Legacy Software Review: SAP ERP Software

In this edition of The ERP Advisor, we review the options for existing SAP customers and provide a prognosis for where we feel SAP is headed in the future.

It is the largest ERP vendor in the world, serving Walmart and Costco, Chevron and Exxon Mobile, Ford and GM, and Google and Apple. SAP is a bona fide ERP juggernaut — and it is making a competitive play for midsize businesses with S/4HANA.

So where does that leave the legacy customers? While the end-of-life for legacy products has been extended, the messaging is clear: SAP is eager to terminate ECC 6.0 and Business Suite 7.


History of SAP

In 1972, five men started SystemAnalyse Programmentwicklung, or System Analysis and Program Development (SAP). Their objective was to build software that integrated various business processes and enabled real-time data processing. And their efforts proved to be successful: for nearly fifty years, SAP has played a dominant role in shaping the ERP world.

SAP is internationally recognized and maintains consistent global operation through the endorsements of countless partner channels around the world. Early on in its life, SAP had an extremely large market dominance. This remains an important benefit to SAP, as the installed customer base provides the company with cost-free salespeople and highly loyal users.

SAP in Today’s ERP Environment

In 2011, SAP began the transition to cloud ERP with their SAP HANA database, which created huge capacity for rapid data analysis. Four years later, SAP released SAP S/4HANA, its current cloud software offering.

Traditionally, SAP services companies with 1,000-5,000 employees and $1 billion to $10 billion in revenue. However, it seems that SAP has recently begun targeting the mid-sized market segment, and this transition suggests that there are worthwhile advantages for SAP to approach these types of businesses.

In recent years, SAP has committed to taking the time to better understand customer experience and customer needs. This has inspired SAP to begin a new campaign called RISE with SAP. Essentially, the goal of this campaign is to move current S/4HANA on-prem users to the cloud. RISE with SAP is designed to appeal to the users who are hesitant to move to the cloud because it is an on-your-own-time transition.

SAP has proven that they want to take responsibility for making desirable cloud strategies for their customers. Moving customers onto the cloud is a mutually beneficial pursuit, where cloud customers do not need to have an extensive information technology team because they are supported by the vendor.

Furthermore, cloud products are generally easier to access and require fewer servers. On the vendor side, cloud deployment provides a much better experience in maintaining apps in the future. It also minimizes the cost of support because fewer experts are needed to address outdated software.

Platform Solutions for SAP

SAP has a vast number of products; however, the three that standout in the marketplace today are SAP S/4HANA, SAP ByDesign, and SAP Business One.

We feel that SAP S/4HANA is best suited for companies with $250 million annual revenue or more. The focus of this application is sustainability, and it has built-in intelligent automation technologies.

SAP ByDesign tends to be best for companies ranging between $100 million to $250 million in annual revenue and claims to require minimal need for IT infrastructure. It is designed to offer large-scale business apps to small and midsize businesses.

SAP Business One is ideal for companies with $25 million and under in annual revenue. This application seeks to automate functions in finance and human resources.

Tips for Migrating from SAP Legacy Systems

SAP is arguably the most tightly integrated ERP in the market. The features and functions of SAP software are seamlessly interlocked, which can be a great thing — however, the functional richness of this software is easy to get lost in. And this tends to amplify the risk of failure on SAP implementations. So how can you minimize the risk involved in migrating from an SAP legacy system?

Make Sure You Know When Support is Going to End for Your Current Software

SAP has the urgency to support all current users, but at some point they have to stop offering support for old versions. It comes at far too high of a cost for them to offer infinite aid to outdated software.

Do Not Switch Unless You Absolutely Have To

We should trademark this next piece of advice! We always advise our clients to maintain their current software if there is not an urgent need to transition to a new one. Educate yourself on current market offerings and evaluate all available options. Even if it is not the right time for your company to participate in an implementation, do your due diligence and figure out what ERP solutions are available.

You are Not a Hostage of Your Old ERP Environment

So, do not make yourself a hostage. You have access to the tools that you need to make the best choice for your company. Be encouraged by that reality and take charge of your ERP.

Know that there are other options

Even loyal SAP users must be apprised that there is a plethora of ERP solutions to choose from in the market today. This was not always the case — even five years ago, there were far fewer platforms to choose from.

Enlist help

Ask SAP about what your next steps should be. They know their products better than anyone, and there are good people working there. It may take some time, so be persistent, but it is worth the effort to hear from the experts.

