Monday, April 21, 2014

What Fiori Means for SAP and Its Customers
Over the past several months, analysts and bloggers have been debating about whether SAP should offer its new user apps, Fiori, at no charge to customers under its maintenance program.

The debate can be difficult to follow for those not familiar with Fiori or SAP's technology stack. This post summarizes the debate, including factors not often recognized, along with my view on what SAP should do in its own best interest and what it all means for SAP customers.

What is Fiori?  

SAP Fiori is a set of apps, newly written by SAP, that address the most broadly and frequently-used SAP functions, such as workflow approvals, information lookups, and self-service tasks. They provide simple and easy-to-use access seamlessly across desktops, tablets, and smartphones.

To get a quick idea what Fiori is all about, watch this short video with examples of SAP Fiori apps for managers, or click on the image on the right.

Fiori is more than just a new user interface. It is a set of cross-device applications that allow users to start a process on their desktop, for example, and continue it on a tablet or smartphone. SAP is developing its Fiori apps based on its latest user interface framework, SAPUI5.

SAP lists three types of Fiori apps
  1. Transactional apps, which allow users to perform SAP transactions on mobile devices, as well as desktops. For example, there is a transactional app for creating a leave of absence request and another for approving a purchase order.
  2. Fact sheets, which display information about key business objects in SAP. For example, there is a fact sheet app for viewing a Central Purchase Contract, which allows a user to also drill down into related entities, such as vendor contacts, items under contract, and terms.
  3. Analytical apps, which allow users to display key performance measures and other aggregate information about the business.
A complete list of all the current Fiori apps is available on SAP's website. At the time of this writing, SAP has released two waves of Fiori apps, of 25 apps each, with additional waves underway.

It is important to note that Fiori will never be a comprehensive UI replacement for SAP.  In a back channel conversation, I learned that most SAP ERP processes cannot be done with Fiori, now or in the future. Those SAP processes are simply too complex in their design and do not lend themselves to deployment on a smart phone or tablet. Everyone knows, for example, that you can do a lot more with the desktop version of Netflix than you can on the Netflix iPhone or iPad app. Likewise, it is difficult to take a complex SAP process and dumb it down to the point where you can deploy it on a smartphone.

Complicating things, Fiori is not the only development effort involving SAP's user interface. SAP has also released a product dubbed Screen Personas, which allows users to customize standard SAP screens to their liking. For example, using Personas, a user could remove fields of no interest or change the placement of fields on the screen.

SAP Customers Are Pushing Back on Pricing for Fiori

The best source of information on the debate about Fiori pricing is a diginomica post written by John Appleby, an SAP expert who works for an SAP partner, Bluefin Solutions. Some of what follows borrows from Appleby's post and its long comment thread. 

The list price for Fiori is currently a one-time fee of $150 per user and it gives that user access to all current and future Fiori apps. That might sound like a good deal, until you consider several factors. First, as Appleby points out, that $150 per user fee can add up quickly. If a user only needs access to one or two Fiori apps (e.g. approvals), the $150 fee gets expensive in companies with thousands of such users. In the comments, Jarret Pazahanick points to one company that has 80,000 employees and would have had to pay $12M simply to let all of its employees view their pay stubs using Fiori. Nevertheless, Appleby points out that there are scenarios where Fiori is easily cost-justified such as when enabling the salesforce with a number of Fiori apps: the $150 fee per user is a no-brainer in such cases.

But, more basically: what are customers paying maintenance for? SAP's current maintenance pricing is 22% of the customer's license fee, which means that, in fewer than five years, the customer has essentially purchased its entire SAP product portfolio a second time. Customers look at Fiori as an extension of the SAP products they have already licensed. Why should they have to pay more money to SAP in order to license Fiori? 

As Chris Kanaracus found when he interviewed those in leadership positions from three major SAP user groups worldwide, SAP customers are up-in-arms over SAP's policy of charging them for Fiori. It's reminiscent of the customer revolt against SAP's forced march of customers to higher levels maintenance fees a few years ago. It is also reminiscent of SAP's struggles with how to charge for its mobility platform and the SAP Netweaver Gateway, back in 2011.

