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SAP’s Slipped Goals Have Businesses Looking for Alternatives

By Aaron Ricadela

In Europe’s top automotive market, a huge exporter of cars, the trade magazine Automotive IT in December noted SAP is offering more services for so-called connected cars, including software to help drivers find parking spaces and pay for petrol. The magazine argues though that SAP systems have become highly complex and led to high-profile projects that have fallen short.

Automotive IT cites the well-known example of German grocery chain Lidl, which a few years ago was touting a new inventory management system from SAP (the acronym is pronounced like “Elvis” in German) that would arm it for future expansion. Last year, Lidl gave up on the project after a reported investment of 500 million euros ($570 million), citing high costs and missed goals. Deutsche Post DHL, the German national mail service and delivery service, three years ago took a 345 million euro write-off on a failed SAP upgrade, tanking quarterly profit.

The trade magazine cites a study by the consultancy Resulting Ltd., which sells software to manage SAP installation projects. It found more than half of SAP projects run over budget and only a third reached their stated business goals. Code that’s extensively customized by businesses may be part of the problem, Automotive IT reports.

In contrast, the magazine applauds Oracle’s cloud data security, achieved partly by its practice of isolating its cloud-computing code from customers’ own production software.  “How relevant SAP will be in the future in the ERP market will be decided in the cloud,” said Gartner analyst Massimo Pezzini. (There’s an English version of the article on Automotive IT’s website).

Oracle is trying to take advantage of a multi-year SAP transition aimed at persuading its installed base of ERP customers to move to its S/4 Hana suite and the underlying Hana database.  It’s a big upgrade with serious disincentives within a few years to staying on older SAP technology, and businesses are considering moving some ERP applications to another vendor because of costs and support concerns.

The German press is picking up on the theme. Business weekly WirtschaftsWoche reported last month that gummy bear maker Haribo produced a quarter less of its popular Gold Bears candy than in previous years because of new software from SAP that hindered the company’s logistics. Supermarkets couldn’t stock shelves with the treat as a result, the magazine wrote. Wirtschaftswoche also cited the stories of other German companies that have encountered SAP project problems including Lidl, Deutsche Post, mail-order house Otto Group, and Deutsche Bank. One customer problem could be considered a hiccup, but so many may point to underlying technical and implementation challenges that are more deep rooted.

 

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