SAP Sapphire 2013 preview: Five big questions

Can SAP get its cloud delivery models down? Is the maintenance hike worth it? These are among the burning questions as SAP's annual Sapphire conference kicks off.
Written by Larry Dignan, Contributor

The SAP Sapphire conference in Orlando this week will largely revolve around two key themes: Analytics and cloud. The latter topic is critical since SAP has to figure out how to navigate it better.

Like its rival Oracle, SAP has bought its way into the cloud via SuccessFactors and Ariba. SAP also said it would put its HANA analytics platform in private clouds along with SAP's BusinessSuite.

However, cloud deployments will remain a key topic. After all, SAP's entire portfolio has to go cloud at some point if only to fend off Oracle's promise that Fusion apps can be deployed any way a customer wants.

Barclays analyst Raimo Lenschow sums up SAP's core vs. cloud debate.

SAP is fortunate in that its strongest position is in core ERP/Financials, which has so far resisted the move to the Cloud, due to its complex and sensitive nature. However, disruptive technology tends to be cheaper, simpler, smaller and frequently more convenient to use. This has resulted in higher adoption of HCM and CRM solutions, particularly at the edge of the enterprise. However, as Cloud solutions are becoming more sophisticated, user adoption should increase and also ERP will likely feel some pressure, particularly at smaller enterprise or subsidiary level. This means that after a long period of benign competition (from Oracle), SAP will likely begin to face increased competition from vendors focused on maximizing revenue growth and willing to settle for lower margins.

In other words, SAP needs a few more cloud answers soon.

Lenschow has a handy chart illustrating how much time SAP has to answer the big cloud questions.



Among the other key questions:

Does SAP have the infrastructure to deliver its products via the cloud? Dennis Howlett at Diginomica recently raised this issue. SAP has said it has seven data centers around the world. It's unclear who owns them. Cowen analyst Peter Goldmacher also wondered about SAP's cloud scale regarding HANA:

SAP has clearly invested in HANA Enterprise Cloud management tools and has built out its initial 500-server farm. However, if SAP were fully committed to delivering the product on line, one would expect more than 60 of its 1,300+ HANA customers to be trialing the on demand platform, and we would certainly expect more than 500 servers in its initial deployment. Also, despite this relatively seamless transition for one customer, we are skeptical that adoption will be as quick as SAP claims.

Are the maintenance costs worth it? Every enterprise customer knows the drill with SAP and Oracle. That drill: You buy software. You pay a maintenance percentage that tends to go up a bit like college tuition. If maintenance costs aren't a recurring theme among customers they should be. Sapphire is the perfect place for SAP to outline exactly what customers get, the value of maintenance and take customer feedback. This issue is critical given SAP plans to raise its support maintenance rates.

Is the time to install SAP worth the effort amid cloud rivals? SAP has been pushing rapid deployments, but systems integrators have to play along and would have to forgo billable hours. Vinnie Mirchandani also noted that SAP customer economics need some serious improvements. To wit:

  • SAP customers pay more for hosting relative to other applications.
  • SAP customers pay integrators more for configuration and support. 
  • Upgrades are slow to come.
  • Cost per user is high.

Mirchandani's bottom line. SAP may address time with deployment but needs to focus on long tail costs as well.

What about mobile and user interface? Howlett noted the following:

Anyone who has worked with SAP applications already knows that UIs have long been a sore point. In some deals, modern UIs win deals, even when functionality is inferior to SAP’s offering. How SAP addresses this will be telling. My hope is that SAP drafts in designers who ‘get’ what modern apps need to look like.

Sapphire is likely to bring a lot of mobile talk. Mobility needs UI. The problem is that SAP and other large enterprise vendors are playing catch up to mobile first startups aiming for various markets. For instance, Tidemark has an interesting infographic approach to delivering data. Would you ever see that approach from SAP?

Editorial standards