When SAP is talking about S/4HANA and their cloud offerings, the story told is mostly centered around the benefits customers can obtain. Sometimes it can be hard to even keep up with what these announcements and how and why these should be adopted. In the last years, the list grew: Fiori, BTP, S/4HANA, ML, AI, Analytics, Data, etc. Customers struggle keeping up with all the announced changes. There is a blog post 🔗 detailing the innovations announced and why customers should adopt them. You can find other articles or presentations that follow the same message: what do customers get when adopting these innovations. Why it is worth the effort and why SAP is doing this, in the context of innovations.
The authors of these articles miss however an important point. While they focus on the impact on customers, they miss the motivation from SAP to do so. Why is SAP investing in these innovations? Why is SAP spending a tremendous amount of money, people and other resouces on these innovations? The answer is not a simple: because SAP wants the best for their customers. This is not the case. If it would be, license costs would be lower, innovations be made available for lower and on-premise releases. Changes would be closely aligned with customers instead of just announced and later revisesd (again). SAP is a public traded company. Management must ensure that the company survives. The main driver for those innovations is to ensure that SAP stays relevant. If some customers are lost during this endeavor, it is just collateral damage.
Therefore, the main motivation by SAP for offering innovations is to be relevant. To stay relevant. To have a seat at the table when customers make decisions. Strategic decisions.
While the SAP partner eco-system is strong, it means comes witht a high cost for SAP. Many times SAP is out. The big SAP partners make a lot of money with services around SAP. Be it operating SAP systems, develop apps, run processes, consulting, etc. There is a lot of money made by those partners and they are deciding the (business) strategy together with the customer. SAP is just seen as a software provider. This is what SAP wants, and needs, to change. This is why they are putting out so aggressively new innovations (aggressivly marketing wise, not necessarily from a business benefit view).
The plan from SAP is working. Regarding S/4HANA, the other database vendors are out. If you want something regarding the HANA database, you talk to SAP. In case you want applications, it is Fiori. And in every app/business decision process, SAP is included: is there a standard app, are there standard tools to support the business and development? What are the BTP services available? What kind of SaaS can be used? And while this is nice, SAP is getting back their seat at the decisions table because customers are now also asking: what can I replace by an SAP software? What does SAP offer? The times where the question was: what does my partner offer is getting less. How can I achieve my outcome with partner tools is replaced by: back to standard. Let’s use what SAP offers. And this is important: even when it comes with gaps. 80% or just 70% are covered by SAP? Well, better than nothing! And this gap SAP can deliver with their standard solutions.
Next step in this process for SAP is to stay relevant, to have a permanent seat at the table. SAP won’t be able to take over the role of the important partner(s) at a customer. For this, SAP does not offer a broadth enough portfolio. But for the aspects where SAP excels - business processes in code - they can ensure to not be easily replaceable. What helps SAP here is the innovations they released are not only a challenge for customers, but for partners too. Be it a small, medium or large partner. They need to support ongoing business and the new demand created. And just like customers, they struggle finding people. People that they can place at customers as experienced SAP professionals for the new innovations. As a result of this skill shortage, customers go to the vendor, because: if someone must know how to use it, it must be the vendor, right? Of course, in case you ever had the chance to work with SAP on newer topics, you know: they also struggle finding people. From the SAP perspective, however, it works: customers is talking with SAP and making decisions together with SAP.
The BTP services show this too. SAP could have opted to mostly use standard apps. Making it easy to run the same app on different hyperscalers. Yet, this is made incredibly hard. BTP experts are needed. Still, after all those years SAP is offering a cloud serivce: they are a rare resource. You cannot simply take an Azure app experts. Even for apps that run on a standard like K8s or CloudFoundry, like CAP, SAP came up with license restrictions. What happens on BTP, stays in BTP. Knowledge exchange accross cloud architectures is limited. SaaS solutions also depend on BTP. No real chance to run them outside BTP. Even for “real” SaaS solutions, you have to deal with BTP services 🔗.
The motivation from SAP is to stay relevant. The playbook followed is to offer features customers want, expel other technologies and products, do a vendor lock-in and keep others out. SAP is performing all these steps at the same time. As an example, let’s take a business solution: SAP offers a solution, but only as SaaS on BTP. Once the data is in the system: moving it out is a task for the customer. SAP limits access by allowing only endorsed products for this. As the SaaS is managed by SAP, the role of the once important partner is reduced to opening tickets and coordinating sessions with SAP product management. When HANA was first announced, SAP executives stated that SAP loves their database partners and nothing to worry about, as the db market is large enough. With S/4HANA, the database vendor still relevant is SAP. SAP is moving its position accross their offerings from supporting a partner to directly talking to the customer and influencing decisions. Accross all sizes of companies.
SAP is playing their strategy in a smart way. It is not just: use our solution or you are out. SAP offers something. Funny enough, a solution to a problem SAP created and their customers are willingly and happily adopting. UI was terrible, customers complained, now they are building their SAP solutions UX around Fiori, and the vendor lock-in is happily accepted. Replacing the UI of a (custom) Fiori app later on with a 3rd party UI framework: a task doable for freestyle apps. And even there: good luck. For Fiori Elements, much of the UI logic is in the backend. And lose the benefit of cost efficiency and full-stack app development. Even when it’s fully about business: nothing better than being able to tell a customer that their feature request will be considered as a standard feature. This binds customers even closer.
When the strategy of offering benefit and innovations is not working, there are always legal actions possible: just look at the SAP API Policy 🔗. Or indirect access 🔗. Or ODP (SAP Note 3255746) 🔗. And while this created some noise, guess who is now discussing with management usage of AI and data accesssed stored in an SAP system? This discussion is now happening with SAP and not with OpenAI or Anthropic. OK, the self-invitation could have been more polite, but congrats: mission accomplished.
When SAP announces something and later it needs to be clarified by a FAQ document and you wonder: is this now good or bad? The happy person SAP puts on the FAQ document is not a happy customer. This is the face of an SAP executive happy to have achieved one more goal in locking-in customers. One step closer to control what customers can do with SAP solutions.
A task left here is for customers to be aware of the motivation from SAP for offering innovations and what it means going all-in. If a customers strategy is to fully stay in the SAP universe for the years to come: no problem. Everyone else ask yourself the question: what is the effort to not go all-in and is it still benefitial for you? In case you are unsure of the effort or think: going away from SAP is easily achievable. What would be the effort to ditch Microsoft Office completely from your landscape (Word, Excel, PowerPoint, Outlook, Exchange)? Moving away from an ERP system is at least the same effort.
In case the goal of the customer is to stay with SAP: you can gain a lot of business benefit out of SAP’s drive to gain back control. If you do it right, it might be even more than just a win-win situation. You might be able to get even more from SAP than they get from you.