While organisations are remaining stationary to protect themselves, and no vendor can ‘win’ the Cloud war, does a Cloud cold war emerge?
Oracle and SAP, two market giants, have been playing a long game of ‘who has the most customers?’ Amidst everything else that’s happening in the world right now, it’s quite concerning to watch this face-off. Rather than focusing on the development of new products and services, the main priority seems to be persuading investors that they have successful Cloud strategies.
In early 2020, Oracle declared plans to steal some of SAP’s larger customers. Later in the year, SAP confirmed that it didn’t happen. More recently, we discovered that “Oracle plans to roll out a broad set of industry-specific Cloud solutions starting with communications, pharmaceuticals, and financial services.” The fact that SAP and Google have already made headway in these areas is just a happy accident.
However, SAP isn’t the lesser of the two evils. When the vendor saw underwhelming third quarter results SAP CEO, Christian Klein, was keen to “promote SAP’s new strategy.” The new strategy in question involves shifting on-premise customers to the Cloud and investing heavily in Cloud R&D.
Clearly, the vendors are doing their respective bests to put themselves ahead in the Cloud war, and ‘enlist’ as many customers as they possibly can.
However, in response to recent events (and the uphill struggle that was 2020 in general), a lot of organisations are at a standstill. The pandemic, subsequent recession, and a decrease in IT spending, have all led to organisations pausing large-scale projects.
With customers unwilling to move, the two massive superpowers therefore can’t ‘win.’ Yet, they continue to fight. Has the Cloud war in fact become more of a Cloud cold war?
Two superpowers, poised on the brink. They’ve built their weapons in their own way, but ultimately made them to a similar design.
For instance, both Oracle and SAP like to sell their Cloud solutions on the idea of simplicity. That moving to the Cloud is a straightforward process, and rich in rewards.
But a Cloud move is not simple, and it’s certainly not cheap. In fact, the cost of a Cloud move can be astronomical. It’s a full reimplementation, and therefore a huge business change, not just an upgrade. You’re not performing a basic lift-and-shift where you can carry on as normal; you are, effectively, starting again from the beginning.
A great many organisations probably aren’t going to move to the Cloud for one very basic reason. They remember what happened the first time. When they first purchased ERP software, did it suit their needs straight away? No. Organisations went through years of customising, process changes, and hard work. All to get their systems to the reliable, efficient state they’re in today.
Vendors may sell on the simplicity of it all, but the process takes more time and more money than expected. Then, even when it’s completed, the next phase of problems begins.
In the mega-vendors’ Clouds, you don’t get access to your customisations. (Or not without buying your own private part of their Cloud with the hefty price tag that comes with it.) If you need certain customisations as a part of your everyday processes and Oracle and SAP say no, that is effectively the end of the matter. It’s your problem to overcome.
Oracle and SAP can provide an off-the-shelf setup to every organisation in need of a Cloud product. Then, the organisations need to adjust their business processes to meet the vendors’ criteria, rather than the other way around. Usually, you wouldn’t expect your customers to work around you, but Oracle and SAP do.
So, in a way, the vendors are right; their Cloud solutions do promote simplicity. It just so happens to be simplicity for themselves, not their customers.
The pandemic and national lockdowns have dramatically increased the need for organisations to update their capabilities. Now more than ever, there is a greater demand for remote working, online meetings, and providing exceptional digital experiences. After all, customer needs must be met and exceeded online, during times when branches and key locations are temporarily closed.
But even so, of the organisations that have moved/are moving to the Cloud out of basic need, it would be interesting to know just how many of them are taking the move gladly.
Meanwhile, on the Cloud cold war front, Oracle and SAP want to get their numbers up. In fact, given SAP’s drop in profit projections – and subsequently, its share value – SAP especially needs to get its customers moving.
Both vendors have realised that the customers are staying put to weather the current storms. Yet both superpowers keep trying to win their ongoing arms race. And to get ahead in the Cloud cold war, they’ll even resort to abusing their positions of power.
For instance, even the events of 2020 couldn’t persuade the mega-vendors to lower their support and maintenance fees. This particular contractual expense only ever increases for customers, costing some organisations millions every year. And despite the ever-rising price tag, the vendors’ support model has a distinct lack of improvement. (Even though these support fees provide the vendors with a 90% profit margin.)
Oracle and SAP use these support fees to “encourage” their customers to keep upgrading to the latest versions. The vendors gradually reduce the amount of support provided on older versions but increase the price. In summary, organisations will always be increasingly overpaying for their support. But only by going through unnecessary and expensive upgrades will they receive the best the vendors have to offer.
The fantastic irony of the situation is that this pushy sales tactic is indeed inspiring Oracle and SAP customers to move. Although probably not in the direction that the vendors want.
Oracle and SAP are preoccupied, heading even deeper into the Cloud, developing their respective arsenal amidst the Cloud cold war. Meanwhile, their customers are stepping away from their support services and seeking help elsewhere, with third-party support providers.
These customer-focused organisations are addressing real needs right now. Notably, a general need to cut costs without sacrificing support quality. Third-party support enables an organisation to remain on its current versions, and therefore extend the lifespan of its Oracle/SAP software indefinitely. It receives a better level of service, while saving at least 50% compared to its previous vendor support bill.
In one move, the organisation loses the need to make unnecessary upgrades while gaining significant savings; it successfully substantiates the investments made on existing software.
Organisations are using these services to stabilise their IT roadmaps.
How can any organisation create a convincing business case for a Cloud migration strategy if its vendor’s Cloud doesn’t compliment the needs of the organisation?
One Cloud move that WILL work and WON’T require a reimplementation, is a lift-and-shift to Amazon’s AWS or Microsoft’s Azure. Third-party support providers, such as Support Revolution, provide this option as a way for organisations to receive the benefits of being in the Cloud without the challenges of reimplementing.
Organisations can cut their costs further by reducing hardware and servers while increasing flexibility, processing power, and storage capabilities. And as standard, third-party support providers enable organisations to save at least 50% on their support fees, compared to staying on the vendor’s support model.
With organisations able to make 50% savings, reduce hardware, avoid the costs of reimplementation, and still get the benefits of Cloud, it’s easy to see why the third-party support industry continues to grow.
Gartner has recognised the rise in demand for third-party support. In a recent report, Gartner confirmed that “uptake of independent third-party support is increasing year over year,” and that CIO leaders should “evaluate third-party support as an alternative, in order to help fund future innovation.“
This report was written before the pandemic and recession; Gartner’s advice has only become more relevant. While the vendors are locked in their Cloud cold war, organisations can use this time (and third-party support) to their advantage.
With the option of third-party support, whichever vendor happens to be leading in this ongoing arms race becomes irrelevant.
Organisations can use this option to remain neutral to Oracle and SAP’s Cloud cold war and instead focus on their own future. That may be a future in the Cloud without the need to reimplement a thing, or a future of sticking to stable on-premise software.
In both cases, organisations can make huge savings and improve their position to endure these challenging times without compromising on anything.
Whichever route your roadmap takes, third-party support gives organisations the chance to make their systems work for them, not for their vendors – the way it should be. Plus, you’re buying yourself time (and saving a lot of money), should you still want an ERP Cloud in the future.Mark Smith, CEO of Support Revolution
There are no ‘winners’ in the Cloud cold war; victory comes from not taking part.