Above the clouds
There is no cloud exit strategy from SAP - forever in the clouds. "All fears, all worries, they say, remain hidden underneath and then what seems big and important to us would suddenly become void and small." So says a song by Reinhard Mey. The song is about the feeling of freedom and how you can simply leave your worries and cares behind when the plane takes off. If you relate this to the SAP cloud, however, fears and worries are currently on the rise.
In digitization, the next logical step is to move data and applications to the cloud, and for that reason alone, SAP is increasingly relying on the cloud. But: Better buckle up and get your seats in an upright position, because there are a few things to keep in mind.
The license models offered by SAP only include cloud or on-prem, so the customer must decide between these two variants or simply purchase both and operate them in parallel. Leaving aside what will happen to our data if the Republicans in the USA win the next presidential election, the Cloud Act already overrides all the regulations of the GDPR and forces US cloud providers to make stored data accessible upon request by the US authorities (see Microsoft Ireland).
Let's stay with the aircraft and the point of no return. There is a point on the flight path that makes it impossible to turn back to the starting point. With the Cloud Extension Policy, SAP offers the possibility for applications that are to be moved to the cloud to take the previous licenses or part of them out of maintenance. This must be defined before the contract is concluded; subsequent negotiation is not possible.
At the beginning of 2022, SAP announced automatic annual price increases for cloud solutions. This was justified, among other things, by rising inflation. However, it was not mentioned that list prices for cloud products already increase on a quarterly basis. Furthermore, the revenue-based metrics also lead to an increase in costs in times of inflation, without companies really earning more in the end. 3.3 percent annual price increases in the cloud, increase of maintenance fees for on-prem, regular partly strong increase of list prices for cloud products, additional costs due to cost increases partly caused by inflation, without generating revenues from it. Are these dark clouds on the horizon?
The usage metric for the S/4 Enterprise Management Cloud is Full Use Equivalent (FUE). Each FUE user corresponds to a specific number of individuals authorized to access certain solution features of the cloud service. FUE is a complex set of rules with precise instructions on how enterprises can leave on-prem to be cloud-ready.
The road to the cloud is a one-way street. However, the cancellation of on-prem licenses and FUEs convert existing licenses into cloud subscriptions, thus the company loses all autonomy over its ERP. There is no cloud exit strategy from SAP. There is no provision for a return to the old ERP world with its own decision-making authority. The lack of a cloud exit makes FUEs dangerous. An exit strategy can only succeed if the old licenses are left in the company vault forever (keyword: back maintenance) and new ones are purchased at high cost.
