Announcer 1: This is The ERP Advisor.
Announcer 2: The ERP Advisor’s overview of SAP.
Juliette: Hello, everyone. Thank you for joining us for our webinar today. This summer, ERP Advisors Group is spotlighting the most prominent vendors in the ERP software market. Today we will be discussing SAP’s offerings and providing key insights into our experiences with working with them. Welcome Shawn, thanks for joining me today.
Shawn: Yeah, it’s good to see you. Happy summer.
Juliette: Happy summer. I like your pink shirt.
Shawn: Thank you very, very Floridian. I was going to try to sit outside today to do the call with the beautiful palm trees behind, but I am not a Floridian, I'm not.
Juliette: A little too hot in the middle of July, right? Yes. So, today in our vendor series we are covering SAP. SAP is, I guess we could refer to it as an ERP mammoth. It is a very huge platform.
Shawn: Without a doubt. Without a doubt. I mean sometimes with our clients, Juliet, I don't know if we've ever talked about this before on our calls, but when we're doing a project with them, and they're like “oh yeah, we've got a lot of Excel." And they use Excel for this and for that, but inevitably, there's always what we refer to as the Mac Daddy excel sheet. Meaning the one that pulls everything together and everybody makes their decisions from it. Could be for planning, like manufacturing planning, could be for financials, etc. So, SAP is the Mac Daddy of ERP vendors, unequivocally, unequivocally.
Juliette: So, with that said, can you talk to us a little bit about who SAP is and what they do?
Shawn: Yeah, you bet. I think SAP, again we’re always open for corrections from the listeners out there, but SAP is the largest pure-play enterprise software, ERP vendor in the world. There's nobody else in the entire world, which says a lot, I mean, that's a big deal. This is hundreds and hundreds of billions of dollars spent every year on ERP, and a lot of it is SAP. But that organization itself, which has over 100,000 people and has been in business I think for 50 years: Rebekah’s cheat sheet’s showing me in 1972. That's a big deal.
Shawn: I love to see these organizations that are successful over time and are adding tons of value and growing and growing, and SAP is one of those for sure. We're talking about a very large organization, again that just sells ERP, but a whole bunch of other related products. We can get into that here in a little bit for sure on some of their other products because it's a lot. You think enterprise software, the Goliath is SAP, that's whom we're talking about, and this is interesting too on my notes here, systems analysis program development, you think is the original name or there's a German name too. But SAP actually does stand for something too, so you’ll often be given SAPAG, which is a designation for a corporation in Germany. Of course, they’re headquartered in Germany, but lots of offices throughout the world, lots of employees throughout the world too. Big presence in North America as well, that's sort of a high level on SAP.
Juliette: Yeah, and with lots of clients around the world, right?
Shawn: Everywhere, yeah. I'm not sure if we have the statistics on that, but my guess is that SAP has customers, maybe even in all 7 continents: like even in Antarctica. No other vendor would probably have the reach of SAP, truly. I don't know if they have customers in Antarctica, but they're certainly around the rest of the world.
Juliette: Right. Well, let me ask you this, what do they sell? Do they have multiple products they sell? Do they focus on a certain type of ERP system? Can you talk to us a little bit about that?
Shawn: I can, yeah. I think the way to sort of go through this is to take a look at how SAP traditionally was. It had its foothold in manufacturing. That's where, when I think about my early career in the 90s—which wasn't that long ago—you saw a lot of SAP on the customers that were manufacturers, distributors for sure. You know good kinds of companies and really renowned in the area of manufacturing. Lots of different kinds of manufacturing all the way from discrete manufacturing, making widgets, to process manufacturing like making chemicals. SAP has really dominated in that area, but then, in a way, they expanded out into almost every industry.
So certainly, heavy asset industries where we've got big trucks like mining; a lot of mining organizations are run on SAP. There's a lot of getting out of products and into services. There are a lot of service organizations that run SAP; we just recently selected SAP for a global services firm based on some of the work SAP’s done with some of the large Big Four management consulting firms. There’s a lot of stuff out there that SAP does position for a lot of industries because, as you can imagine, over time and a lot of resources—the market capitalization for SAP is mammoth. Maybe Rebekah could Google that and send it to me.