If you still want more advice, enlist the help of ERP software implementation partners who know your company. It is the responsibility of implementation partners to educate themselves on your company so that they know when it is best to transition to a new software.

Contact Us

It’s why we’re here! Our passion is helping you make the best possible decision for every company that we work with, so reach out if you are not sure what to do next. We are happy to assist you in your next ERP venture. Contact us today for an individualized ERP consultation.

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Narrator: This is The ERP Advisor. Today's episode: Legacy Software Review SAP.

Juliette Welch: Shawn Windle is one of our speakers for today. Shawn is the founder and managing principal of ERP Advisors Group based in Denver, Colorado. Shawn has over 20 years of experience in the enterprise software industry. Hi Shawn.

Shawn Windle: Hello.

Doug Ham is our guest joining us today. Doug is a principal consultant with ERP Advisors Group. Doug has over 25 years of experience in implementing and managing domestic and global enterprise resource planning and customer relationship management. His depth of experience across many applications and industries is truly unique in the enterprise software market. Doug, thank you for joining us.

Doug Ham: Hi Juliette, thank you.

Juliette: Hi yes, well I'm so glad to have you guys with me today. We're going to continue our review of different legacy software, and today we're focusing on SAP, the largest ERP in the world, right? And so with that said, as the largest ERP vendor in the world, SAP holds an intriguing position in the market going forward.

Shawn, I'm going to pass this one to you. Can you talk to us about what SAP is in the market today, currently?

Shawn: Yeah, I can. As always, I'll give you my disclaimers. I can give you my observations and my opinions on what we're doing with different folks, different clients in the market, but if any vendors are listening and need to correct anything that I'm saying, let us know.

But with that said, there's a couple things I'll say about SAP specifically. The first thing is, like you said, it is the world's largest ERP vendor. So, they have resources, and you sort of have like God, and then you have SAP in terms of the amount of resources — I'm just kidding. Don't mean to get religious.

But it is true that SAP has experience and many people all dedicated and deployed to ERP.

And if you think about it, probably the next pureplay ERP company that's that big is Unit4, which is more of an international organization. You hear them certainly throughout the world, not as much in the US — although they have a pretty big presence in North America — anyway, we're seeing this on one project right now too, where in terms of industry experience, that they have people that have been through anything you can think of at SAP, so you have this mammoth organization — tens of billions of dollars —I was just trying to see what their most recent revenue was, and I mean this organization is — it's gargantuan. €27.55 billion, which I think the euro’s worth more than the dollar now, so we're talking a very large organization with lots of resources. Global, right?

So, you have SAP as the software publisher — if you call them that. Their job is to write software and training materials and all the stuff around that.

And then you have a partner channel that is mammoth, beyond imagination basically from some of the top, the largest professional services companies in the world — Doug and I have worked for some of them — down to smaller shops that just do SAP or some other vendors, too. So, you not only have SAP — I think it’s SAP AG, is that right? I think that's the full legal name.

Doug: I think that’s it.

Shawn: Yeah, it's a German company, right? And it's multiple entities throughout the world. But then you also have lots of partners that are out there supporting the product.

So, whatever is going to come from SAP, it's going to be big and it's going to make a big impact. Just because it can.

So, that's the first thing I would say, and then the second thing I would say is — and why we're really excited about this call — I think Doug and I have some real, practical insights on what's happening literally today — although I don't know if you saw some of those more recent emails, Doug, about the prices — but anyway, we're excited because if you look at the competition and where SAP fits in as a tier one ERP and some of those other products like Oracle and Workday and some of the Infor products that are quite large, too. SAP has an interesting opportunity there that we'll talk about through this call because they have so many customers that are on their older versions.

So, what are these older customers going to do? They’ve been on ECC 6 or R3 is another platform in there after ECC 6 and so they're really starting to look around to say, “Hey, what's going on?” And we think SAP is getting a little bit more insight, too, in terms of the Business Suite 7.

There’s some support for these products through a certain amount of time, but is there? Are they going to increase the support time frame?

