Even when a large com­pa­ny wants to be for­ward-think­ing, it’s tough to let go of what made it a large com­pa­ny in the first place — and some­times that means alter­ing plans to please long-time cus­tomers and ensure rev­enues are flow­ing. SAP’s new on-premise HCM ven­ture appears to be just that when put in the con­text of sur­vey results released last week by DSAG, the Ger­man-speak­ing SAP user group.

In DSAG’s sur­vey, which asked 667 respon­dents (97 per­cent of which were SAP ERP HCM cus­tomers) about their HR soft­ware plans, 41 per­cent said they are stick­ing with ful­ly or most­ly on-premise for HR, while anoth­er 41 per­cent said they plan on a hybrid mod­el with some on-premise and some cloud. That’s more than four out of five respond­ing orga­ni­za­tions that are keep­ing some­thing on-premise for HR. 

That didn’t real­ly jibe with SAP’s vision for HR, which meant cus­tomers want­i­ng to upgrade from SAP ERP HCM would have to move to the cloud and SAP SuccessFactors.

Prob­lems arise with HR in the cloud in Europe par­tic­u­lar­ly, where employ­ees car­ry more sway in deter­min­ing a company’s soft­ware choic­es com­pared to the Unit­ed States, and employ­ees are over­whelm­ing­ly say­ing no to hav­ing their pro­file data in the cloud. On top of that, there are much stricter reg­u­la­tions with worse pun­ish­ments for employ­ee data breach­es in Europe than in oth­er areas of the world. With those con­sid­er­a­tions, many large orga­ni­za­tions in Europe are opt­ing to keep employ­ee data where the feel more con­trol —on-premise. Have a look at this quote from the DSAG sur­vey press release: 

When asked to give a rea­son for their skep­ti­cism towards the cloud solu­tions, around 26 per­cent of those sur­veyed said they were afraid of los­ing con­trol of the soft­ware – espe­cial­ly of indi­vid­ual com­po­nents. For almost 27 per­cent of those sur­veyed, uncer­tain­ty around reg­u­la­tions, com­pli­ance and secu­ri­ty also plays a sig­nif­i­cant role. ​“Where is the data being kept? Where is the data going? How do we deal with con­tracts? Who pays when the SAP data cen­ter goes on strike and the solu­tion is down? These are huge ques­tions that are mak­ing it hard­er for users to decide in favor of the new, cloud-based solu­tions. The new solu­tion gives us more time to clar­i­fy these issues,” explains Her­mann-Josef Haag, spokesper­son for the DSAG HR man­age­ment work­ing group 

An Infor­ma­tion Shortage?

There’s no doubt that SAP has tried to answer those ques­tions for its cus­tomers that are resist­ing the cloud, but clear­ly they haven’t been con­vinc­ing enough. So, for SAP, it was if you can’t con­vince them, let them stay

Hence the announce­ment of a new side­car on-premise HCM prod­uct for S/4HANA two days before DSAG’s sur­vey results were released to the pub­lic. As a refresh­er, the new HCM tool will run exclu­sive­ly on HANA, is expect­ed to be released in 2023 and will come with main­stream main­te­nance until at least 2030 — five years beyond SAP’s 2025 date to end main­stream main­te­nance on all lega­cy software. 

The deci­sion to piv­ot, at least par­tial­ly, on pre­vi­ous state­ments about its HR soft­ware vision, which were all-in on the cloud, was not a light one for SAP. It does show how influ­en­tial the vendor’s home user base can be. Stephen Spears, SAP Suc­cess­Fac­tors chief rev­enue offi­cer, says there is less cloud skep­ti­cism in oth­er markets.

“[The DSAG sur­vey results] are so counter jux­ta­posed com­pared to rest of the globe,” asserts Spears in a recent con­ver­sa­tion with ASUG­News. ​“If you take that across APJ [Asia-Pacif­ic], the results would have been com­plete­ly mir­ror oppo­site — 10 to 20 per­cent have some plan to keep on premise. North Amer­i­ca is pret­ty much the same.” 

He expands to say that the trep­i­da­tion sur­round­ing cloud in Europe is about a lack of infor­ma­tion, and that SAP needs to bet­ter edu­cate on its data secu­ri­ty prac­tices, as well as how it has addressed GDPR com­pli­ance in its software. 

Respond­ing to Feedback

For now, it appears SAP’s infor­ma­tion efforts have fall­en short in con­vinc­ing DSAG mem­bers that cloud is the way to go — so we see the move to cre­ate an on-premise HCM to keep Euro­pean cus­tomers hap­py. Thus far, that seems to have worked.

“It is great that SAP will now offer an on-premise solu­tion until at least 2030, pro­vid­ing many of our mem­bers with some real options for the first time,” says Jean-Claude Flury, the DSAG board mem­ber respon­si­ble for Busi­ness Net­works Inte­gra­tion, in a press release. 

While the tim­ing of the release of the DSAG results near SAP’s on-premise HCM announce­ment is cer­tain­ly no coin­ci­dence, SAP’s David Lud­low, SVP at SAP Labs, says the new HCM prod­uct was in the works before the sur­vey results, but the sur­vey does reflect a trend. 

“The new HCM solu­tion wasn’t in spe­cif­ic response to [DSAG’s sur­vey results], but def­i­nite­ly in response to cus­tomer feed­back,” explains Lud­low in an inter­view with ASUG­News. ​“We’ve been work­ing on this for a while.”