Even when a large company wants to be forward-thinking, it’s tough to let go of what made it a large company in the first place—and sometimes that means altering plans to please long-time customers and ensure revenues are flowing. SAP’s new on-premise HCM venture appears to be just that when put in the context of survey results released last week by DSAG, the German-speaking SAP user group.
In DSAG’s survey, which asked 667 respondents (97 percent of which were SAP ERP HCM customers) about their HR software plans, 41 percent said they are sticking with fully or mostly on-premise for HR, while another 41 percent said they plan on a hybrid model with some on-premise and some cloud. That’s more than four out of five responding organizations that are keeping something on-premise for HR.
That didn’t really jibe with SAP’s vision for HR, which meant customers wanting to upgrade from SAP ERP HCM would have to move to the cloud and SAP SuccessFactors.
Problems arise with HR in the cloud in Europe particularly, where employees carry more sway in determining a company’s software choices compared to the United States, and employees are overwhelmingly saying no to having their profile data in the cloud. On top of that, there are much stricter regulations with worse punishments for employee data breaches in Europe than in other areas of the world. With those considerations, many large organizations in Europe are opting to keep employee data where the feel more control —on-premise. Have a look at this quote from the DSAG survey press release:
When asked to give a reason for their skepticism towards the cloud solutions, around 26 percent of those surveyed said they were afraid of losing control of the software – especially of individual components. For almost 27 percent of those surveyed, uncertainty around regulations, compliance and security also plays a significant role. “Where is the data being kept? Where is the data going? How do we deal with contracts? Who pays when the SAP data center goes on strike and the solution is down? These are huge questions that are making it harder for users to decide in favor of the new, cloud-based solutions. The new solution gives us more time to clarify these issues,” explains Hermann-Josef Haag, spokesperson for the DSAG HR management working group
An Information Shortage?
There’s no doubt that SAP has tried to answer those questions for its customers that are resisting the cloud, but clearly they haven’t been convincing enough. So, for SAP, it was if you can’t convince them, let them stay
Hence the announcement of a new sidecar on-premise HCM product for S/4HANA two days before DSAG’s survey results were released to the public. As a refresher, the new HCM tool will run exclusively on HANA, is expected to be released in 2023 and will come with mainstream maintenance until at least 2030—five years beyond SAP’s 2025 date to end mainstream maintenance on all legacy software.
The decision to pivot, at least partially, on previous statements about its HR software vision, which were all-in on the cloud, was not a light one for SAP. It does show how influential the vendor’s home user base can be. Stephen Spears, SAP SuccessFactors chief revenue officer, says there is less cloud skepticism in other markets.
“[The DSAG survey results] are so counter juxtaposed compared to rest of the globe,” asserts Spears in a recent conversation with ASUGNews. “If you take that across APJ [Asia-Pacific], the results would have been completely mirror opposite—10 to 20 percent have some plan to keep on premise. North America is pretty much the same.”
He expands to say that the trepidation surrounding cloud in Europe is about a lack of information, and that SAP needs to better educate on its data security practices, as well as how it has addressed GDPR compliance in its software.
Responding to Feedback
For now, it appears SAP’s information efforts have fallen short in convincing DSAG members that cloud is the way to go—so we see the move to create an on-premise HCM to keep European customers happy. Thus far, that seems to have worked.
“It is great that SAP will now offer an on-premise solution until at least 2030, providing many of our members with some real options for the first time,” says Jean-Claude Flury, the DSAG board member responsible for Business Networks Integration, in a press release.
While the timing of the release of the DSAG results near SAP's on-premise HCM announcement is certainly no coincidence, SAP’s David Ludlow, SVP at SAP Labs, says the new HCM product was in the works before the survey results, but the survey does reflect a trend.
“The new HCM solution wasn’t in specific response to [DSAG’s survey results], but definitely in response to customer feedback,” explains Ludlow in an interview with ASUGNews. “We’ve been working on this for a while.”