Strangely, SAP's policy toward existing customers appears to be harder than it is toward new customers. Back channel conversations indicate that when SAP is selling net new deals, it nearly always demonstrates Fiori--because it shows really well. When it comes to putting together a proposal, then, SAP typically bundles Fiori as part of the total deal. 

Yet, when an existing customer wants to buy Fiori, that customer needs to pony up $150 per user. The exception, of course, is when the customer has something else it wants to buy from SAP. Then SAP can wink and nod and bundle Fiori into the deal with the other SAP products the customer is buying. In other words, unless you are willing to buy something more from SAP, you have to pay for Fiori.

Other Vendors Provide New Functionality at No Charge

Some on Twitter have argued that SAP's policy is no different than that of other vendors. I disagree. Some other vendors have a much more liberal approach to delivering new functionality to existing customers under maintenance at no additional charge. For example, Workday recently rolled out a new user interface, and previous revisions added extensive mobile support. Workday didn't charge its existing customers extra for this new functionality.  Salesforce did something similar with its Salesforce1 platform, a major new release of its platform--at no additional charge.

Furthermore, it is not just the pure cloud vendors who provide new functionality at no additional charge. For example, Microsoft Dynamics recently announced major new CRM functionality at no additional charge to existing enterprise users (the top tier of users). This was not a user interface upgrade but totally new functionality from acquired products: a complete marketing automation system, from its acquisition of Marketing Pilot, a social media listening system, from its acquisition of Netbreeze, and a new service desk system, from its acquisition of Parature.

Finally, releasing new functionality at no charge already has precedent within SAP. For example, in 2012, SAP released a new product known as HR Renewal, which encompasses learning, employee and manager self-service, personnel administration, organizational management, and more. All of this was provided at no additional charge to customers under maintenance. See this blog post from Jarret Pazahanick for details (including the comments). I see no logic in how SAP can charge customers for Fiori, while releasing HR Renewal to existing customers at no charge.

But...Paying for Fiori is the Least of the Problem

The argument to this point is simple: customers are paying maintenance on existing SAP products, and Fiori is an enhancement to those products. Therefore, SAP should make it freely available to customers. This was and is my position. But, as it turns out, for most SAP customers who want Fiori, that $150 flat fee per user is the least of their problems. There are two other obstacles to Fiori:
  • Fiori needs current releases of SAP products. Some years ago, SAP introduced the concept of enhancement packs, whereby customers could selectively apply upgrades to individual SAP products instead of installing a completely new release. This approach is good: it lets customers can more easily install only the updates they really need or want. But it also means that many customers will not be completely up-to-date on all enhancement packs. Therefore, when a customer wants to install a Fiori app, the customer may first need to upgrade to a more current version of the product and install certain enhancement packs. Depending on how back-leveled the customer is, the upgrade can be a major effort. The prerequisites for each Fiori app are listed on SAP's website.  
  • Fiori needs HANA. Sometimes lost in the debate is the fact that, to use Fiori, customers need to be running HANA underneath their SAP products. SAP explicitly says that HANA is a hard requirement for Fiori fact sheet apps and Fiori analytic apps. For transactional apps, SAP says, somewhat cryptically, "They run best on an SAP HANA database, but can also be ported to other databases with acceptable performance." A back channel conversation with someone in a position to know, however, says that without HANA, Fiori transactional app performance is slow on mobile devices and, as a result, may not deliver a positive user experience.
Neither of these are small issues. One source with direct Fiori experience reports that the biggest problem is the effort required to upgrade SAP products and the expertise required to install Fiori. What percentage of SAP customers have all the upgrades and enhancement packs in place for Fiori? It is impossible to determine, but it cannot be a large percentage.

Another source points out that slow adoption of HANA is a major impediment to Fiori. Out of approximately 40,000 SAP Business Suite customers, only about 1,000 have bought Business Suite on HANA, and SAP doesn't say how many of them are live on HANA. Even if all of them are live on HANA, that is less than 3% of Business Suite customers. Charging for  Fiori is "a small barrier" in comparison to the need to implement HANA.