Sort of like we talked about with Oracle if you remember that, Juliette. But the SAP said, “Hey, we're going to support these products to a certain time.” I can get into that in more detail here in a bit. But what's going to happen? So, you sort of have this trifecta. This perfect storm of a really strong, big, experienced ERP company and you have all these partners that are out there generating revenue and feeding their families and paying their people based off of what to do with SAP and you have this market out there, these customers that are on these products that are getting to the point where they're thinking about changing them. They want to go to the cloud or whatever, and so it sort of sets up this really interesting dynamic like, whoa, we're expecting some big things here — so I'll leave that as a little prelude to what we'll get into in more details.

Juliette: Because there's a lot more to it as we know, right?

Shawn: Right, that's right.

Juliette: Yes, so Doug, let me ask you — I know you have a long background with SAP — speaking from your experience, what do you feel are some of the most important lessons that you've learned from working with SAP solutions? Can you talk to us a little bit about that?

Doug: Yeah, sure I do have a kind of an extensive background with SAP, going back to the R3 days. So, this is going back a little bit, but I know some of the lessons still apply today.

The thing with SAP is, as Shawn said, it’s one of the — maybe the largest ERP out there in the market. And it's also I would argue the most tightly integrated, meaning the modules and the business functions within SAP are all very tightly linked together, which is great, but with that, it’s functionally very rich, very deep environment, so you can very easily get lost in it.

So, all to say, that scope management — scope control — strong project, governance is a very important part of any SAP — major SAP — initiative, in my opinion. Because you want to stay focused on the areas that are most in the functions and the areas that are most important for your business needs and not get lost in all the functionality.

Just as an example, myself to a degree and others back in that time — you could take just the order management pricing capabilities and kind of make a little career out of that. Not as much anymore, but it's that rich and it's that in-depth and there's that much functionality there that it's very powerful — the functionality — but it's very easy to get lost. So, anyway, enough said on that.

The other thing I would say is just be prepared to try and be open to adopting software-enabled business processes, specifically, SAP-enabled business processes. They’re best of breed over time — Shawn, 40 years — over time you build up industry specific processes and best of class ways of executing business processes. And you want to take advantage of that, but you also want to avoid having customizations and a significant amount of complex enhancements in your environment.

Again, my opinion, but that's if you look at that continuum of, “Do I adopt what's in the application and change my business processes to match that? Or do I change the application to meet my business model? Try to go more the other way because it'll save you a lot of heartache down the road, and I would argue that you'll gain a lot of business value out of that.

Finally, I’ll just let you know upfront that this is my opinion, but SAP implementations can be — they don't have to be, but they can be and traditionally have been a little bit painful, a little bit high risk. Especially if you adopt that process, I just said you're going to have business change in your environment, but my advice would be to phase it a best you can and also give it time, and what I mean by giving it time — I have been directly involved with implementations that we delivered and they were challenging, and they were a little painful, but overtime they're still there for one thing, and they've been adopted by the whole corporation in the example I'm thinking of. So, you just have to give it time to burn, and you have to give it time to work through the change and really optimize the environment and reap the benefits of it. So, those are my nuggets there.

Juliette: Yeah, no, that's great. Let me ask you this, because I really — as we know am not technical and know nothing — is SAP the largest vendor in the world because — is it more user friendly than the others? Is it just more widely adaptive than others? Why do you think it's the largest?

Shawn: Go ahead, Doug.

Doug: Good question. Do you want you want to take that, Shawn?

Shawn: No, go ahead.

Doug: I was just going to offer my perspective on that. They just had an extremely large market dominance early on and so I think they have a huge installed customer base out there. And we're independent of any — here at EAG we’re independent of any of the vendors — but I mean, it's hard to argue that the functionality that's in SAP and the level of integration. It can be a little bit like the SAP bubble, it can be a little bit like that, but I think it's gotten better in more recent versions of the package, but it became a very dominant package back in the late 90s and early 2000s. It’s shifted a little bit, but once you get that installed customer base, it's an industry and it's just open there.

Juliette: We've learned through this that people tend to have a platform and stick with it for as long as they can. And then sometimes they're forced to have to make the decision, right?

Shawn: Yeah, that's spot on and I think it's interesting — I'm in Florida and I don't think I'm that sunburnt, but that’s why it looks like I've been sitting in the sun tanning a little too long. Although we were at Universal Studios, which was pretty cool, it's good to see everybody out there — but the bottom line is that SAP started, I want to say in like the 90s, the early 90s, and got a lot of market-share globally. There's a lot of very large organizations, global organizations, that standardized on SAP, and they haven't moved off, like Doug said.

