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!

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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.

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.

This could get very messy……

I mentioned a growing scandal in South Africa a number of days ago. Well it seems that now others are concerned that links with those either under investigation or investigating, might drag them in and their links to those companies are now being questioned. It remains to be seen how this will be untangled, but there are some nervous corporates out there. Standard Bank is now considering its links to McKinsey and SAP and also having conversations with KPMG. As the old saying goes “there’s no smoke without a fire”. Question is where and what is the fire? Everyone is keeping very tight-lipped about it.

I like the video clip…..

Every day we are all bombarded with marketing clips and then one comes along that catches your attention….in this case for me it’s an SAP one. My view is that this is slick and good marketing……doesn’t tell you that much but works exceptionally well as a teaser, and does what it says on the tin. It gets you thinking.

Click here.