The rollout of SAP S/4Hana cloud has been challenging for SAP after the recent acquisitions but it has set a deadline, by 2025, for its legacy ERP (enterprise resource planning) customers to consider moving to cloud offerings.
Even though the German enterprise giant continues to push for innovation and new technologies, its strategy on future common data models and integration is not yet clear to many of its customers.
According to research firm Gartner, SAP had a market share of 22% of global ERP market, cloud and on-premises, while Oracle had an 11% market share in 2018.
Both SAP and Oracle, biggest ERP providers, are warming up to be the world’s number one apps provider.
SAP has huge followers on on-premises ERP and very strong when it comes to manufacturing and in case of Oracle, they are strong in the public sector.
At a recent SAP’s Capital Markets Day event, newly named SAP co-CEO Christian Klein said that SAP is number one in ERP while Oracle’s CTO and Chairman Larry Ellison said at the Oracle OpenWorld Conference in September that its Fusion ERP is number one in cloud offering and holds more than 95% market share.
SAP started offering ERP on-premises much before Oracle but Ellison said its Fusion ERP will be the lever that ultimately dislodges SAP from the number one spot.
According to a survey of 270 CIOs in Germany, Austria and Switzerland, and conducted by the German-speaking SAP user group DSAG in September, only about a quarter of respondents said they were well informed about the role SAP’s product roadmap plays in their companies’ digitisation strategies, 45% partially agreed and 30% said they weren’t well informed.
DSAG had written on their blog that one major complaint is a failure to get its new offerings in the same coding language, creating additional work for their clients to get it all working together and the group wants better integration, uniform master data, advanced, stable functionality and scalability of solutions and licensing models.
Ellison said in September that Oracle started rewriting all of its on-premises applications for the cloud a dozen years ago but SAP, which acquired several cloud applications companies over the years, somehow forgot to rewrite their applications for the cloud.
Zakaria Haltout, managing director of SAP UAE, said that public cloud offering is something new, about three years ago.
- SAP to migrate all of its customers from own premises to public cloud by 2021
- Huawei has no intention to be a data centre colocation operator
- Oracle sees more UAE governments moving to the cloud platform
- Microsoft is witnessing a strong uptake for its data centres in UAE
ERP on public cloud can be challenging
ERP on a public cloud can be challenging, Haltout said, adding that customers don’t take it seriously from the beginning and due to the lack of involvement from senior management as they only rely on IT staff.
“When we meet a customer, we say that this is a business project and not an IT project. Customer should have a clear understanding of what he is looking for and without taking advantages of SAP’s best practices, then it is challenging. Public cloud limits customisation,” he said.
“We are still adding pieces by pieces of vertical solutions. Customers are expecting the same offering they get from on-prem in the cloud also, just like plug-and-play. People are comparing it with the S/4 Hana on-premise as it covers twenty-five vertical solutions,” Haltout said.
According to Gartner’s Magic Quadrant, Oracle ERP is in the leader category for the last three years while SAP is in the visionaries’ category.
Aarti Mohan, director for ERP and EPM cloud strategy at Oracle Eastern Central Europe, Middle East, Africa, said that Oracle took the best from different ERPs since 2011 they own and fused them for Fusion ERP.
“This was built specifically to run on the cloud. We haven’t repackaged our existing on-prem software and said this is cloud ERP. We built it from the ground up. We know that yesterday’s ERP was built for on-prem and for Web-based technology only and not for the new era of mobile, big data, AI, digital chatbots or blockchain or IoT. We built the cloud ERP, from the ground up, to infuse these technologies as they come,” she said.
When asked whether SAP is facing a big technical challenge to get all recent acquisitions working together by integrating them, Haltout said that more than 90% of its acquisitions are now running on Hana and everything will be on Hana platform in 2020.
“We aim to exterminate product silos and to bring greater focus and rigour into SAP’s product strategy,” he said.
“The core for S/4 Hana is the same but both private and public products are different. If customers request a lot of customisation on the public cloud, we recommend them to have it on-premises. If customers go for discrete manufacturing, manufacturing, professional services, retails and so on, then we recommend the public cloud,” Haltout said.
Moreover, he said the objective of the public cloud is to have “zero customisation”.
Regarding product integration, Chris Pang, senior director analyst at Gartner, said that some of the larger vendors have indeed made several acquisitions and even though it is one brand, it is typically many products underneath.
“There will be some integration challenges after a couple of years’ acquisitions. SAP, Oracle and other vendors have programmes to harmonise the data structure and also the security model but it will take a couple of years.