So, it's more of a global play, not to say that Oracle or the other apps aren't either, but there's a large dominance of that product throughout the world, but I would say, too, that the channel that supports SAP is really large. A lot of organizations support that product — probably because they make a lot of money at it — versus a smaller product, like NetSuite, where there aren't frankly this — the channel is tiny compared to SAP and that's amazing to think about because we're in the NetSuite channel all the time talking to hundreds of different people. SAP is a magnitude bigger, so I think that's probably what I would say. I mean, you can certainly look online and see what folks are saying, but in my experience, I think SAP really dominated internationally was able to grow through getting the world largest organizations running SAP. I think that was an ad back in the 90s, the world largest organizations run SAP, I think it was — maybe it was Oracle — but that's what I think is the big difference, Juliette.

Juliette: Well, thank you for that. I know that's a big question to ask. So, thank you for taking a stab at it. So, Shawn, I'm going to continue with you. What insights do you have — or what have you been hearing about SAP legacy products right now?

Shawn: Again, a very good question.

There's a couple things. We had a client that was running the ECC 6 product that we worked with late last year — let me check the date on that one — I take that back. It was like mid-summer, so less than a year ago and we reached out to SAP to understand what was happening with that particular version of SAP.

And it's interesting to try to get from a vendor, “Okay, so you know what's your what's your maintenance window here? Like what are you really doing for this product? When are you going to stop supporting it? Oh well, we talked about that with your Oracle stuff, right? Well, there's this sort of rolling period on that and — okay, but what does it really mean?”

And at that time with SAP ECC 6 — which again is sort of like the second oldest version in the big SAPs. They were saying they were going to support that particular product through 2030. Now I'm looking through some notes literally as we speak, because this stuff changes all the time. And in a good way that the vendors will tend to push out their maintenance windows longer and longer.

Well, I guess the e-business suite window that we were just looking at for a client, Doug, that one didn't get pushed, that one’s going to end this year. But there's definitely an urgency around support — SAP has the urgency to support customers that are on their existing products. You just have to be very cognizant of what the dates are that the maintenance is going to stop, and you want to make sure that you have a couple years before that, before you just decide to make a change. So here I finally found this, that as of 2027 SAP will stop supporting and delivering service packs for ECC 6, so that was the data we had in August 2020, so that was at the 2027.

So, this particular client, who's a smaller company running on SAP — we basically you don't really have to do anything yet. You could go do a selection just to see what's in the market. You don't have to switch, but go look in the market, go see what other apps are there. Go see what else is happening, including starting to put a little bit of pressure on your SAP incumbent partner to say, “We're going to make a change here. What are you going to do to help us with this upgrade, right?”

And so you know, that's what we're seeing from a lot of clients that are like, “Okay, I've got a window here. That window is shortening, right?” I can't tell you for the R3 — SAP R3 — what the support window is for that. But it's going to be shorter than — actually, I'm just going to quickly look here. I mean, it's a little bit hard to say, but I'm seeing some information here, literally on SAP support plan — or support portal — that it’ll be available for three years from the beginning of 2028 until the end of 2030. That's where I got the 2030 from.

So, it's a little bit tricky for sure, but the key things are these, and I'll stop yammering on.

Two of them. The first one is do find out what the window is and do be aware of it, and you really want to get onto the SAP portal and make sure if you're a customer that you're registered, you're getting regular updates. Stay on these windows for sure — the maintenance windows — know what they are.

Two, you give yourself five years and I hate to say that. I'm like, “Oh, God, five years. That's a lot of time.” But you know, five years to do something. So let's say 2027 or 2030 is the date whatever your date is for your particular version, work back five years and then you need to start looking in the market. You need to start looking at what you want and need and what's important for your organization and then start looking at the apps that are out there so that you have some feel for what's going on, right? Like, is Workday an option for you or not? If you're on SAP, you may be most likely a manufacturer, a distributor, a hardgoods sort of a company, maybe not services — although it definitely support services — but, Workday is not the right product for that. Maybe IFS or QAD or some other products are — the N4 products.

