In The Era Of Simplification, The Complex Still Remains Complex
More than 20,000 customers, partners, and prospects are expected to convene in Orlando, Florida for America's SAP User Group (ASUG) and SAP's annual conference known as Sapphire. Co-CEO Bill McDermott hopes to close a chapter in SAP's history and open a new chapter as the sole CEO.   As the market shifts to a world of digital business and digital transformation, Constellation expects many changes to be announced, some more cosmetic than others.

The theme for this year's Sapphire begins with Simplification.  Despite this push for Simplification, conversations with over 100 SAP customers, partners, and employees indicate a need for clarity in direction, not just simplification.  Constellation attempts to answer the top 12 questions in four key areas the SAP diaspora wants answer for:

OVERALL CORPORATE  STRATEGY
1. Given very few applications and offerings for SAP to sell and that we want to buy, will SAP build new apps or make acquisitions?
POV: In order to meet its financial targets and avoid attrition of the customer base, SAP would have to roll out new applications at a faster pace or acquire at a faster rate to achieve their targets.  Many believe that SAP has not successfully rolled out enough applications or platforms that customers want to purchase.  Constellation believes SAP will have no choice but to make more acquisitions in areas where customers have been pursuing a surround SAP strategy.  Some areas include customer engagement, big data, integration, internet of things, and mobile.
Customers will watch carefully where their maintenance dollars are used to make purchases.
2. What will change other than simplification at SAP in its marketing mesage?
POV: As we enter an era of digital business, SAP is shedding the IT centric, tech marketing terms such as social, mobile, cloud, and HANA.  A concerted effort is underway to move to business oriented marketing and attract line of business leaders.  New terminology can be translated in the following manner: HR or HCM becomes Future of Work.  CRM is now engaged customer.  Ariba, commerce and procurement evolves into the networked economy.  SMB turns into Think Like a Startup. Classic LOB turns into growing your next generation business.
Customers will be introduced to the new translation at SapphireNow.
3. Does SAP still care about innovation?
POV: No company will state they do not care about innovation.  However, Constellation believes that SAP will have to acquire innovation in products and talent via an M&A strategy.  The move back to ABAP is a bad signal to most customers.  Many of the gains made in opening up SAP to the broader tech world and start up community may be at risk.
Time will tell but customers expect innovation and a trusted face or many trusted faces to represent SAP.
 
FUTURE LEADERSHIP

4. What does it mean for Bernd Leukert to be in charge of global development now that Vishal Sikka has departed?

Point of View (POV): Bernd will focus in on the global development organization.  Germany is now in charge again of core development.  Constellation believes that organic innovation will be curtailed while the focus will remain on keeping the maintenance cash cow alive.  Many partners have signaled that Waldorf is undoing the work of Vishal Sikka starting with a reemergence of ABAP.  Constellation believes that Leukert will focus much of his time on post merger integration with acquired platforms.
Customers expect to see stronger and clearer leadership

5. Why was Rob Enslin, Head of Global customer Operations, appointed to the Executive Board?
POV: Many insiders have indicated that Enslin is Bill's right hand man and a potential successor should McDermott depart.  Constellation expects McDermott to clear the deck where possible and add his chosen team to the board and management team.
Customers will want to know which cloud heads report to Rob and expect transparency on the org chart from an accountability point of view.
6. Who's leading cloud leadership with Shawn Price's departure?
POV: Currently Rob Enslin's team owns the cloud sales and marketing efforts.  Constellation expects SAP to ramp up mergers and acquisitions.  In that process, SAP plans to acquire new talent to take these teams to the next level.
Customers expect to see clear lines of accountability.
PRODUCT AND TECHNOLOGY DIRECTION
7. How do the recent layoffs impact SAP's ability to innovate and impact our ability to receive new innovation?
POV: Constellation understands that 2.5% to 3.0% of the workforce was targeted for rebalancing.  The rebalancing is in advance of skill and staffing changes.  Moreover, SAP expects future mergers and acquisitions to also add to the employee rolls.   Constellation believes SAP will gain acqui-hires (i.e. talent gained from mergers and acquisitions) who would continue to drive innovation.  Overall head count will most likely grow while SAP reallocates talent.
Clients need to know who the replacements are and that key services will not be cut.

