starter questions, but my experience tells me the answers are not as clean or clear as you might expect, and that the sales team will definitely not know all the answers. Be prepared to demand that you have real experts demonstrate the benefits, and don’t ever rely on spoken undertakings. Make sure you see the things that are important to you, and bake them into your contracts. Remember every organisation is also now an IT organisation and you are handing its inner workings to someone else – it has to be right!

If you get the right answers that are documented – remember, ‘in God we trust, in others a piece of paper,’ then great – the Cloud becomes clear and sunny skies beckon!

Blogs for the UK and Ireland SAP User Group: Musings on SAP

At the request of User Group I’ve started a series of Blogs trying to share some of my experiences from 20+ years of involvement with SAP and IT. My first can be found here.

For ease I’ve also reproduced it here.

Transformation is THE word

We’re in an era of transformation according to all the purveyors of digital solutions. Transformation means change, revolution, conversion, renovation or, in reality, all four of them together.

Let’s talk SAP and digital transformation. There’s a huge amount of change being promoted, that combines both revolution and renovation. We’ll skip the conversion and renovation bits for the moment.

So what is the SAP revolution? It started maybe 10 years ago with SAP’s development of its own database – HANA. This allowed different concepts to be explored and led to S/4HANA (SAP for HANA) which allowed the concept of data updates (changes) to be removed and just work with inserts (new data) and no intermediate tables. And the core of SAP starts to be rewritten…

But let’s just step further back for a moment.

Back in 1975, Xerox passed on software to IBM that resulted in Xerox financial systems being deployed on IBM hardware. This software (Scientific Data Systems (SDS)/SAPE software) was what the original founders of SAP were working on. Their first customer, after the founding of SAP, was the British chemical giant ICI. But all this was based on mainframe computing. However, by the mid 90’s, SAP R3 (Major Release 3 of SAP) became available utilising client-server technology.

So why the history lesson? Well because anyone designing the software in that era is 30+ years older now. Yes, the core of (original Pre S/4HANA) SAP is at least 30 years old, and in reality some parts much older still. So hold on to that fact for the moment.

Away from SAP, some other big technology-wide changes have taken place. The cloud (a massive change not to be discussed in detail today), and advances in wireless and fibre connectivity have increased the ability to transfer data literally anywhere and have led to the creation of low-cost location focused IT operations providing IT as a service. The world all of a sudden has become very small.

SAP now and in the future

SAP today is in the midst of the transformation – becoming a cloud-centric sole solution provider to customers worldwide. Indeed so much so, that SAP has announced its own internal transformation that will cost the best part of €1 billion. At its investor event this February, SAP clearly stated that it was offering early retirement options to several thousand of its employees, in what is described as a graceful retirement. Remember the history lesson? Who is most likely to retire early? Well in the main, those of a more mature age, likely those associated with the original product. So, what does this mean for the many SAP customers still working on-premises, using that original software?

Well firstly, don’t just sit there expecting that this “revolution” will go away. I’m going to call it a revolution because the changes in the land of digital are so all-encompassing that this 21st Century revolution is so big as to mirror the original Industrial Revolution of the 19th Century in terms of impact.

Secondly, SAP has been very clear and responsible by giving plenty of notice that SAP Original will be going into hibernation from 2025. By then the original code will be around 40 years old, and even if the original staff have not retired gracefully, they will likely be retired anyhow. I know people talk about continuing with their current solutions post 2025… my advice would be to make sure you have done your comprehensive risk analysis, not just of the software in question, but also the needs of the future as defined by the business, not IT. I think I know what the answer and outcome will be…

Thirdly, I mentioned conversion and renovation. I’ll use a simile for this – the advent of the electric car. They are coming to our streets…faster and faster, literally. By 2040, no new cars with just ICE (Internal Combustion Engines) will be sold in the UK by government decree. This means running ICE cars in the future will become less attractive, especially as parts and servicing will decrease in availability as focus moves to lower maintenance electric vehicles. Petrol and diesel outlets will also be replaced by more and more home charging and public charging points. Some say that the big oil companies will not let this happen…when in fact, they are now helping it. In the UK, Shell Recharge now has 1,175 Shell Recharge points and BP’s acquisition of Chargemaster in 2018 makes it the biggest provider of home charging points as well as the largest public charger network in the UK.