So, you want to have some familiarity at least know your options for when it is time to change, so then the second part of number two is start the dialogue with your SAP partner now and you'll see that the SAP S/4 HANA adoption is going to go like a hockey stick. It's going to go way high. It really has been pretty slow to being adopted, that's the new version of SAP. It can be in the cloud, it can be on premise, public cloud, all kinds of clouds — rainclouds, wherever. But you want to just also understand what's happening or what your partners are doing with that — what they're really doing with that, not just, “Oh yeah, we're upgrading people left and right.” OK, how many upgrades did you do in the last six months? And can I call three of them? — “Oh. Well, I have one person you can call.” “Why is that?” “Well, I only did one.”

Consultants — and I know — have an ability to sort of weave a tale in a way that makes you think something, even though they really didn't do it, but they kind of did it. They're not lying, but there may be embellishing, and this is an area where we see that a lot of customers are just looking at another report there where this SAP specialist — I don't know where he got his numbers from — but he was saying that 11% of SAP customers have upgraded to S/4 HANA, this company Avantra. I just found them online. I already got that number.

But I do think that's about the right ratio from the companies that we're talking to, the industry analyst calls that were on. I think that's going to change with this SAP rise that we'll talk about a little bit later, but those are the two things to keep in mind.

Again, just that we have super fast, so make sure you understand your dates, what's happening with those dates and watch those dates and then to get out to the market early. See what's out there. Get your needs identified. The types of solutions that you want. And then start getting your understanding of what the options are in the market before it's too late.

Juliette: That's great advice. So, we had a question come in and it says, “Is SAP still code heavy?” Doug or Shawn, do you want to answer that?

Shawn: Doug, do you want to talk about that?

Doug: I guess you could make an argument that it is a little bit, but what I'm what I'm seeing that they're doing more lately is — and just to try to, I think move away from that kind of that perception in the market and things — is that they have these industry cloud solutions.

And Shawn, we're seeing that with our client just literally today and this week. They have developed preconfigured cloud solutions that help accelerate implementations and also presumably help minimize some of the code, a back in the ABAP days, it was really closed off. The ABAP development, I think, maybe that's what the person sending that in could be referencing.

But you know that I would say yes. There's probably still some of the proprietary code kind of vibe with with us for S/4 HANA even, but I think it's more open now than it used to be, and I think there isn't as much need for heavy customizations with — like I said, some of the things they're doing with the industry cloud solutions and the technology platform in particular, but that's my take on that.

Shawn: Yeah, and I would add to that. SAP as a product is probably bigger across the board, infrastructure wise. So you have — we’re getting some notes in here, too — but, the point of it is, is that there's a lot of tools in that platform. There is a whole lot, whereas if you went with Intacct, which doesn't have as many tools. SAP probably has ten to 20 to 100 times the amount of tools that Intacct has.

That's a great way to actually think about it, because if you're implementing a product for a company like — I’m trying to think of some of the larger SAP deployments that I'm familiar with — but, a large automotive manufacturer we’ll just say, down to a mid-sized professional services firm that's global or whatever, there's a lot of tools and a lot of infrastructure required to run that many transactions for you know, tens of billions of dollars for revenue. As well as functionality to — or tools — to meet the functionality needs of different kinds of industries as well. So, reports and analytics and the HANA database structure itself is sort of this new concept in ERP moving away from relational databases and into different kinds of structured tables.

I can get out of my realm of expertise very quick there but the point of it is — well, we've got a client that I'm thinking about right now that their business processes, even though they're in the utilities industry, which is a very SAP-centric industry, their business processes are actually pretty straightforward. A lot of the really hard stuff is handled by a line of business apps, best of breed apps that they don't want to change.

So, now we're really just talking about projects, MRO (maintenance, repair and operations), financials, maybe even HR. And maybe we don't maybe need the platform of SAP to do those things, even though they're one of the top apps for that industry. So, it always goes back to look at what you need.

And there are instances where that tool set is exactly what a client needs to meet their specific business, or even their technical requirements. Like Doug said, we're always going to drive clients towards packs, industry packs or industry solutions that sort of come out of the box for sure.

But you know, sometimes you need a semi-truck. And SAP has all the tools in the back there that you could use anything for other times — hey, I have those little like little kits from Home Depot for my tools that are not very manly, the same one my daughter uses in college or in high school, but that's enough for me for now. Doug, on the other hand, he's actually the real handyman, he's probably got a lot of tools. Mine, not so much. So, we have to really look again. But the good news about SAP is it's all there, but the other good news that every client we talk to who is on that platform needs to know there are other options in the market that are very real, whereas even five- seven years ago they weren't.

