SAP Nation revisited


SAP CEO Bill McDermott presents the 'Run Simple' keynote at SAPPHIRE NOW Orlando in May 2015

After releasing SAP Nation, what he called “an expose on waste in information technology”, Vinnie Mirchandani, analyst, author and CEO of Deal Architect, discovered a number of things: that with the release of S/4HANA earlier this year, customers had more questions than ever about the future of their SAP strategy; that other customers wanted to share what they were doing to optimise their SAP environment; and that many thought he had underestimated the size of the SAP economy.

Mirchandani has now written a follow-up book, SAP Nation 2.0, updating his economic model and examining what the introduction of S/4HANA means for customers and the ecosystem at large.

In the wake of the release of SAP Nation, Mirchandani said he became increasingly aware of the diversity of SAP environments, and the recent rapid expansion of the SAP ecosystem to include Fiori consultants – a new area of the SAP services ecosystem, HANA start-ups and private cloud providers.

Though the key message from SAP in recent time is ‘simple’, many customers believe it is anything but. And S/4HANA may not change that picture.

“In reality, there is little that is simple about S/4 migration. It will call for implementation projects with elaborate change management, data conversion and testing requirements,” Mirchandani writes.

He expects that, if SAP’s predictions that at least 1000 of the top 2000 companies will do some sort of S/4HANA project in 2016 – of which 41 per cent will be net new customers, according to SAP – there will be a serious crunch for talent, “which often leads to premiums in the SAP consulting market even for more mature skills”.

Mirchandani also now has a more comprehensive picture of how customers are ‘simplifying’ on their own terms.

In SAP Nation, he identified four categories of customers using particular strategies to optimise their SAP investments – the unadopters, diversifiers, pragmatists and the committed. He says he has since seen “a veritable tsunami” of other SAP customers using similar strategies.

“In many ways, the situation reflects customers doing their own thing to ‘simplify’ and optimise their SAP environments. Many customers started their initiatives before S/4HANA was announced, and with so many questions swirling around S/4, I expect others to join them in crafting their own coping strategies,” he writes.

These strategies include creating multiple hubs for product engineering/R&D, customer-facing, industry-specific and back-office operations (in many cases using SAP as the hub for the back office); ring-fencing SAP ERP capability with specialist and cloud solutions; utilising independent support; and employing two-tier application strategies for corporates and their subsidiaries.

For example, high-performance footwear, apparel and accessories manufacturer ASICS is implementing NetSuite to support its expansion across Southeast Asia, while still using SAP for its corporate functions.

Other developments are the increasing automation of application management, provided by outsourcing firms; moves to private cloud for hosting infrastructure with added services; and adding small SAP front-ends using Fiori or SAP’s Rapid Deployment Solutions.

These moves are all aimed at freeing up money to keep IT budgets in check and allow spending on innovation.

“Today, enterprise customers also have many conflicting technology investment choices that they did not have a decade ago, or even five years ago. Every dollar spent on back office and IT infrastructure takes away from investments needed in digital products, services and business models,” he writes.

For its part, he believes SAP, in taking S/4 HANA to market, will need to have good answers to some common customer questions over the coming years, such as:

  • When will SAP catch up to functionality that reflects dramatic changes in every industry?
  • When will SAP environments be truly ‘simplified’?
  • When will the SAP cloud become world-class?
  • How do we mitigate the risks of adopting HANA as a transaction database?
  • Will Fiori be able to keep up with rapid advances in UX design and expectations?
  • What are the economics of moving to S/4?

And to thrive in the current environment, customers need to rethink their talent mix and diversify staffing to reach beyond SAP veterans, expect more from their sourcing/vendor management groups, and push for more customer advocacy, through user groups, market analysts, technology media, academia and regulators.

SAP Nation 2.0 is available here.

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