But they have a lot of R&D they invest back into products, and so they're constantly building new solutions. Because of this, we have better not just industry solutions, but micro-vertical solutions. Not just process manufacturing, but batch process, which is hard. All of it's hard, but batch is tough. They'll have batch processing specifically for life sciences, and specifically for pharmaceuticals. These micro-vertical solutions that SAP has built, and then, of course, this is the thing I love the most about software vendors, not only are there 100,000 people working on SAP, but there are probably, for SAP I would say —especially if you include the big guys—there's probably 4-5x the amount of people in the market that are implementing SAP.
Juliette: Oh, wow.
Shawn: They’re building custom solutions within SAP, supporting SAP, around the world. There're global organizations in areas where labor is a little less expensive and they specialize in supporting SAP. It's a big product, and it's a big software vendor, but you also have really large implementation partners around them and different kinds of support providers as well. SAP also offers those services too, but they have a huge channel of partners that help them with that.
Juliette: So, with that said Shawn, let me ask you what the major features of SAP are. Do they have specific features that are more attractive to one industry over another, or are their features pretty similar throughout the different products?
Shawn: It's a really good question; the answer is yes. SAP has every feature you can possibly imagine. I mean even on this recent deal we did we were looking at really specific billing methods for a pretty complex process. And SAP had the ability to do that out of the box with a little bit of configuration. The way we used to think about ERP, and we used to think that way because is how SAP implemented it. There were main modules, there were always financials, and over time SAP started of course with manufacturing, distribution, and financials and then project modules. Over time they've also purchased some other organizations, so now they have some of the top Human Capital Management functionality in the world with the SuccessFactors product.
Especially if you're integrating with SAP, they have a lot of analytics and business process management functionality they've developed and purchased over the years. Net Weaver was an example of that, where you've got a platform, you can build out very complex process automations on. They have robotic process automation platforms that are built into SAP. There're other areas too. There are analytics and reporting that's super strong with some of their analytics cloud solutions. There’re commission tools, marketing, and even CRM in SAP too. Now a lot of customers who use this app use Salesforce too, but you can still get a marketing cloud, or you can get a service core in SAP as well. So, you can see all the functionality of an organization automated in SAP’s products. I think there's a material number which SAP calls it internally, then there's a product and there's a material number which is sort of like their order form.
It's like going to a restaurant and you want to see the menu. Well, SAP is huge. Again, covering everything from corporate performance management to CRM to Human Capital Management to financials, blah blah blah blah blah it goes on and on and on and on. Then there's the technical side too; the technical solutions you get with that platform. So, the interesting thing is it's like—we always try to play around with these analogies—but if you think about a house for a single family, it's going to have 2, 3, 4 bedrooms, whatever. It's going to have a certain number of bathrooms and a certain amount of space. It could be big it; could be small, but there's a range.
SAP is like a house for like 1,000,000 people; if you really wanted to house a million different kinds of users in one solution you would have to build out this thing to be really big. It would cover a lot of areas, but it would also go super, super, super deep. So, when we talk about SAP—I'm really glad we're having this conversation because a lot of people will gravitate towards SAP simply because that's what they used at the last big company they worked with. That's fine, that's a great reason. But what's happened is SAP's catalog of their products is so big, and now their offering is actually richer and it's better. You can get more from them out-of-the-box is what I'm trying to say because before—and we should talk more about this in a minute—the upgrade challenge of SAP was so significant with some of their older platforms that a lot of people, even to today, still haven't upgraded them.
SAP does have plans to sunset some of its older solutions to get customers to go into the S4 solution, the new one. And there's a lot of change that're happening in the SAP space too, but just for right now, I want everybody to know, there's a lot of stuff in there and that's amazing. Do you need it all? Maybe not. Now the rise program from SAP is identifying that and saying, “ok, well, especially for smaller clients, we can bundle this down to something more consumable for you.” When you think about SAP and what they do, you basically say everything that's in enterprise software and that's related to ERP solutions.