Juliette: Well, with that said, Doug, let me ask you, considering working with our current clients, what are you seeing with SAP in the market right now?

Doug: Yeah, just some real recent data on that. I was very surprised recently — we were working with one of our clients analyzing their needs and going through a selection and they were just kind of on that cusp of what you would consider to be too small for an SAP client historically. They just seemed to be a mismatch.

But, SAP came in very aggressively. They came in with S/4 HANA. They came in with some pricing that was that was attractive. But, as you alluded to Shawn, it's trickling up a little bit. But still it's very competitive even with some of the high Tier 2 or low Tier 1 applications we deal with.

So, I think my point is, I think they're aggressively going at the market segment that's a little bit more mid in size in terms of pricing and also in terms of, like I said earlier, the industry solutions and the technology platforms that that they have to offer.

That's sort of what I'm seeing right now.

As a difference — I mean, back in back in the old days they would never approach those size companies that the application was just too large and frankly the opportunity for them was a little too small.

But I think they're seeing advantages and they're being aggressive at how they're approaching that side of market.

Juliette: Yep, makes sense.

Shawn, you briefly touched on the subject of upgrading. Can you talk to us a little bit about Rise with the SAP program and some of the pros and cons that go with?

Shawn: Yeah, you bet.

And the details are continuing to come out as we speak but from what we can surmise, Rise is probably the most concentrated all-vectors-aligned towards getting clients onto SAP S/4 HANA that we've really seen to date.

Again, like I said earlier, you got a company with almost unlimited resources that has a cloud solution — actually there's two cloud solutions. By the way, I should take a quick half step, there's three platform solutions for SAP on the ERP side.

There's all kinds of other products, of course, but there's the SAS S/4 HANA, there's SAP ByDesign, and SAP Business One.

And Business One is targeted towards organizations, companies that are maybe $25 million and under, and I'm sure some Business One partners would say, “We've got clients that are running it for $100,000,000.” Okay, okay, you got it.

Then there's ByDesign is maybe around $100 million, maybe $250 million, and then the we see the 4 HANA $250 million and above $250 million in revenue or above. So, it's the big one, and it's usually much farther above.

And the cloud for SAP, in my experience, it's been interesting, because when you have all these resources, billions and billions of dollars going into R&D, you would think, “Oh hey, I better have a cloud solution so voila, here it is.”

Well, they've had some misfires over the years. They haven't had the adoption like they expected with 4 HANA. And ByDesign, too, is a good product — we have couple clients running it — but even that, the partner channel isn't as big as you would expect, there's some great partners out there, some not so great partners, too. But there's good partners out there, but just not a lot of them. So, you look at the last five, six, seven years while all the other products — everybody else is really accelerating their cloud strategy. I think SAP — from our view, with more midsize organizations — is really starting to get it and to get a story in place and an executable strategy with Rise, because the way I understand it is that Rise takes this approach of, there is the S/4 HANA cloud product — because you can get S/4 HANA on-site on-prem.

Or you can do it in a private cloud, but this is more of the real, in-the-cloud and the cloud providers you could call hyperscalers, but those types of organizations, Amazon, Azure, those types of organizations, they all have an offering for SAP — now we've done some work with Rackspace, Rackspace does a lot with SAP, too. So, they’re sort of like, “We're going to get you the cloud version of SAP, which also changes the licensing, the subscription, and pricing has gone down, like Doug said, it's just for the software, so that's good. Then there's sort of a process-analysis-view using an acquisition that they made from some business process management tools to focus on business process. Like Doug said, let's go with out-of-the-box processes, industry accelerators, and that. So that's a big part of it.

Then the partners are coming in as part of this implementation and making it easier for companies to make the upgrade. There's probably a couple other pieces to it, too. But, I just think that there's — SAP is really coming to grasp with our customers want more in order to upgrade. And when you have a maintenance stream that's as big as SAP’s, it's sort of hard to change. I'm thinking of an SAP executive listening to this call right now saying, “Hm, is that right, Shawn? You don't know what you're talking about.” And I would say, “Well, I don't know because — okay, where are we at with cloud adoption for ERP?” If you look at HXM, CXM, there's other products and the SAP Concur, which also owns TripIt, so there's other products and cloud-based applications, Ariba, there's other great cloud-based apps that have been out there forever, but we're talking core ERP.

