SAP should provide clarity over S/4 HANA upgrades

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User Group calls for transparency over customer upgrade path to HANA product.

SAP must clarify whether or not customers will have to take the unusual step of paying a new license fee to upgrade to S/4 HANA, according to its UK & Ireland User Group.

Released in February, S/4 is the latest version of SAP’s Business Suite, and the German ERP giant boasts that customers are “voting with their wallets” by moving to it.

Most of its 1,300 users have adopted the product during a “promotion” period ending 31 December, which allows customers of existing Business Suite versions to obtain an on-premise license for S/4 at no additional cost.

However, the UK&I SAP User Group says that usually, customers who have paid maintenance fees on an on-premise product get to upgrade to the next version for free.

Vice chairman Paul Cooper tells IT Pro: “Most people’s expectation would be if they’re paying maintenance, they’ve never had to pay for an upgrade before or additional license fees for an upgrade before, so they wouldn’t be expecting to do it this time around.

“The distinction about if they’ve been paying maintenance is important because that’s effectively what generally pays for SAP’s development.”

The argument is that users’ maintenance fees fund SAP’s R&D efforts, so they should not have to pay to upgrade to a product their money helped create.

Cooper adds: “There’s a bit of clarity that needs to happen because as of 1 January, it’s not entirely clear what happens about the promotion – does it carry on, does it stop, will something different happen?”

While anyone who upgrades before 31 December will not have to worry about this, it could prove an issue for customers who see S/4 further along their roadmaps.

An SAP spokesman told IT Pro that S/4 should not be considered a new version of Business Suite, but added that users' views would be taken into account on pricing.

“SAP S/4HANA is a new product and not a successor of SAP Business Suite," the spokesman said. "It delivers simplified, optimised and extended capabilities, as well as building the core of our customers’ digital transformation programmes.

“The S/4HANA promotion will end on 31 December 2015. We are currently finalising a new pricing model for existing and new SAP customers, taking into account feedback from SAP user groups and other external stakeholders.”

Should SAP provide better incentives to upgrade?

Perhaps one reason for the offer is SAP’s desire for customers to adopt HANA products, with Constellation Research founder Ray Wang calling it “the future of the SAP platform”.

SAP's UK & Ireland MD, Cormac Watters, says as much himself, telling IT Pro: "That’s the core of that whole digital framework, so it is really big. It’s the hub, the centre, the core."

With this in mind, Wang says he was surprised that SAP has not announced any incentives to drive adoption among its UK&I users - the majority of whom are not greenfield customers.

“I was expecting the UK&I MD to announce programmes that spur people to build stuff on top and they didn’t do that,” he says.

He believes money-off offers are not the most powerful motivators to adopt new products, though.

“There're different types of incentives – there’s money but the non-monetary ones are more powerful. If you did something awesome, I'm going to sit you down with the CEO for an hour – that’s very cool,” he says.

“A lot of companies are trying to figure out 'do I do this or not?', and if you have a conversation around business value, for example, saving you money on recalls, then it’s a no-brainer.”

But the user group says that an incentive already exists in the form of a free upgrade to those paying maintenance fees, and SAP should make it clear whether or not that will continue to be offered.

One S/4 adopter IT Pro met at the conference was Hillarys, a blinds fitting firm.

Head of ICT Julian Bond says HANA was “non-discountable”, but he managed to find savings elsewhere.

“As ever you always have to negotiate hard with SAP, you need to bundle the stuff together, you need to go at the right time of year, and your partner is key to helping you do that - we got an attractive deal,” he says.

“It’s more about what else do you want at the same time. You need to put some things with it that are discountable so overall you do get the right price – they wouldn’t concur, but that would be my experience.”

S/4 HANA isn’t the finished article yet

But he also points out that S/4 isn’t a complete product yet either - meaning those taking advantage of the early bird promotion will not get full functionality.

He is moving to the “barest essentials” Hillarys needs - ERP and CRM sitting on HANA, which S/4 offers - but others might want different features to be live before they consider moving.

“Some people would say you’re S/4 HANA when you’re in a position to do Simple Finance, some people would say you’re only there when you’ve done Simple Logistics,” he says. “It’s a journey rather than an endpoint and it’s not a very clear one – there are plenty of ambiguities out there.”

Putting this into context, S/4 was only released in February, and already has plenty of customers - SAP’s global VP of S/4 HANA, Sven Denecken, says: “We have more than 1,300 customers who voted with their wallets and it’s not a question of if but when they are going to go to S/4”.

But Chris Houlder, principal BI architect at RS Components, does not plan to adopt S/4 until 2019/20, though he says the product would benefit the firm.

“There’s always interest in whatever SAP does, we look at it seriously,” he says. “Are we ready for S/4 in our business for our ERP system? Not now. With our ERP it is a bit different to our BI – it’s mission critical.

“Though there are certain features we would love to have from the S/4 suite, which would make processing data much quicker. We will want to learn a few more lessons from our business warehouse on HANA [first].”

Elsewhere, Newcastle University will not move until Simple Finance is on version 3.0 of S/4.

As for the option of hosting S/4 in the cloud, the university’s SAP development manager, Alan Cecchini, tells IT Pro: “If we ever went down S/4 cloud we’d go for the option where you retain a degree of control over having your own custom enhancements, because we do have a comprehensive bespoke solution.”

Going to the cloud

The cloud, according to Constellation Research’s founder, Wang, is where SAP wants people to end up because it can earn more money that way.

“Cloud is much more lucrative for vendors,” he says. “I pay so much more of recurring revenue, I might even buy maintenance from you - there’s no third-party cloud maintenance.”

But SAP’s Watters tells IT Pro he wants customers to decide where to run S/4 if they do eventually adopt it.

“I don’t get overly worried about it,” he claims. “I know it’s available in the cloud, I know it works in the cloud, I think the customer needs to pick.

“From the customer perspective, security is always really high on their list of priorities. Putting what they consider core business processes into the hands of a cloud provider might be a bit scary for them at this point. We have to get the customers to a point where they trust the cloud.”

More clarity

But the user group and analyst Wang see it differently.

Cooper believes SAP must provide clarity to customers who are not sure whether their maintenance payments entitle them to a free upgrade to S/4 in 2016.

Wang, on the other hand, believes SAP can attract more S/4 customers - or HANA customers - by helping them with creative incentives, like migration assistance for those considering moving to the cloud.

“A lot of it really comes down to a perception that the existing SAP base is focused on maintenance, they are focused on keeping the lights on, not on doing new stuff,” he says.

“I’m curious to see if customers are going to make the shift and if SAP is going to give them an incentive to get there, other than the discount maintenance. Because if you want faster adoption you’re going to have to prep the customer.”

Source: ITPro

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