Juliette: Right. Well, you kind of touched on this, and let me ask you, because of the multiple platforms and all the industries that SAP covers, is it more of an all-inclusive platform, or is it customizable for, like you mentioned, a restaurant menu where you could buy different pieces what have you. Or is it more like you buy the platform for your needs, but then there's probably more you can grow into? Does that make sense?
Shawn: Makes perfect sense.
Juliette: Like maybe you're buying more than you need initially, but it's there if you need it.
Shawn: Now that's a good point too, it's really both. We're really seeing this right now in the market with SAP, which is why people are probably listening to this video, so this question is spot on. The SAP software pricing is actually very effective against its competitors; it's very similar. You can buy these modules or subscribe to them because you're going to pay for them every year and it’s good stuff. The thing about it is maybe you do need more in the future. If a company is not fast-growing, if they're under half a billion in revenue, maybe even under 250 million, and they're pretty flat, if they buy SAP, they're going to buy certain modules and they're probably going to stick to them. A big reason why that same organization, even upwards of a billion, would really say, “ok, I'm definitely going in on SAP,” is because they're growing.
Shawn: It is like the house; we're getting into a house that has all kinds of features. Forget about. Like you wave your foot, and the sink faucet comes in. That would be cool, right? Well, that's simple. These guys have that handled, it's more like you think the thought and the waterfalls. SAP has got some of the smartest engineers on the planet building that product up, and some of the smartest partners that are building these fantastic solutions. So, you can get in, get the products you want, but then also grow with more, and it is a configurable platform. Now I will say this, SAP’s model of cloud deployment means there's a certain number of customizations you can't make when you deploy it in their cloud solution; that's part of their cloud solution. SAP is working, I think, day and night to shift towards this model of having more installs in the cloud. And it's like, “well look, if you want to upgrade your instance, well, you can't customize as much.”
There are these general concepts in ERP that we talk about, and a lot of them are based on SAP. One of those general concepts is “don't customize,” because as soon as you customize the app you can't upgrade it. “Well, how do I get my tax reporting for next year if I can't upgrade? How do I keep all the cyber security patches that you’re putting into the software if I can't upgrade? How do I get additional feature functionality I need in the future if I can't upgrade?”
That's what happened to a lot of SAP customers over the years is they customized their product so much that they couldn't upgrade and keep up with the upgrade path SAP had. They just had to stay, and they said “fine, we'll just stay on this.” And SAP said “fine, we'll keep supporting your product up until I want to say, 2028.” We have to check that date for sure, but there are some dates coming up in the late 2020s we'll say for sure, where they're saying, “we're not going to support R3 anymore.” But then there're other partners out there that will.
So, it's a really interesting product because it is so pervasive throughout the world of ERP. So many customers have stayed on it because they have customized. They've had cloud-based products before, but we're really seeing it in mid-sized customers a billion and under. We're really seeing SAP for on the cloud come into play now. In the last couple of years, prices have gone down, the partners understand the platform, you can deploy it into a public cloud like Azure or into AWS. Rebekah, I think just announced some of those things on our ERP minute recently. So, you see this evolution that SAP is going through, but it's just like anything else that's big, it just takes time. You have 100,000 people; you have to change their mindset.
Juliette: That's right. So, everyone will be sort of forced, they won't have a choice but to move to the cloud in the next several years. Is that kind of what I'm reading into?
Shawn: That's what you're reading into. So, it's tricky because it looks like, as Rebekah, I got to give credit where credit’s due come on Rebekah. You can look online—that's essentially what she did, and I am actually looking at it too—basically, there are going to be changes coming up for sure, unequivocally, absolutely with different versions of SAP. There's old, old, old, old, R2 I don't think I've seen an R2 since Star Wars, just kidding. We've had clients on R3, there are clients on ECC products and there are different numbers. Each one has a number. You need to know what that is and if there's a way in SAP to go and search on what you have. It's actually, I think, on the login screen. So, once you have that, then you can search online, but you can also call SAP and say, “hey, what's going on,” and call the support number and figure it out. But remember, like I said, just because that product isn't going to be formally supported by SAP, that doesn't mean you have to get off it because there will be other ways to get support.