And, I think we would come to some agreement to say that there is more focus on why it's important to have a really strong cloud offering today, and I think partly is because Oracle is all in on cloud. Everything they sell is cloud, Workday, pure cloud where if you make a change to the platform — which you don't have to do that often, you can do tags and other things — but you make a change in that platform. Everybody gets it, pure clouds.

Anyway, it's sort of like — I view Rise as pushing the chips in that SAP is doing to say, “Okay, we are all in on cloud. We've got the process view, we've got — like I'm looking at something called “what is included in rise with SAP” on SAP website? Go look at this stuff. We do this often. Technology cloud credits, so they're actually thinking what it's going to take to take a customer who is in an on-prem. deployment and put them into a data center, a hyper-scaler because those costs are significant.

So let me let me just take a half a step back here, that the move to cloud — Oh, it's wonderful, it's great and blah blah blah — okay, I get it, but when you go to like Azure there's monthly charges that you're going to be charged now that you weren't before. “Well, that's because we don't have the hardware and the people to maintain the hardware and the environmental software and all that stuff.” That's true, but I already paid for that. And I'm used to upgrading those servers and I got a bunch of people that support this that are doing just fine today, so you’re telling me I can let go of them? Well, no, you still need them. So, I'm going to still need the people? I've got these servers that I use for other apps, not just SAPs, so maybe I can get rid of like five physical servers that are running a bunch of virtual machines, but I still got 50 other servers.

Juliette: Right.

Shawn: Now I have to do this monthly charge? No.

And that has been the dilemma that I think SAP's been in, so I think that's why they're going all in on what we do to give credits to clients to get into the cloud, get the process that their business processes said, have a product that is truly, based on industry practices, best practices in that. So, that's my in-the-trenches view of it. Again, an SAP exec. would certainly change some things that I'm saying, but I think that's really where it kind of comes down to. So, I'm excited to see more. I really am. I was on an industry call earlier this week actually and I gave SAP a high ranking, because I think I'm seeing the right moves being made to actually start getting some more market share on cloud-based apps from SAP with this Rise, that's what I think is going to happen.

Juliette: We’ll at least have the option for it. Even if someone decides they want to stay on-prem., at least have the option for a cloud solution for those who want it, whether there's a charge or not, right?

Shawn: Well, right, but there is an option today. Just folks are like, “Why would I do this?”

Because of the reason I just said, and I have to redeploy SAP? Are you crazy? I almost lost my job the first time, why would I go through that now? That’s why I said that the options are always there. They have been there, but I think it's just becoming more client-focused on doing it, not just “Hey move to the cloud!” Like, why would I risk putting my child in a crazy ride at the roller coaster if there's —last time I was there it was crazy. People sort of get keyed in on an upgrade of SAP, too. Let's not forget that.

So, I that's what I'm saying that SAP’s really trying to understand that experience for customers and doing something about it.

Juliette: That’s what they need, for sure. So another question came in, “Is SAP ByDesign what my SAP All-in-One used to be?”

Shawn: No, it's not. So, All-in-One was sort of a — I think it was, like Doug said earlier — I think it was an attempt to take the ECC version of SAP, the big version and templatize it for specific industries and I think the goal was to target that towards mid-size organizations.

So that was on the I, I think. Again, I think it was the ECC platform, it was after R3 but certainly before 7.

So ECC — whereas ByDesign — totally different code base that was purchased by SAP. It’s actually a multi-tenant software as a service deployment, so it only runs with the SAP cloud license. So, two separate apps.

Juliette: Okay. So I think to wrap up, if we can just summarize today's topic. What can — I'm going to ask this to both you and Doug, Shawn — what can you offer as an outlook for where you feel SAP is headed in the future?

Shawn: Doug, do you want to take that?

Doug: Yeah. I think if you are — I think where they're headed in the future is just — they'll continue to maintain their existing customer base work through as much as I can, work through the transition that I think they will come in the next — as we were seeing in the dates that were presented earlier — in the next, probably five years or so be a little bit more aggressive on moves to S/4 HANA. Which the database performance on that is supposed to be really good. And I have some first-hand experience with that.

I mean, there's no reason — I think you touched on all the various options for cloud versus on-prem. versus hybrid. I think it's a good product and I think they're going to be more aggressive in moving their customer base in that direction in the next five years.