SAP Could Make More Money By Giving Away Fiori

So, if the price tag for Fiori is the least of customers problems, why not turn it around and ask, what would it mean if  SAP were to offer Fiori to existing customers at no charge?
  • It would give a positive reason for SAP customers to upgrade to HANA. The real opportunity, in my opinion, is not some small amount of revenue SAP might receive from sales of Fiori to existing customers. It is in moving those customers to HANA.

    SAP has staked its entire product strategy on HANA. Yet, as we have just shown, fewer than 1% of Business Suite customers have purchased HANA. If SAP wants to be successful, it must do everything it can to move customers to HANA. Yet, the business case for Business Suite on HANA to date has mostly been, in effect, "you can do things faster." Yes, there are a few dramatic examples, such as large companies being able to do a complete MRP regeneration in seconds instead of hours. But for most customers, "faster" is not enough to justify the time and expense of a HANA migration.

    Fiori changes that. SAP can now say, if you go to HANA, you can change the user experience of SAP with these Fiori apps. Fiori, in effect, could be the trojan horse for HANA.
  • It would sell more SAP user licenses. The only individuals who can use Fiori apps within a customer's organization are those who have a user license for the underlying SAP product. Fiori, therefore, may tip the scales in favor of getting more users licensed for SAP products.

    As Appleby wrote:
I don’t have any facts to support this, but it makes sense from a strategy perspective. Fiori Launchpad hosts multiple Fiori apps for a given person. If I’m a sales rep, then I could have approvals, accounts, and a bunch of other things. Each of these apps requires some user license of some kind....

If users are using Fiori, they will want new capabilities too, and those new capabilities have a sell-on, but only if people are using Fiori. Get customers on it, and get the account team in to sell-on.
Compared to the strategic value and revenue opportunities for moving customers onto HANA and selling additional user licenses, charging existing customers for Fiori is chump change.

SAP Has It Exactly Backwards

In summary, charging for Fiori is a big mistake for two reasons. First, it annoys customers, who need to see more value in SAP's maintenance program. True, it is unlikely that any single customer is going to migrate away from SAP simply because SAP is charging for Fiori. But SAP's stated policy reinforces the perception that there is not much value in SAP's maintenance program. SAP's most recently quarterly results show that SAP's core business--sales of its Business Suite--are shrinking. SAP, therefore, should be doing everything it can to keep the customers it already has.
Second, SAP in practice already gives away Fiori when it is part of a larger deal. As discussed earlier, nearly every Fiori deal to existing customers is by definition going to be a larger deal, either because the customer will need to license and implement HANA or because the customer will want to move additional users onto SAP in order for them to use Fiori.

In a subsequent email discussion, Appleby asks:
How can SAP positively motivate customers to move to SAP's innovation stack (HANA, Fiori, Hana Enterprise Cloud, etc.). This is where the good stuff will happen. Why isn't SAP bundling these three things together including the services to get customers there? Why doesn’t SAP take some of the risk up front to keep its relevance?
Taking it a step further, if Fiori is part of the key to moving customers onto SAP's latest technology stack, perhaps SAP should by paying customers to take Fiori, rather than charging them for it. The payment could be in the form of a moderate credit toward new user licenses or HANA licenses. Or, as Appleby proposes, a discounted bundle of products and implementation services.

Such a program would generate much good will among SAP's installed base and would further SAP's larger product strategy.

SAP Customers Should Investigate Fiori Possibilities

What does this mean for SAP customers? First, get up to speed on the Fiori apps currently available and show them to your end users. Long time SAP users are often jaded in their expectations, which means the bar is set pretty low. They will most likely be pleasantly surprised by the possibilities of Fiori. Screen Personas are another way to impress long-time SAP users with new possibilities. If they become supportive of Fiori and Screen Personas, they may give you the business case to make an investment.