Trying to convert what you have or keep it going is not going to make the grade and the same practice applies for organisations’ IT solutions in the future.

SAP users should be no different – you have to transform how you work and what you are – to at least keep up; but if you get onboard, you can play your full part in the digital revolution.

 

 

Not impressed…….

Here’s a statement from Darren Roos of SAP:

“In the past, CIOs were consumed with a facilities management challenge,” said Roos. “They are now focused much more on the business, and on business outcomes. Licensing has become a new distraction for some CIOs who come from a generation where they were still working with a facilities management approach. But I simply don’t believe licensing is an issue. SAP’s licensing is infinitely flexible. And so they can get bent around the axle.”

My concern with this is that it feels a little or maybe more than a little out of touch with the reality of the situation. Let me explain why:

  • If you have ever tried to work your way through SAP licencing you would never, ever say that, just think about the current documents. Currently on premise runs to 86 pages. And cloud requires you to have at least 4 agreements (of varying length) including the order form, the cloud service description (and of course there will likely be more than one), the data processing agreement, and the general terms and conditions. And don’t expect many people in SAP to be able to answer the detailed questions around these…..they do exist but they are truly hard to locate (ask the SAP sales teams themselves about this!).
  • Then you have the transformation to cloud from on premise, how you translate this as most go through a hybrid phase of on premise and cloud together.
  • You also have the harsh reality of cost – and fundamentally as you move forward from hardware, facilities, people and software, you are looking at moving to more people and software through service provision (but some form of facilities even as a service will still exist). And the dilemma is getting this cheaper – so off shoring (or best shoring as it is often referred to today), or clearly demonstrable additional business value (emphasis on the clearly), through the purchase of these services.
  • External service providers have to make a profit, internal do not so cost challenges of moving will exist where the business has already best shored its operations.
  • And if licencing really wasn’t an issue why is there all this noise out there?

The comment about CIO’s that come from a certain generation I find to be certainly not empathetic with the customer (in some countries that might be deemed a discriminative remark) , almost saying they don’t know what they are on about, continuing the global theme that experts shouldn’t be trusted, because that’s what they are, people who have travelled the whole journey through what is an amazing period of time where technology has grown and grown to become almost the “saviour” of business. I say almost because good management is still needed…..

At the end of the day Indirect Licencing continues to be an issue in a more and more connected world…..that’s what the noise is about, and for whatever reason SAP seems to be getting the customer worried about it, based on surveys that have been done, which is a shame as SAP software has always been a trusted solution.

Where there’s noise there is a problem…………

There’s an article on Enterprise Irregulars Dont write off SAP yet  By  on November 29, 2017 that I think is helpful….it highlights the challenges that are out there. It also highlights how problems of 20 years ago can get forgotten by those now in control…. Trust is the biggest key to success, and it feels like trust and therefore confidence has been, and maybe still is being, eroded.

In the FMCG world the key to success is repeat purchases, and those are driven by guaranteed safety, guaranteed quality which drives expectations of continued enjoyment of the purchase…….and you go back for more.

Experiences in software drive exactly the same behaviour! Trouble is the longer you leave it before you address the customer experiences, the faster the issue grows and the bigger it gets.

We need SAP, but it isn’t the only game in town, and we need them to up theirs.

Cloudy days…..

Back in 2009 I penned a piece for the User Group about cloud computing. That was 8 years ago and some of the same discussions are still being held.

The fact of the matter though is that cloud computing is being provided to all of us every day in nearly everything we do today. It’s interesting how things go through cycles – fashion being one of the most obvious ones. But in computing we had the mainframe, essentially a screen connected to a central computer somewhere, then we went client server where some of the compute was taking place on the client machine with server largely being a data repository. And now we have cloud where there are 2 schools operating – the browser to cloud, and the app to cloud. The browser to cloud is so similar to mainframe!