You need to have it on your road map, need to have be thinking about it now and not wait. And then I would also say that I do see their customer base changing a little bit as they do the things we talked about earlier — approaching more mid-market companies and making inroads into that segment with their core product S/4 HANA. So, I see them being more approachable — that's the way I saw our latest interactions with them.

So, I would say if you're looking at it — if you're not on SAP now and you're looking at other options — I mean, I wouldn't be afraid of it. I would reapproach them if you haven't talked to them in a while because it is a little bit different experience than it used to be.

Juliette: Shawn, can you speak to that a little bit?

Shawn: Yeah, I think I would echo exactly what Doug said.

Talking to customers on R3 and the ECC platform, like I said, has been a little bit like, “Oh I can't blame you. I wouldn't want to switch either.”

Oh yeah, I mean just memories and stories. How much of it's real? How much of it isn't? That's where it gets pretty interesting, like what's really going on out there?

But what's really going on, like Doug said is, I think there is a shift. I think SAP is interested in — and willing — to take responsibility for a true sort of desirable cloud strategy for their customers. What can they do to make it desirable to move because, as we've talked about before, a lot this summer, Juliette — Juliette's like the expert in cloud ERP, which is amazing now and she always says she isn't but she is —but I think you asked this question, but cloud-based software, software that runs in the cloud solves a major problem that many, many SAP customers have had in the past which is upgrades.

They would customize and they couldn't take the upgrade versions of the product because it would blow up their instance. Being in the cloud helps for sure with that, but mostly because you have to take an upgrade, some of the vendors don't require it, but eventually they do. But the bottom line is that the cloud deployment is a much better, more maintainable experience for the software vendor to maintain their apps in the future.

And so, there's a lot of benefits to the vendors for doing that. And then customers started going on the coattails of that. Lots of benefits as well, too, shorter term investment — there's a longer-term dollar that you put into it — but it's easier to get into the products and you don't have to have a huge IT team and lots of servers and all that stuff.

So, the value proposition of cloud is there. I think SAP is getting more realistic about why their customers haven't gone. I think they're actually really making a difference. I think their show “SAPPHIRE” is happening right now as a matter of fact.

So, they'll probably be some — like literally right now — so there's probably some interesting announcements that come out about that.

So, the key point I'm really hammering a lot about this today, but it's really important is that SAP customers, of all of our customers, they have to be aware and responsible to understand what their real options are because it may feel like you don't have any because you don't want to go through that upgrade and lose your child on the roller coaster — or whatever I was trying to say earlier — but, you can get into other apps, maybe even smaller apps, but also again SAP is making some real movements.

Maybe your partner is not telling you what you need to do. You need to find another partner then. Call SAP.

Ask someone else to work with and get some really good insights. They’re there, they’re definitely there.

Again, I have a really good feeling for SAP, for the customers that are on that product — again, I think there's some great options they're not even aware of today, especially as some of the other products like IFS and Infor get their cloud strategies really clear frankly.

But then also, like I said, SAP is going in the right direction and I think this Rise thing we're keeping a super close eye on that, and we'll find out to here very shortly with the client that we're in the middle of — we’ve downselected to SAP and Microsoft, like, when does that ever happen? Usually they're in different categories, but it's a $300 million on their way to $500 million on their way to a billion firm. And so it's like, are they going to be a big one? Are they going to be a little one? How much time do they need? So there's a lot more options for customers to really keep in mind.

You're not a victim to your old SAP environment. That's the key thing.

Juliette: Not being held hostage, right?

Shawn: That's it.

Juliette: Yes, knowing what your needs are helps you make better decisions, right?

Shawn: Yep, that's it.

Yeah. Well, Doug, Shawn, thank you for your time and as always, sharing your very valuable knowledge and experience. I appreciate it.

Shawn: You're welcome, thank you.

Doug: You're welcome.

Juliette: Yeah, thank you. And thank you everyone for joining us for today's call. Please let us know if you have any questions. We're happy to help in any way we can. You can call us, email us, whatever works. We're happy to help.

Please join us for our next call scheduled for Thursday, June 24th when we continue our legacy software review focusing on SAGE.

Please go to our website erpadvisorsgroup.com for more details and to register.

Narrator: ERP Advisors Group is one of the country's top independent enterprise software consulting firms. Advising mid to large sized businesses on selecting and implementing business applications including ERP, CRM, HCM, business intelligence, and other enterprise applications which equate to millions of dollars of software deals each year across many industries. This has been The ERP Advisor.