Concentration of Power at SAP

A significant number of users and institutions initiated an antitrust lawsuit against SAP. In the initial phase of the legal proceedings, SAP emerged as the clear victor. Given its market power, SAP can easily enforce high license and maintenance prices and prevent the market for second-hand licenses from developing. Both complaints, filed in Brussels and Bonn with the German Cartel Office, were ultimately unsuccessful. In Switzerland, an interest group succeeded in achieving a stage victory with the price watchdog. SAP has been the subject of close scrutiny in Switzerland for a number of years.

The risk is not solely attributable to the elevated maintenance costs. As demonstrated by a global computer outage, technical dependence on a few IT suppliers poses a far greater risk than financial damage caused by cartelization. In an article from the German business magazine Handelsblatt, Lina Khan, the head of the US regulatory authority FTC, offered her perspective. [...] Kahn also criticized the failure, without naming Crowdstrike or Microsoft, on the grounds that it was also due to the concentrated market power of the companies. This results in the creation of "fragile systems." [...] This could result in a concentration of risk, including regulatory inquiries directed at cloud computing companies.

The SAP Hana database, the ERP software S/4, cloud services for procurement, HR management, and logistics, and the IT platform SAP BTP (Business Technology Platform) are all integral components of the SAP ecosystem, which leaves the user completely dependent on SAP.

An increasing number of SAP customers are seeking to mitigate this cluster risk and concentration of power by leveraging a best-of-breed solution. In the CRM (Customer Relationship Management) sector, the American software provider Salesforce is a popular choice among SAP users, while a cloud solution from Workday is becoming increasingly prevalent in HCM (Human Capital Management) and finance.

SAP is pursuing a strategy of consolidating its market dominance by continuing to concentrate and focus on the public cloud. The latest quarterly figures demonstrate SAP's continued success, with significant growth in cloud revenues and increased efficiency (which positively impacts the share price). Additionally, ongoing cloud standardization is driving a reduction in the number of employees. At the beginning of this year, SAP announced plans to eliminate up to 8,000 positions. However, due to an attractive redundancy program and further cloud consolidation, the company is now projecting a reduction of approximately 10,000 jobs.

Long-standing SAP customers and European partners who are unable or unwilling to transition to a public cloud are already experiencing the effects of the staff shortage at SAP.

For new customers, the public cloud is a viable option. However, for SAP customers with complex organizational and operational structures, their own data center, hosting partner, or private cloud with a hyperscaler is the only alternative. For all SAP users who wish to avoid a cluster risk and a concentration of power, a hybrid solution combining on-prem and cloud is likely the optimal choice.