Second, spend some time to determine what additional investments you will need to implement Fiori.  If you are like most SAP shops, you will need to upgrade some SAP products. You will also probably need to migrate at least some portions of your Business Suite to HANA. Or, at least you will want the option to do so if Fiori performance turns out to be unacceptable without HANA. You may also need some additional SAP user licenses.

Finally, talk to your SAP account representative about putting together a bundled deal for Fiori, Screen Personas, new user licenses, and the other technologies you will need, including HANA. Despite SAP's stated policy to charge for the new apps, it is likely that SAP will be quite willing to cut an attractive deal when there is a larger amount of money at stake. 

Update: Dennis Howlett had a post on diginomica last week where he delves into some of these same points.

Update, June 4, 2014: Better late than never. SAP, responding to pressure from its customers, announced during its annual user conference that Fiori apps and Personas will now be available to customers under maintenance at no charge. 

Related Posts

Risks and Opportunities with SAP's Platform Economics 
SAP innovating with cloud, mobile and in-memory computing
Mad as Hell: backlash brewing against SAP maintenance fee hike


Andy Klee said...

SAP could take a lesson from the Oracle/JD Edwards pricing for the new User Interface and for all mobile apps (about 25 right now). All free--it's paid for with the $ clients spend on maintenance, just like a long list of other enhancements.

Frank Scavo said...

Andy, thanks for the tip. I didn't know that. Another piece of evidence that refutes the contention, "All vendors do what SAP is doing."

Jon Reed said...

Exceptionally well put Frank, and all your info checks out with everything I've heard.

Another piece of the argument picked up by Kanaracus is the user groups in US and EMEA that have weighed in on why UIs should be included in SAP maintenance costs.

One argument I have heard from those inside of SAP is that Fiori is essentially free when it needs to be because it can be bundled with other offerings. But this argument underestimates the good will earned through a "free" UI practice.

Then there is the concern of how SAP sales won't push a product that doesn't have a price tag. The lack of adoption of NetWeaver Business Client is often cited as a rebuttal.

But I think UX expectations have increased considerably. In future years charging for modern UIs just won't happen.

Culture and business model change is hard but I believe that's what's behind this. Many in SAP support making these UIs available for free but there are others who don't, hopefully they will get out a bit more and read your post several times. :)

Frank Scavo said...

Jon, I appreciate your feedback as someone close to the action. I don't have a lot of patience for the argument that Fiori is free when it needs to be, because basically the sales team will cut deals for bundled products and services. SAP should make that policy explicit. If I am right, then nearly every Fiori deal will be a bundled deal. If so, then why doesn't SAP come out and say Fiori is free for the bulk of SAP customers? They are losing the opportunity to generate good will and needlessly annoy their customers.

Concerning SAP's salesforce needing a price tag in order to be motivated to sell Fiori: again, if nearly every deal is a bundled deal, then it is a moot point. Nearly every "free" Fiori deal will generate revenue from other products. As I pointed out, Fiori, in fact, is the Trojan horse to get a lot of other SAP technology in the door.

Graham Robbo said...

This is a good rundown of the issues Frank.

I can't help thinking back to my post when Fiori was first announced - among other things I said "... I believe that they should be free ... SAP could use the goodwill that such a move would provide and I think that it would reinforce the message that fixing the user experience is SAP's problem not their customers'".

I think that the opportunity to maximise the goodwill SAP would have garnered by including Fiori apps as part of maintenance has now passed. If (when) SAP cave in and stop charging additionally for Fiori it will now be seen as a response to customer discontent rather than SAP seeking to help customers through the UI morass.

Not nearly as good a story.

Frank Scavo said...

Graham, you are right. The time for SAP to have made the biggest splash with "free Fiori" would have been last year at Sapphire.

By the way, do you have any feedback on the issue of HANA being a prerequisite for Fiori? I didn't see that addressed in your original post, nor in any of the comments.

Usman said...