“If you Google search some of the big names, you will get some horror stories and it is not lack of integration but it is the lack of quality of integration. A lot of acquisitions made by SAP are historically designed to work outside of SAP and as well as with SAP and other vendors. The issue is the quality of integration,” Pang said.
The big acquisitions which SAP made recently are Qualtrics for $8b, Concur for $8.3b, SuccessFactors for $3.4b and Callidus Software for $2.4b.
Pang said that SAP acquired Concur [expense management] and that needs to work with ERP as well as SuccessFactors while its acquisition of Qualtrics needs to work with everything.
“So, the acquisitions have to integrate and work on multiple fronts. With Oracle, it is in a slightly different position. For the last few years, there have been fewer acquisitions but if you go back to earlier years, they did a good number of acquisitions from 2005 to 2018,” he said.
In recent years, he said that Oracle had fewer issues but they also had challenging issues before.
But, he added that Oracle now has a standard framework on how to build apps with Fusion and how everything comes together.
SAP has been slow in the cloud
Comparing SAP and Oracle in the ERP space, he said that both have the best of the breed in HR when implementing core ERP, Oracle is slightly ahead by having more ERP in the cloud than SAP.
“SAP took time to release the S/4 Hana ERP apps in the public cloud but having said that, they have a lot of ERP apps on on-premises,” he said.
SAP has had many failed ERP cloud implementations but Pang said that it takes, generally, at least a year to implement ERP or can go for five years, it depends on how integrated your business is.
Moreover, he said that a lot of failed EPR implementations are more related to expectations at the beginning and there is a lot of hype around what the technology can do and what a platform can do and sometimes it is miscommunication and poor planning.
“A lot of ERP projects, going from an old system to a new system, fail because they need to carry some old data to get reporting properly and the problem here is that the system generally has differences in the data structure. If you are bringing data from an old system to a new system, you are going to have data quality issues,” he said.
Some of the organisations bring one-year or two-year data and some organisations bring all the data to the new system.
ERP is no more an IT project
For a cloud ERP project to succeed, Mohan said that there are a lot of factors involved. In the on-prem, she said that it will take years to implement an ERP because organisations are very dynamic and certain sponsors have started the project and when the management changes after a couple of years the project is left alone or more changes in the software happen.
Moving from on-prem to cloud is 40% cheaper and faster, she added.
However, she said that if there is a change in management or the culture of the organisation or different heads in the business can’t communicate with each other, then the project takes time to upgrade.
“Every ERP needs C-level coordination to succeed. It is no more an IT project. In the on-prem, IT was involved heavily despite the involvement of business stakeholders.
“SAP came out first with the ERP suite in on-prem but in the cloud world, Oracle is much ahead of SAP and we have more than 6,500 large enterprises. Out of that, more than 60% are new customers. Our biggest strength in the cloud is that we have a connected platform instead of a separate platform for procurement, HR, etc,” she said.
From an on-prem perspective, Mohan said that enterprises own the core, database and server and they could change anything in the data model and when they upgrade since they own the data model and the customisation, it becomes little expensive and takes longer to upgrade.
“In the cloud, we have the standard capability in SaaS, protected data model for finance, HR, procurement and supply chain. Since every customer is unique and has their industry tweaks which they wanted to do it on their ERP and which is not available on the standard software, we provide them with a separate environment on PaaS for customisation, database and Java developer on top, which is linked to SaaS,” she said.
Within the cloud apps, Pang said that there is a black box in the middle and enterprises cannot go into the black box to make any major changes.
“In on-premises, the source code is with the customer and they can customise the way they want as they own the app. In the cloud, there is a standard framework and it cannot be changed for every customer,” he said.
Mohan said that customers can do full personalisation (add fields, delete fields, create reports, create workflows, configure the screens) instead of customisation within the SaaS on the cloud.
In the on-prem, she said that the customers use to change the code and do the customisation and that is why it is expensive to upgrade.
“In the cloud, we don’t allow customers to touch our SaaS data model but we give them a separate sandbox or play area in PaaS so that they can create any table or extensions they want. We kept the data model separate so that upgradation will be smooth and easy. In the on-prem ERP, customers would use 50% standard capability and 50% customisation while in the cloud, it is 80-90% standard capability and 10-20% customisation on PaaS,” she said.
Moreover, if a customer wants to move from on-prem (any older versions) to latest SaaS, she said that Oracle has a programme called ‘Soar’ where it created a set of tools that extracts all your configurations, data, setups and upgrade directly on to the cloud version.