Juliette, you and I know this, sometimes you get into a relationship, and you probably haven't gone through problems, but then you can be like “oh, I don't want to deal with that.” At least me, I don't know about you, but me.
And that could be happening with somebody who's on one of these older products because they've had it for maybe 20 years. A little bit changed in the last 20 years, but they're like, “oh my God, I went through the worst thing in the world on my ERP implementation with SAP and I'm never doing it again.” I'm going to wait a couple of years here and I'm going to retire. We have people that say that; I'm not going to do the upgrade the next person is. I really mean this when I say there are good options out there including the rise program from SAP that does drop your cost—in the short term at least. And there are partners that are doing a good job of these conversions from your old SAP to a new SAP instance, it's very real.
So, I would rather our public that listens to this get the information for themselves on when their products are going to be sunsetted; which looks like some of them are in 2027. I think ECC is supported through 2027 on standard support. Now sometimes, even Oracle said after that point you can pay us more and we’ll still support your product. So, there's going to be something, but you really should just stop and look and say, “is there software supporting my business or not.” I think what happens often is customers will go look and they'll realize, “oh my gosh, we have all this stuff that we're doing in the Big Kahuna spreadsheets which are outside the system.” Our people, our new people especially—folks out of school, maybe a little bit younger in their career—they look at something like SAP and they’re like, “it's terrible. I can't do this, I'm leaving,” maybe not that bad.
There are things about your product that're probably scary in the first place, and I even hesitate to say what I'm going to say now, but I'm going to say it, if you look at your fiduciary duty, to the shareholders, to your boss, they don't know this stuff. So, the technical people that do, the people that’re going to listen to this call, they get this feeling in their stomach like, “oh my gosh, what would happen if this thing went down and the one person who knows all our customizations is on vacation.” Or “we haven't upgraded our cyber security stuff. We can do it on the servers, network, and everything else but not on the software itself, we can't force password changes.” I mean, that's a simple example you can do that, but there's new multi-factor authentication, or there are other cyber security enhancements that an app, even QuickBooks, does. Just because it's small and simple then SAP is catching up on, they're there in the newer versions, but they're not in your old one.
Shawn: We've had that happen where clients get an attack, the app goes down, and the next thing that happens is somebody starts pointing the finger saying, “why didn't you tell me this was such a risk?” “Well because I didn't want to do the implementation,” or whatever. Don't do that, don't do that. Just get the data, we’re always around, there’re great SAP partners we can get you in contact with. They can give you the information on what you need.
Juliette: Right, right, well, we've talked about this on many of our calls through the years, is that doing your due diligence and knowing what your needs are and then almost preemptively making the decision for yourself rather than being forced to.
Shawn: And I would say, Juliet, of all the products we've talked about and all the products we will talk about, that concept is the most important with SAP because you're dealing with a house that’s BIG.
Juliette: Right, right.
Shawn: When you're dealing with this solution, everything about it is big. The product itself, the functionality it has, it's big. The technology architecture that runs it is big. It's built to scale 10s of billions of dollars. Now, you can scale it down for sure for annual revenue transactions, but it's built for business. I think they used to say about SAP, there was a motto that I used to love. I can't remember what it was, but it was super cool; a best business run with SAP, and it's kind of true. These larger organizations that have done really well overall on SAP, now it's changed certainly over the years. But the bottom line is really do your diligence with this product because it's that important. It's just more important because the dollar and risk impact is bigger.
Juliette: That's right. Well, Shawn, let me ask you this, from your experience working with many clients throughout the years, why does SAP tend to win over their competitors?
