August 8, 2017

SAP Indirect Access – ERP – Starting to Smell like a Silo?

Indirect Access

SAP indirect access is a wakeup call in understanding how the tides of enterprise software are changing – in particular ERP and software suites.

The recent court case where SAP customer Diageo was forced to pay £54m and the upcoming one reputed to be over $600m vs another customer, Anhauser-Busch Inbev should provide a good reason to have an open mind when it comes to new technology solutions. Preferably, solutions that don’t result in being sued by your providers.

The ideal would be to achieve the same objectives that ERP and software suites have promised to provide in the past but without the need to be single sourced to a single provider and without a high cost of organizational change if you want to switch your software around.

Below we take a look at what the future needs to look like and how the CIO, CPO and CFO could quite possibly reshape this future.

What is SAP indirect access?

One of the most toxic contractual terms in the SAP ERP world is that of “indirect access”.

Simply put, this is where users exchange information with the SAP software in dialog or prompt mode. The issue is not with licensed users who access the software using its UX, but with unlicensed users who may be accessing the SAP information via a third party software. In the case of Diageo, they got into trouble when they allowed customers and members of their customer support team access to SAP, via two different third party systems – ironically in an attempt to save money and improve efficiency.

“According to the text of the judgment, the drinks company and SAP had begun their software license and maintenance agreement in 2004, and came into dispute after Diageo deployed two new third-party systems in 2012.”

The result? Diageo has had to shelve out a staggering £54m (c. $71m) to SAP, doubling their typical annual outlay.

You have to wonder how well their PR team have been sleeping over the last few years.

Is SAP trying to kill off innovation?

The recent indirect access ruling potentially puts in question the future of other up and coming, more innovative P2P players such as Basware, Coupa, GEP, Ivalua, and SciQuest/Jaegger.

It is no secret that SAP, even with the acquisition of Ariba, has been losing market share in the procurement software market. (We recently also blogged about the impact of Corporate IT strategy and how it has had a negative contribution to Enterprise software innovation here.)

Whether or not their rather disturbing love of litigation will have an impact on existing P2P providers is not 100% clear yet. Looking at a typical implementation, all P2P systems take as a minimum, vendor master data out of SAP as well as other reference information such as General Ledger Accounts, Material Groups, Cost Centers, Profit Centers, etc. Does this count as indirect access?

Also, what about other portals and networks which may be pulling out purchase order and invoice data, such as Tungsten, and Apex Analytics?

SAP has come up with new pricing based on orders but it’s still not 100% clear on the actual costs and the wording provided is slightly ambiguous. Only when customers choose to adopt this will we see the true cost behind it.

Is Enterprise Software forgetting about the customer?

We have recently written about the need for innovation in Enterprise software and a big part of that exciting innovation is an open architecture.

Looking at 21st century technology companies like Google, Salesforce.com, Domo, Amazon, etc. the common thread is that you can see an adoption of open architectures allowing you to openly use their services and connect other services as you see fit. The reason for this and their huge success, has been putting the customer first. Arguably the most forward thinking example of this is Amazon when it chose to allow other sellers on their platform – the reason for it was because it was what the customer wanted.

So the question has to be asked. Do companies like SAP want to hinder innovation and have they forgotten how important the customer is?

If so, it could well be the beginning of a seismic shift away from these long established brands.

How to avoid being single sourced in an ERP or “suite”?

That is probably the question every CIO is trying to answer at the moment. Having already pumped millions into existing ERP software platforms, the dilemma is twofold:

  • Do I continue down the single vendor path? If I do, will I be in an even weaker position in 10 years?
  • If I break the pattern how high is the cost of change and impact to my organization?

It’s a tough call but if we consider pretty much anything living, be it an organism or an organization, those that adapt are those that survive and even thrive.

CIOs could well capitalize on the recent event as a trigger for changing the way they architect business systems. £54m is a good reason for any organization, and if it’s not enough, how about the $600m gun that SAP are pointing at , Anheuser-Busch Inbev.

One possibility is to embrace multiple systems as a way to be – that’s the true benefit of software as a service. If you cannot replace it easily then it’s not really software as a service. (We recently blogged about these in: Think like a VC, What can we learn from SAPs recent acquisitions, why a single supplier system is a waste of money?)

Clearly the key issue of swapping out software for any large Enterprise is the organizational change management impact. One solution to that would be in having smaller SaaS modules (from the same or a different provider) which can be changed individually. This allows you to transition in a phased approach and adapt different parts of your organizations capabilities without affecting everyone.

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In the second part of this blog, the focus will be on what the options are going forward. How companies arrived in the situation they are in now with indirect access and and how they can reshape the enterprise software landscape, make huge savings and increase efficiency in the coming years.

 

by Costas Xyloyiannis

Chairman & CEO

With HICX since its formation in 2004, Konstantinos has been instrumental in building it into a leading Supply Base Management company. He is responsible for setting the company’s strategic direction as well as overseeing the growth and expansion, strategy, planning, execution and overall performance of the company.
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