SAP Watch

Oct 29 2008   12:07PM GMT

SAP: What went wrong? Blame marketing, NetWeaver

JackDanahy Jack Danahy Profile: JackDanahy site expert Axel Angeli isn’t one to pull his punches when it comes to SAP and he makes no exception in discussing SAP’s recent earnings in this guest blog.

SAP has seen better times. The company’s quarterly revenues have declined and SAP is tightening its belt accordingly. What’s really to blame for the tension in Walldorf?

Deputy CEO Leo Apotheker blames the financial crisis. This is an attempt to avoid mentioning the turmoil ignited by the raising of annual SAP service fees from 17% to 22%. Customers haven’t shown the least bit of understanding for this decision. As a consequence, many customers have put their SAP purchases on hold. For example, the German SAP User Group (DSAG) decided in a common action to withhold any SAP purchases until next year.

The new enterprise support is a marketing disaster. The way it was communicated left the impression that SAP makes decisions behind the backs of its customers. Since Apotheker is the SAP marketing guru, he has turned into a burden for all of SAP. There is no one he can blame for this unfortunate move, and I have no idea how Apotheker will be able to escape from this trap. I myself am a techie and therefore feel indifferent towards Leo Apotheker; he is simply not my kin. But the analysts, also, do not seem to like him very much, which makes it difficult for him to explain his position. If this mishap would have been linked to Henning Kagermann, he might have escaped with a simple “Sorry, we meant it differently!” But the contract of the congenial, bright-minded professor is ending soon and he seems to be partially retired, like many of the old SAP crew. 

The explanation given by SAP for the steep increase in support fees is the same old story: Due to the increasing complexity of the full NetWeaver stack, the costs invested by SAP into support rose heavily and now need to be recouped. Customers see it differently. The higher costs stem only from the new dimension of components that SAP introduced in the past decade, against customer wishes.

High support costs and a high frequency of support requests are signs of low quality or a depreciation of support-friendly design. And the same products that have been under fire for years have caused the problems. These are the products that require the Java stack, with the biggest culprits being Enterprise Portal (EP) and Process Integration (PI). PI is awkward to use, costly to install and operate, difficult to examine for causes of malfunctions and no longer based on state-of-the-art Enterprise Service Bus technology. There is no time to pimp up PI into a full featured, modern Event-Driven-Architecture process engine.

In part two of this blog, Axel Angeli discusses ways for SAP to get back on track.

4  Comments on this Post

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  • Peter
    So, why did they refuse to give an outlook on Q4/2008 ? On September 24th Henning Kagermann, Co-CEO, saw SAP untouched by the financial crisis. This is an invitation to investors ! 10 days later the party was over and an unexpected steep down turn had occurred in the last 2 weeks of September ? Is this the whole story ? If you calculate this down turn from the prognosis and the figures presented, you end up with a decline of about 60%. By October 28th it should have been possible to judge the situation.
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  • Chikram Naramurthmerganahtan
    You should check out Ray Wang's blog that talks about how to rebuild the vendor-client trust factor. This is good for all vendors not just SAP.
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  • Deasún
    Axel's comment on the reason for increased support costs is absolutely correct - SAP designed a complex set-up which is difficult and costly to support but, of course, this is a problem of their own making. To ask customers absorb increased costs because of SAP's design decisions borders on the suicidal in a competitive market. Further, he is also correct that the products which use the Java stack are the main culprits; even relatively simply tasks such as patching BI is now a complex and wearisome chore.
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  • chandra shekar dasari
    Though we agree, using the Netweaver stack is bit complex with the mix & match of abap & java stack.Even its widely known that Pi dont support all the features seamlessly, followed by licenced cost of volume based messages makes the large scale customers think twice before evaluating the productsecially going for industry specigfic standards. Still if SAp needs to fulfill this gap, it needs to come up with an seamless integration components, low cost based for wider usage. Regards chandra dasari Project manager-Process integration Yash technologies.
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