Shawn: I think there are probably 4 reasons why they win. The first one is feature functionality. Like I said, SAP does a great job building out really good functionality that can meet specific means. Then the second thing is, it goes right with that, is that it's easy to extend the product. In this example I'm thinking with the billing process for this professional services firm was here when we needed it to go a little bit further. And man, the other vendors really couldn't do it. The SAP guys went, boom and like overnight they said, “oh, here's exactly how we would do it.” So that's the second reason is that the platform is extendable right?
The third reason is because, I really want to get to my fourth. I'm just going to go to my fourth and I'll come back to the third. because. The fourth reason is because we used it before, and it was great. That's a big reason why a lot of organizations go to SAP is because they used it before at their other company. If they were at a large mining company, and now they’re at a startup or a junior mining company, that might not be the right answer. The third reason I would say is the channel partners. But there are really good firms and we’ve talked a lot about that with some of the other vendors.
But the SAP partners, there are tiers of partners, again everything is the same it's just more complex and deeper with SAP, there are tiers of partners. There're global SAP partners, they work with companies around the world. There're regional, country-specific or multi-country partners that deal with North America and South America, or Europe and Asia, or just Asia, or whatever; they deal in continents.
Then there are partners a little more focused around maybe a specific country. Then you even have some smaller partners too, because you’ve got to remember also, Juliet—we're 30 minutes in here or so and I probably should have said this earlier—there are multiple ERP platforms for SAP. And some of those are scaled to work with smaller businesses. There're partners that support those products too, so that's the third thing I would say. Overall, it’s feature functionality, extendibility, the partners, and having used it before.
Juliette: There’s familiarity of it.
Shawn: Yeah, their technology platform is also strong, and we can customize and build a bunch of stuff; that's sort of the fifth reason, maybe, for a larger company that has an RPA analyst--a robotics process automation analyst. It’s just a person who sits around and builds bots, literally. Some organizations have that, and that kind of person just goes, “ohhh I love SAP,” because there're so many technical assets that they can play around with and work with.
Juliette: Right, so Shawn, you mentioned this at the very beginning about SAP, like really working to improve their product and that they do a good job with that. Are there any offerings that you would like to see from them in the future?
Shawn: Well, the S4 HANA cloud is great. I'm in no position to even offer anything on that product because I mean it's got everything--as you think of characters Saturday Night Live and stuff--I mean it's got everything. And they're doing a really good job especially since I think it took a leadership change to really say, “we aren't going to just sell big deployments of SAP. We know we need to be able to sell SAP to these midsize organizations around the world and get the footprint bigger at our customer base.” But that's S4 Hana cloud, then there's also SAP by design, which is a pure ERP cloud solution, and I don’t know if they purchased that or wrote it, I don’t know to be honest with you.
But SAP by design is sort of focused on different micros or different verticals. Also, different partners do different things. That product we've implemented once, or recently I should say in recent times, and it was a challenge, but it was good. The concepts like the basics in there were good. But I'm not sure how much is going into the development of that product, so we'll see on that. And then the next one down is called SAP Business One, which is definitely targeted towards smaller organizations, distributors mostly, and again is a really solid product: from a development perspective, it's a bit more complex and there's some opportunity there. Ultimately, I would say just continue, SAP, with refining your offering so it's more approachable by a less sophisticated organization that doesn't have a larger IT staff or a significant number of people that can work towards the deployment. That's what I would like to see happen, for sure, and I think they're working on it.
Juliette: Yeah. Well, Shawn thank you as always, you are such a wealth of knowledge. We could keep talking about SAP for a long time, maybe we'll have to circle back on another webinar.
Shawn: That sounds great.
Juliette: Well, thanks for your time. I appreciate you joining me.
Shawn: Thank you.
Juliette: Be sure to join us and continue to be on the lookout for our multipart series this summer that will help advance your ERP knowledge and allow you to take advantage of over a century of combined ERP experience from our expert consultants here at EAG. Thank you again for joining us today.
Announcer 2: This summer, ERP Advisors Group will be reviewing the most prominent ERP software vendors in the market. For more information about these vendors, please visit our website at erpadvisorsgroup.com. You can also find more EAG content by following us on social media or by subscribing to our podcast The ERP Advisor.