SAP: Are its customers happy?

SAP's financials are solid but are its customers satisfied? Only through keeping them happy will the European software giant be able to enjoy continued success. Quocirca's Dale Vile goes to the source to find out.

This week SAP took some knocks in the press after one of its major customers, MFI, cited problems with an SAP supply chain implementation as a reason for poorer than expected financial results. Such stories occur from time to time and, not surprisingly, the media laps them up.

For every horror story, however, there are many success stories that we never hear about. And since all of these projects are based on the same family of software, common sense tells us that other factors - such as the way these implementation projects are managed - are the most likely causes of failure.

Despite these knocks, SAP continues to show strength with regard to financial results and market positioning - as was highlighted in silicon.com's recent vendor dossier.

But, as the saying goes, past performance is not always a reliable indicator of future success. Siebel Systems, for example, saw its skyward growth turn into a nose dive over the course of a relatively short period of time.

For the past three years, Quocirca has monitored SAP's health by interviewing over 100 of the largest SAP customers across Europe on a six-monthly basis. We ask the customers about their investment plans and the rationale behind them, as we find this is a good way of assessing the future potential of a vendor.

This research has consistently revealed a high degree of commitment to SAP amongst its customers. Unlike Siebel, an investment in SAP is viewed as a strategic rather than a tactical decision by most customers. We have observed that SAP customers continue to broaden their use of SAP year on year - not pouring money into out-of-control open-ended projects but into structured, incremental rollouts.

Of the 111 SAP customers Quocirca interviewed in June 2004, around three-quarters told us their level of ongoing investment would either continue or increase over the next two years. Less than 15 per cent said it would decrease, with the remainder not being sure. This was true of investment both at the overall programme level (including services) and on software licences, underlining a healthy outlook for SAP in terms of software revenues from its customer base.

The reasons given for ongoing investment included bringing new subsidiaries or departments online and continuing rollouts to users in existing business areas as part of a phased implementation programme. Increasing deployment to 'occasional' users was particularly prominent. The rationale given was that allowing more employees to participate directly in automated business processes leads to additional operational efficiency gains and more accurate business visibility - two of the most common reasons for investing in SAP in the first place. In line with this theme, the most common driver for additional investment was increased access by field users via mobile technology.

Looking at the challenges faced by SAP users over the years, integration between SAP and other systems has been a continuing theme. Traditionally, SAP systems have published proprietary interfaces that everything around them would need to adopt in order to communicate. This was to a degree a limiting factor on growth within existing accounts and certainly an Achilles' heel often exploited by competitors in bids for new business.

As a result, SAP has been investing heavily in R&D to move its solutions onto open standards and a more service-oriented footing. The NetWeaver platform, which underpins the latest SAP offerings and allows easier integration with J2EE and .Net environments than previous products, is the result of this effort.

NetWeaver is probably the single most significant product-related development to come out of SAP in recent times and customers have responded well to it. More than 70 per cent of the customers we surveyed regard NetWeaver-related benefits as compelling or significant in terms of operational cost reduction - particularly in relation to building and maintaining interfaces to other systems. Almost 65 per cent said they also expect NetWeaver to significantly reduce the cost related to extending and/or modifying SAP functionality.

The findings of this research confirm that SAP is in the enviable position of having a strategic relationship with most of its customers. In addition, its customers acknowledge SAP is listening to them and making the right moves to make their lives as easy as possible.

With such a firm position in its customer base and Oracle's antics with PeopleSoft continuing to undermine the credibility of the competition, the future does indeed look promising for the European software giant.

For more information on the research outlined in this article, please contact Quocirca's Dale Vile at dale.vile@quocirca.com