But the obsession with cloud computing obscures what is really going on. The digital revolution. It’s as big as the so called “Industrial Revolution”. What is the Digital revolution? The best way to describe this is to consider the concept of analogue television to digital television. In analogue days you watched it now, if you didn’t you missed it and there were 4 channels. In digital days you can watch it now, replay it, store it – watch it on tablets, phones, computers and TV’s on hundreds of channels. And therefore the choice moves from the provider to the consumer.

So there is a digital transformation underway, aided by ever cheaper and more powerful technology. The internet has provided a backbone to connect everything, and I mean everything. And this digital capability is no longer confined to business, it’s in the home, it’s in your school, it’s everywhere. In fact the digital transformation is being demanded and shaped by the consumer, not business.

This key change, where the consumer leads, is sadly not understood by everyone. Businesses can no longer drive, they have to predict. They have to establish intelligence that sets them up in the way the consumer demand is going to go. Only the very lucky will be able to pull the customer along with them.

And this is now 365/24 – the always on and available culture that is becoming the norm. There will be some brakes in the ecosystem – internet availability – cabling and fibre are likely to be surpassed by mobile with 5G on its way giving mobile 1GB per second speeds along with 5ms response speed. And then people – and this is the part that seems to get overlooked.

For some areas people will actually not want an always on culture – most likely in the work arena. All work and no play makes Jack and Jill dull people, so expect some legislation starting to segregate work and home life.

This people culture change is the largest of the black holes in the digital transformation roadmap. No longer can companies dictate to their staff that this is what is going to change from upon high if they want success. It has to be a hearts and minds approach, so if you are starting your digital transformation then you need to have proper people change management strategies and processes in place. Ignore this at your peril.

Now remember I said that the consumer was leading this transformation? That is also something you have to understand. The consumer is split into many groups, by ability to change, willingness to change, and fear of change. These are not always age related but can be……… So you have several streams to contend with which is why I believe there will be hybrid solutions primarily adopted out there. The same inevitably applies to your own workforce.

Some companies get it….I’m quite impressed with the Digital Eagles campaign. So yes Barclays are being nice to their customers to help them get digital, but it’s really about them having recognised that to get their consumers through their (Barclays) digital transformation they need to help them. Change management!

This Digital Revolution is the biggest change to our world since the Industrial revolution. And it offers so much to so many….if it is done properly.

 

 

SAP reveals more in South Africa….

SAP promised to reveal the results of its internal investigation at the end of October, and it seems there was fire behind that smoke. The South African headlines with “SAP apologises to South Africa, reveals truth over SOE and Gupta dealings”.

SAPs statement reads ““The investigation has not revealed any evidence of a payment to a South African government official, including Transnet and Eskom employees. It has, however, uncovered indications of misconduct in issues relating to the management of Gupta-related third parties. To this end, SAP has instituted formal disciplinary proceedings, in accordance with South African labour law, against three employees who were placed on administrative leave at the beginning of the investigation. SAP has been clear from the outset that it will not tolerate misconduct or wrongdoing.”

All credit for SAP for bringing in an independent team to review and more credit for introducing a policy of no sales commission will be paid in any countries where there is a perception of corruption score below 50 based on Transparency Internationals published league table of corruption which basically means that nearly two thirds of the worlds 176 countries drop into that category.

SAP Q3 Results are out…..rounding up what some of the press says.

The Register in it’s typical style, suggests some challenges “SAP reassures market: Cloud is sustainable, just don’t look at our wheezing bookings

Whilst Reuters highlights below market expectations and the reassurance that Q4 will be good   “Just relax, Europe’s tech leader SAP tells investors, fourth quarter will be dynamite“.

The FT though focuses on warnings of the impact of the strength of the Euro on SAP earnings “SAP leads warnings on euro strength hit to earnings”

My POV – Q4 is always a strong quarter for any software vendor, it’s when the deals are made and the discounts applied. The underlying interest is cloud sales as a percentage of the SAP business and what impact it has on licence revenue. The 2 key questions being, firstly is SAP getting new revenue from the business that it is putting all its effort into (Cloud and HANA)? And secondly is SAP adding to the revenue base with service subscriptions? And the answer…..probably too difficult to say.