Fiori is Italian word which means “Flowery” and purpose of Fiori apps is to give better UI experience.
Performance is most critical part of UI.
SAP clear differentiation of Fiori fact sheet/analytical apps ( HANA Prerequisite) from Transactional apps (HANA/ANY DB) conclude following points

- Analytical/fact sheet apps involve more data which give better performance on HANA.
Allowing them on ANYDB will impact performance and bad UI experience.
- Performance on Mobile devices depends on many factors like network speed , Online/offline capabilities etc. but I think performance
Of Transactional apps is acceptable on ANYDB for better UI experience but trying analytics other than HANA will spoil UI experience and kill Fiori apps

Graham Robbo said...

Hi Frank,

HANA is a prerequisite for quite a lot of the Fiori apps that have been delivered since the original release of 25 known as Wave 1. This ultimately comes down to the requirements of the odata services the Fiori app consumes. I assume that many of the later Fiori odata services are actually delivered from the HANA XS engine rather than the ABAP-based NW Gateway service.

Matthew King said...

Hi Frank,

Checked the online Fiori app list and can see that they now number 227(61 transactional apps, 83 fact sheet apps, and 83 analytical apps).

That the list is exploding is interesting, but SAP management might be even more surprised by what's to come.

I agree that some apps are too complex to work effectively on a tablet or smartphone; Microsoft Excel is another example; but why wouldn't SAP offer desktop specific Fiori apps alongside tablet specific apps and smartphone specific apps?

Is SAPUI5 a user interface framework that can't handle anything heavier than light weight chores?

Will SAP instead try to revamp the NetWeaver Business Client? Or will Fiori third party developers do it for them?

I get the feeling that SAP needs to jump of their own (Fiori) train or get run over it...

Frank Scavo said...

Matt, all good questions.

Matthew King said...


I took the time to watch a few Fiori videos on YouTube.

I now see that Fiori is first and foremost a web app access manager, in the form of a web application that runs inside a web browser.

Initially I felt deceived and disappointed, but upon further reflection it's not so bad, because it breaths new life into the web app.

For two reasons: First, I'm disappointed with virtualized deployment of applications because integration with the user client machine is terrible (one must experience it to fully understand this point). In contrast web applications don't suffer this. And second, managing web page links within a web browser is cumbersome. The Fiori solution solves this, limited to the Fiori web apps.

My only gripe is that I'd need to place my web browser into full screen mode to remove the unsightly header, when running Fiori web apps or any other web apps for that matter. This is an age old problem of running web applications through a generic web browser.

In regards to heavy workloads, Fiori apps would be subject to the same limitations as any other web app. But consider that Microsoft Office is now available via the web, which speaks volumes for the power and capability of modern web apps.

But where does this leave SAP in the battle for Enterprise App Store supremacy? Should the Fiori master app instead be available as a standalone app instead of running inside a web browser? While it's a novel approach, I feel like SAP has taken the cheap way out...

Frank Scavo said...

Matt, I believe one of the major points of Fiori is to provide the same functionality seamlessly across desktop, tablet, and smartphone. "Desktop-only" Fiori apps don't really make much sense. So, when we say "heavy workloads," it is not that web apps cannot handle them, it is that they don't work well on small screens.

Matthew King said...


Most managers these days have a smartphone and or tablet, which means they are going to reach for one of those even when sitting in front of a desktop.

Not to mention that touch optimized apps are cumbersome to use on a desktop.

So the multi-channel (seamlessly across device) marketing line doesn't really amount to much.

Thankfully, after I wrote my previous comment I discovered that a Fiori Client is now available for iOS and Android devices. My aforementioned gripe is no more.

In the rare case where someone wants to run a Fiori app on a desktop, they can use their web browser.

Regarding a deployment method for heavy duty desktop apps, I think SAP has the right deployment strategy with NW Business Client, but they need to improve the personalization features such as allowing users to organise their shortcuts and include a mash-up tool similar to Screen Personas.

Screen Personas looks good, but it's lipstick on a pig.


Marek said...

I'm very excited about sap Fiori. I think the major points of Fiori is to provide the same functionality seamlessly across desktop, tablet, and smartphone.