8. What happens to the future of ECC 6.0 and the originally promised road map they made to us?
POV: Customers realize that the suite will move on to HANA.  What has not been clear is what they will pay for in that upgrade process and when there will be functional parity.  Customers want SAP to be clear on these details.  Further, customers want the industry vertical and micro-vertical functionality they thought their maintenance dollars should have paid for.  The inability to deliver critical functional requests from as far back as 10 years has been a sticking point for users.
Clients want a commitment on road map not a set of empty promises.
9. Has SAP management heard the fury over SAP Fiori?
POV: While the new products build on the user experience are quite fabulous, Constellation believes that SAP has been tone deaf on Fiori.  Many customers who have paid millions in maintenance over the past 15 to 20 years expect new user experience to be included in upgrades.  Instead, their maintenance and upgrade dollars were funneled into acquisitions that customers have to pay extra to purchase.   With few products in pipe to sell, SAP sales reps are trying to capture revenue where the vendor can and customers are not happy.
Customers are furious about the Fiori pricing and will remain so until this issue is addressed.
10. What platforms and skill sets should I focus on for SAP?

POV: SAP has done a poor job cleaning up and integrating its platforms on-premises and in the cloud. As with the multiple code bases and data models in on-premises, much confusion exists as SAP has multiple stacks of cloud from areas such as Ariba, ByDesign, HCP, HEC, and SuccessFactors.   In addition, the Sybase acquisition created a mess of mobile platforms.   Integration tools for a connected world are desired.  A common master data model is needed. A common set of APIs and composable processes are required.  A common set of user experiences is expected.
Constellation and clients hope Leukert addresses this issue of platform cleanup, despite the focus on applications.

RELATIONSHIPS WITH CUSTOMERS
11. Will SAP provide clearer direction on shelf ware and license credits?
POV: Many established and mature installs of SAP continue to face shelf ware issues.  Sitting on software purchased, not used, and paying for maintenance is a sticky and sore point for customers.  At this moment, SAP does not officially have a position other than they do not park licenses.  However, Constellation recommends an apps strategy review and contract negotiations to address these issues.  Success in reaching a win-win has been achieved by many clients.
Clients are tired of paying for shelfware and considering third party maintenance given the inability to extract concessions and access innovation.

12. Will my SAP sales reps stop their poor treatment of me?
POV: Constellation has had hundreds of interactions with customers who have dealt with sales bullying, contract bundling clauses, and indirect access audits.  Despite a pledge by Bill McDermott when he took the reins as Co-CEO to address this customer centricity issue, the memo must have been lost by many sales reps and sales management.  A common tactic by the sales team is to talk about the need for a good relationship and then bully the customer into accepting poor payment and contract terms in the contract in return for empty promises of guaranteed service levels or functionality commitments.   Customers who buy new products should read their contract terms carefully as SAP has new unbundling clauses which will make it impossible to remove products without triggering price increases or contract changes.  Constellation's advice is "Never Ever Bundle".  Finally, SAP and other vendors have stepped up indirect access audits.  This threat starts with since your system is connected and being accessed by another system we need to charge you more.  Short answer, fight back because this is not in the original terms of the license an it's just another way for SAP to extract more value on licenses without delivering value.
Clients want to be treated with respect and to have a real partnership
Click here for a good resource guide on software contract negotiations

The Bottom Line: The Burning Platform is More Real For SAP Than For Its Customers

Bill McDermott has a unique opportunity to reinvent SAP.  The road will not be easy.  The technical debt incurred over 15 years of engineering mismanagement and the need to accelerate mergers and acquisition activity must be balanced by simplification.  The work required for simplification is complex and requires a lot of rolling up the sleeves.  As with many mature software vendors, SAP will need to show how it will

• Bring customers into the digital era
• Deliver products and services that customers seek to buy
• Improve how it treats its customers
• Identify a platform that will support an accelerated mergers and acquisitions strategy and the need for future integration paths
• Show partners that SAP can co-innovate and co-create
• Improve total addressable market size

None of the above are easy tasks on their own and the combination is quite a challenge.  Customers will want proof as they have many more alternatives today than in the past.  Customers expect show not tell on the simplification messsage.  But with the huge presence and install base at risk, there is a burning platform for change.
Your POV:

Are you investing more or less with SAP?  Do you feel SAP can innovate or will it buy it's way to growth? Add your comments to the blog or reach me via email: R (at) ConstellationR (dot) com or R (at) SoftwareInsider (dot) com.
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