How Accurate was Forbes on Oracle Replacing SAP As #1 in the Cloud?
Executive Summary
- Forbes published an article that predicted SAP would become the number one database vendor.
- We review the accuracy of this article.
Introduction
On Aug 2, 2017, Forbes published the article, Oracle’s Booming Cloud Business Could Rip and Replace SAP As #1. In this article, we will review the accuracy of this article.
Our References for This Article
If you want to see our references for this article and other related Brightwork articles, see this link.
Lack of Financial Bias Notice: The vast majority of content available on the Internet about Oracle is marketing fiddle-faddle published by Oracle, Oracle partners, or media entities paid by Oracle to run their marketing on the media website. Each one of these entities tries to hide its financial bias from readers. The article below is very different.
- This is published by a research entity, not some dishonest entity that is part of the Oracle ecosystem.
- Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on Oracle is provided by Oracle, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, Oracle pays off all IT analysts -- who have the same concern for accuracy as Oracle. Not one of these entities will disclose their pro-Oracle financial bias to their readers.
Article Quotations
Bill McDermott on S/4HANA
So it was rather odd to hear SAP CEO Bill McDermott claim during his company’s July 20 earnings call that his company’s cloud ERP product, S/4HANA Cloud, “is the #1 and fastest-growing cloud ERP solution in the market—hard stop.”
SAP CEO Bill McDermott has led an impressive transformation [+]I’m a huge fan of McDermott’s strategic vision and leadership style, and he’s done an outstanding job of guiding SAP’s transformation to the cloud—but still, that assertion didn’t seem to be supported by facts.
While SAP executives did say that more than 6,300 customers have purchased the S/4HANA product—which does not refer specifically to the cloud version, which is called S/4HANA Cloud—they did not offer any specifics on how many of those 6,300 are the cloud version. And for context, recall that Oracle said it added 868 new cloud ERP customers in the quarter ending May 31, with 200 more customers that had already bought Oracle’s cloud ERP adding more services.
SAP has many customers of S/4HANA that have never implemented the application. SAP has even fewer S/4HANA Cloud customers, which is why SAP has not released any specifics. The 6,300 number is highly exaggerated, covered in the article How SAP Uses Customer Numbers of Control Perceptions.
So in researching this article, I sent SAP via email a number of questions about S/4HANA Cloud and its cloud ERP business, and I specifically asked SAP if it could share any market-research or financial data to back up McDermott’s claim.
SAP initially scheduled a call for me to speak with Darren Roos, president of its S/4HANA Cloud business, but later canceled that call and subsequently sent answers to my questions from Roos via email.
Interestingly, Darren Roos is not interested in speaking to someone writing for Forbes when the question of support for statements is the subject. Forbes has been very friendly to SAP on S/4HANA in the past.
Here’s the email answer from Roos to my question about specific data to back up the claim that S/4HANA Cloud “is the #1 and fastest-growing cloud ERP solution in the market—hard stop”:
“As Bill and Luka [CFO Luka Mucic] said on the earnings call, we are in the early days of the SAP S/4HANA adoption curve and we are confident in our growth trajectory. In the first half of the year we grew over 400% YoY and see massive growth in our pipeline to support this continuing in the short to medium term. Our ability to simplify the journey to the Cloud for our existing customers by leveraging our S/4 code line and data model, along with new innovations through a quick-to-deploy intelligent ERP is a formula which resonates well.”
All in all, a nice summary of what SAP hopes to achieve in this strategically vital market—but it dodges the question and blurs the line between the on-premise version of S/4HANA, which has been out for more than 2 years, and the cloud version, which was introduced about six months ago in February 2017.
Right, if the comment is parsed, it looks like this:
- “Early days of the adoption curve.” (this translates into low adoption. Bill McDermott repeatedly promoted this way of interpreting S/4HANA, even though S/4HANA is between 2.5 and 3 years old. This is covered in the article The Inaccuracies in SAP’s 2017 Q2 Earnings Call)
- “First half grew 400% year over year.” (No specifics provided, and unless S/4HANA were again given away for free, it would not be possible. Secondly, this does not match with the numbers for S/4HANA provided on the Q2 call.
- “Massive growth in the pipeline.” (Future statement. SAP was asked to provide evidence for a historical statement by McDermott, and Darren Roos responds with a future statement, which is impossible to verify)
- “Ability to simplify the journey…..” (This has nothing to do with providing evidence. it a sales pitch).
None of this is what Forbes asked for. The answer provided by SAP is an attempt at a pivot.
It’s impossible for the 6-month-old cloud version of S/4HANA—which is the product that Bill McDermott specifically referenced in his remark and which my question specifically addressed—to have grown “over 400% YoY” because it didn’t exist a year ago. So that growth rate must apply to the on-premise version, not the cloud version.
Yes, but the quote is obviously deliberately non-specific. And it can’t apply to the on-premises version. In the 2017 Q2 call, SAP reported 6300 S/4HANA customers. SAP has been reporting roughly 400 new S/4HANA customers per quarter while implementing almost none of them. No matter what, the cloud customers are included in those numbers. So if we go back a year, that would be 4 * 400 customers per quarter (so 1600). SAP can’t have 400% year-over-year growth on S/4HANA.
The synopsis? Bill McDermott has zero evidence for what he stated regarding S/4HANA’s growth.
SAP Cloud Platform
We do know SAP’s Roos is extremely bullish on his cloud ERP prospects: “We provide a high level of flexibility and extensibility via the SAP Cloud Platform and none of our competitors are offering the same level of integration between cloud apps,” Roos said in his email reply to my questions. “In May, we released significant enhancements for large enterprises including discrete manufacturers, and we’ll continue our rapid quarterly innovation cycles with our August release, which will, among other things, bring Treasury & Risk Management, Contract and Lease Management.”
Darren Roos is extremely bullish because he is paid to be.
SAP Cloud Platform, formerly the HANA Cloud Platform, is not doing well at all. This is covered in the article Was the HANA Cloud Platform Designed for Cloud Washing? The statement about SAP’s competitors not offering cloud app integration is entirely false. SAP may have heard of a little company called Salesforce? SAP should look up Salesforce because they have the most integrated cloud marketplace in the market.
As for the last parts of the quotation, these are all future statements.
In his concluding email remark, Roos said, ” We see Oracle and we compete with them. And as more of our customers go live and put our Cloud ERP at their core, I’m confident this will be a true runaway story for SAP.”
I always wonder about quotes that state the obvious. Yes, SAP is aware of Oracle and competes with them. Thank you for that, Darren Roos.
After winning the boobie prize for the most obvious statement of the year, Darren returns to future statements again.
Allow me to predict the opposite, as a person not drawing millions of dollars per quarter in SAP stock options. Because all of the evidence thus far has been that SAP will not be successful with cloud ERP.
Conclusion
This article is not appropriately titled. First, SAP is not #1 in the cloud, so Oracle can’t replace SAP as #1 if SAP never was #1 at something.
Overall the article does a good job of questioning statements by McDermott. And of course, when questions, SAP can’t defend them.