How to Best Understand ASUG on S/4HANA's Cloud Relaunch

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Executive Summary

S/4HANA was relaunched. SAP has an explanation of this relaunch, which they pushed through ASUG.
We review the accuracy of this explanation.

Introduction

In this article, we will review ASUG’s article on the S/4HANA Cloud relaunch.

Our References for This Article

If you want to see our references for this article and other related Brightwork articles, see this link.

Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.

This is published by a research entity, not some lowbrow entity that is part of the SAP 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 SAP is provided by SAP, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, SAP pays off all IT analysts -- who have the same concern for accuracy as SAP. Not one of these entities will disclose their pro-SAP financial bias to their readers.

Quotes from the ASUG Article

“While S/4HANA in all flavors appears to have had a successful sales start, with SAP now claiming 6,000 customers having purchased its next-generation, in-memory-centric ERP, those buys have primarily come in the form of on-premise or managed cloud deployments.”

That is misleading. According to ASUG’s own S/4HANA Study of 2016, only 350 customers are live on S/4HANA. Brightwork estimates that the number is quite a bit lower than 350 live customers. Many of the S/4HANA implementations are either demo type systems or offline systems. ASUG knows that the 6,000 customer number is a gross exaggeration, but they published it anyway. This is covered in the article How SAP Controls Perceptions with Customer Numbers.

“The public cloud, or software-as-a-service (SaaS), edition, which was originally announced alongside the other two versions originally, has not picked up the same steam—with SAP having set a goal of 30 S/4HANA Cloud customers by the end of 2016 last May.”

And is ASUG going to explain why that is? Why does SAP have so few public cloud customers on S/4HANA?

The answer is simple. S/4HANA is not now and will not be in the future a good fit for the public cloud. The reason is that history shows us that 92% of customers, either moderately or aggressively customized ECC. However, you can’t customize a public cloud application because, at that point, it ceases to be multi-tenant. And therefore, it becomes a private cloud.

Curiously, ASUG does not explain this to its readers.

“Since August, however, SAP has put a renewed focus on S/4HANA Cloud by creating a dedicated division led by Darren Roos, who told a roundtable of analysts and reporters at SAP Capital Markets Day in New York City this week that the vendor signed up more S/4HANA Cloud customers in the Q4 of 2016 than it had in all previous quarters combined. He declined to give specific numbers, but the goal by the end of 2017 is to see the customer numbers “in the hundreds.”

SAP effectively re-launched S/4HANA Cloud this week. To be clear, this is not a new offering but rather the maturation of the product that was announced in early 2015. What the announcement does signal is SAP’s clear dedication to growing S/4HANA Cloud.

“We are gaining good momentum,” says Roos.”

That isn’t very likely, for reasons that were just covered.

SAP needs to continue to present a brave public cloud face for Wall Street. However, S/4HANA is not inherently designed for the cloud, as is covered in this article.

Pizza Chain Takes S/4HANA Cloud Leap

SAP is targeting the mid-market—businesses with above 1,500 employees but not quite at enterprise scale—with S/4HANA Cloud. Most of the S/4HANA Cloud customers thus far have been net new SAP ERP customers, Roos says.

SAP may or may not be targeting this segment, but it won’t matter. S/4HANA public cloud so far has only attracted the smallest customers. This is because some small customers can get by without customizing S/4HANA. That will be the future market that will work for S/4HANA regardless of who Roos wants to target.

“One of those net new customers is MOD Pizza, a fast-casual pizza chain that launched in 2008. MOD is currently two months into its S/4HANA Cloud Core Finance module implementation, with about another two months of work before go-live.

MOD’s commitment to S/4HANA Cloud is an encouraging sign for the product, which had previously been targeting at professional services firms that could implement, then help their own customers do the same. MOD, instead, is a 3,000-employee consumer-facing organization with hundreds of locations conducting thousands of transactions every day.”

Why is S/4HANA targeted towards professional service firms? S/4HANA is an ERP system; why would a professional services firm deal with the expense and overhead of S/4HANA unless they were managing a physical product. There is one reason why it is covered in the article, The Problem with S/4HANA Consulting Company Case Studies.

“So why did MOD go with S/4HANA Cloud above other options on the market that may be currently more mature? One major reason was a belief in SAP as a stable organization committed to growing its product.

“Some other alternatives were more advanced than where S/4HANA is today,” says Bob Barton, chief financial officer at MOD Pizza, who also spoke at roundtable in New York this week. “But it wasn’t about where they are today, but they are going to be. The ultimate selection came to the fact that SAP is a real company with a real set of solutions that has been there and done that before.”

This is a somewhat ridiculous statement. Intacct and FinancialForce, which are two far better choices for a professional services company, are also real companies with a real set of solutions. And they have also been there and done that before.

“Barton also cites the support and commitment received from SAP in the selection process, saying “it felt like we were doing them a favor” and that SAP was there to answer any questions, offer creative pricing to ensure affordability and promises to implement quickly.

Of course, MOD is doing SAP a favor. Being an early adopter is never an easy task, but MOD saw that as a positive, adds Barton.”

MOD is doing SAP a favor. S/4HANA is still not ready to implement, and MOD won’t be able to get much value out of S/4HANA, but it will be a boon to SAP to use them for propaganda purposes, which is the entire point of the ASUG article.

“If we got in early, we could influence where the product is heading,” he says. “It’s a great opportunity. We’ve got an SAP-based product, a new product that is going to evolve.”

Tiny little MOD will not be influencing where the product is heading. And S/4HANA is not a new product. It is roughly 93% identical in code to ECC. But I can see that SAP told them that it was new. Rod Enslin, head of SAP Sales, apparently tells clients that S/4HANA is a new product.

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Conclusion

As with any ASUG article, it is difficult to tell how much it was written by SAP, but this is a rather standard piece of SAP propaganda that ASUG has released. The nice thing about writing for ASUG is that SAP writes most of the articles for you.

This ASUG article receives a 3.5 out of 10 for accuracy.