The following commentary is the author’s weekly guest posting on the Supply Chain Expert Community web site.
Imagine for a moment that the CIO or CFO of your company has just encountered a vendor audit of the resident backbone ERP system and informs your supply chain organization that the cost and payback of that recent best-of-breed focused supply chain planning or business intelligence capability will now cost more than previously assumed. Would that change the direction of existing or planned future technology automation efforts?
While ERP vendors continually speak to “openness” of their systems, the potential of collecting software licensing fees for what is termed “indirect access” is too lucrative to ignore.
Supply Chain Matters calls attention to an important posting on the SAP North America Users Group (ASUG) web site titled SAP Systems Open Up, But Watch for Software Licensing Gotchas. The ASUG posting notes that SAP in its periodic audits of existing customer installations is citing certain customers for unpaid access to SAP generated data. Examples may include tapping into SAP from a Salesforce.com, supply chain or sourcing and procurement focused application. The posting points out that “indirect access” have been stipulated in contracts since the late 1990’s but generally unfamiliar to most SAP shops. It further notes that apparently SAP has not provided a clear definition of what is meant by the term, except when audits are performed. Also noted is that there can be upwards of 60 different definitions of “user” that can be applied, along with vagueness as to real-time or batch access to an SAP application.
It is important to note that this ASUG posting communicates to the broader community that SAP will not risk the wholesale ticking-off hundreds or thousands of its customers, but will uphold a principle that SAP generated information is subject to software license privileges. It does not preclude the surprise that may come at the conclusion of a user audit when multiples of non-SAP software applications are tapping SAP applications for needed data. In our view, it is positioning the SAP community for what to expect.
This trend also reinforces what some independent analysts, such as this author, have been warning, that as more innovative supply chain and B2B focused applications gain market attractiveness, larger enterprise technology vendors will attempt to buffer the market attractiveness by extracting suitable value. You can call it a form of an excise tax. In our view, it provides more ammunition for C-Suite executives to question a best-of-breed approach in favor of harvesting existing cost-benefit value provided by the resident ERP backbone. Even more profound to contemplate are future S&OP enablement, business intelligence or supply chain control tower initiatives that will tap countless existing sources of supply chain and supplier related data from the resident ERP backbone or other supplier ERP systems.
Interesting enough the article notes that some of SAP’s more innovative customers such as Burberry and Kimberly Clark have elected a strategy to innovate their business processes via “indirect access” to SAP applications, from other best-of-breed platforms such as Salesforce. Their lies future conflict as well as customer realities.
The takeaway for the broader supply chain community is that the continuance of ERP vendor’s insistence on collecting information access licensing adds a different dimension to the cost-benefit equation. It introduces added tension among supply chain functional and IT teams since added access licenses initially hit the IT budget and our invariably allocated to various functions or business units. The determination of that allocation could get messier to say the least, adding additional unplanned cost considerations or could temporarily de-rail some truly innovative initiatives.
In the end, customers will ultimately determine the course of events in existing backbone ERP and best-of-breed software strategies. Firms have been rather aggressive in pushing back on ERP providers in the increasing cost of annual software maintenance and licensing, especially in times of economic challenge and uncertainty which is again evident today. We would argue that the increased adoption of cloud computing, B2B and/or other new systems innovation practices are the direct consequence of this ERP customer pushback. These latest “indirect access” license enforcements only add more to the overall market dynamic and could accelerate strategic change in the market.
In the meantime, stay aware of the fact that information may not be necessarily free, depending of whom is your ERP backbone provider.