SAP faces more accusations of breaching on-prem customers' trust

Cloud-only innovation strategy slammed as users opt for on-prem and hosted support for S/4HANA

SAP again stands accused of breaching trust with customers by a second user group following the decision to introduce innovations in its preferred cloud adoption models exclusively.

Speaking for the UK and Ireland User group, chairman Paul Cooper said SAP faced a breakdown of trust with his members over SAP's choice to only introduce innovative features such as AI in S/4HANA — its most up-to-date ERP offering — in the cloud under the RISE with SAP and GROW with SAP schemes. Users that have implemented the software on-prem or in cloud-hosted systems would not get those updates, although they would be supported and receive other updates until 2040, the vendor said.

"On-prem and hosted customers are unhappy, to put it mildly, with the statement from [CEO] Christian Klein stating that SAP will only be releasing new innovations in the cloud," Cooper said.

UKISUG's latest member survey shows 79 percent of those that have moved to S/4HANA have an on-premises or hosted deployment. Of those that are planning to move to S/4HANA, 70 percent plan to move to an on-prem or hosted version, the user group said.

UKISUG's concerns echo those of the German-speaking user group DSAG, which covers users in Germany, Austria and Switzerland, and which also spoke of a breakdown in trust this summer following Klein's statement to investors.

Both groups fear the vendor is reneging on its commitment in 2020 when SAP executive board member for product engineering CTO Thomas Saueressig talked about giving customers a choice between cloud and on-premises deployments.

Speaker to the UKISUG conference in Birmingham, Cooper said: "Mr Saueressig didn't once say that cloud deployments came with full innovation, while other flavors of S/4HANA didn't. We were also told that S/4HANA would be supported until 2040. There were no caveats that major innovation would only be delivered to public and private cloud customers using RISE or GROW.

“Why did SAP not tell us that new innovation was only going to be available to cloud customers? Did they not think it was an important in our decision-making process? These are the questions our members are asking," he said in a speech.

Speaking to The Register, Cooper said SAP's cloud-only innovation decision could put IT leaders who got board-level backing for an on-prem ERP upgrade in a difficult position.

"As a functional leader in IT, when you go to see the CFO and the CEO to get S/4HANA project signed off — because the magnitude of expenditure means these are board-level projects — then a year or two down the line, you've got to go back and say, 'Oh, by the way, we now need to do X or Y because the events changing,' your credibility and the credibility of your function is dented. We're definitely seeing that from the membership and I think there's a bit of confusion in terms of how it has been communicated [by SAP] and what it actually means."

In September, when talking to German-speaking users, Klein promised SAP would not leave any customer behind: "We will continue to hold more than 200 ERP versions in more than 130 countries. We will localize them and we will maintain them. For that, we will spend several billions of euros to take these customers along," a translation of his speech said.

However, Klein said "strategic" innovation, such as the introduction of generative AI into enterprise systems, could only be achieved in the cloud.

When we put these concerns to SAP today, it responded: "Our partnership with each of our customers is built on trust, as many of them have made significant investments with us for decades. Therefore, we do not intend to discontinue our promise to serving on-premise customers that are either implementing, running, and building their future with SAP S/4HANA on-premise. SAP S/4HANA maintenance will continue to 2040.

"That means SAP will deliver continuous improvements, extensions, and innovations to these valued customers, inclusive of all required legal changes, as part of our maintenance commitment. Innovation roadmaps for SAP S/4HANA continue to be updated and published on"

Conor Riordan, UKISUG vice chair, said the user group understood from SAP that innovations such as AI are only being developed on the latest code-set available on the cloud version. The vendor's commitment with RISE with SAP is that it keeps customers on the latest code-set, allowing customers to access the latest innovation.

“SAP's strategy is to develop software for the latest code set, not necessarily make it backwards compatible. That adds tremendous cost. So technically, there's no reason they can't do it; commercially, they've decided not to do it," he said.

In the third quarter, SAP's operating profit was up 11 percent on the same quarter a year earlier, to hit €1.7 billion ($1.87 billion), on the back of €7.7 billion ($8.46 billion) total revenue. ®

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