We have all heard the buzz over the past year around mobility and enterprise software which holds an enormous potential for SAP and their customers. Mobility is already becoming a major battleground between the software vendors and an area over the past year that I have spent more time trying to understand. SAP has recently shared a lot of impressive information on their mobility solutions as well as released 23 new mobile applications many of which will be well received by their customers. In a recent interview Matthew Schwartz, Vice-President of Enterprise Mobility at SAP was asked.

What are key components of a solid enterprise mobility strategy?

According to Matt, each app needs a very specific business case that hits 1 of 4 pillars

  1. Employee efficiency – what resources can be transitioned to other roles or eliminated by the mobile app
  2. IT efficiency – what processes/applications/ databases can be eliminated by the mobile app
  3. Day 1 cost takeaway – what are the immediate cost savings gained by moving to a mobile app
  4. Improved margin/revenue growth – what will be the impact to margin and revenue by deploying the mobile app

As you can see at the core of a solid mobile application strategy was cost but what was not discussed was the underlying SAP technologies needed to be able to use these applications. It is my understanding that most of the SAP provided applications are “free” and the 3rd Party applications are “free” once you buy or license their underlying product. So you may ask yourself how does SAP make any money with this model and one of my favorite sayings is “The devil is in the details”. Trying to get SAP to talk about the licensing model can be challenging but many of new apps, including all the HCM ones, have a prerequisite of the Sybase Unwired Platform (SUP 2.1) and Gateway 2.0 which are additional licensed SAP products. In talking with customers the cost of these platforms can be substantial though I have also heard that SAP is still considering an alternative pricing model and my fingers are crossed.

Can you imagine after purchasing your new iPhone or iPad that you had been told that for only $999 year you could buy another piece of software that allow you to be able to download all the free and 3rd party apps and oh by the way we have less than 50 apps available but promise to have many more in the future. No one doubts that the Sybase Unwired Platform comes with a slew of benefits and functionality but I think SAP should consider using the razor and blade business model in which they provide the underlying mobility technology/platform for a small incremental cost and get their money/benefits from the following:

Applications– Given the size of the SAP install base why wouldn’t SAP consider using a consumer model with an enterprise twist. It has the potential to be very lucrative if useful value added applications are built and Dennis Howlett does a good job of providing some details around an Alternative Pricing Model that I very much agree with. This involves a new way of thinking for SAP but I have no doubt customers WILL pay for value added, cost saving mobile applications especially without a sizeable up-front platform investment. If it is good enough and working for Apple I would think SAP would want to consider it.

Software Licenses – Something that never gets mentioned enough is that mobile applications help open up more employees to be users of SAP software which would allow SAP to increase their overall user licenses. The Avon case study from Sapphire was a great example of this as they moved from paper based catalogues and order forms to iPad catalogues and order management using SAP mobile technology as the underlying infrastructure.

Partners – SAP’s stated goal is to have 3rd party developers and partners deliver 80% of the mobile applications. If more customers have the underlying SAP platform in place it will provide a larger market and opportunity which will then increase the quality and amount of applications built. We have all seen how successful the Apple and Android platforms have been by capturing the attention of best and brightest as they gravitate towards where the most money is to be made.

Customer Retention – SAP can use its mobile technology to help protect its large install base as it is important to note that most of the large SaaS competitors like Workday are offering their mobile technology with no additional cost as part of their base subscription. It is important that SAP stay competitive from both a pricing and functionality standpoint in the mobility space. It has a lot of exposure with enterprise software buyers as per Forrester, 75% of business decision makers believe that mobility is key for long-term success.

User Interface – Bill McDermott, Co-CEO of SAP recently said that “Mobile is the new desktop” and in the coming years there will be a dramatic shift in which a majority of users will access the system via a mobile or tablet based device and it will become the default customer platform. It is a golden opportunity for SAP to build mobile applications with a great UI that uses the underlying back-end functionality SAP is known for. The next generation of users will get a totally different opinion on SAP, its look and feel, and usability as they will ONLY access it via a mobile or tablet device.

Bill McDermott has repeatedly said that “Mobile computing will lead the way for business” which is pretty easy to agree with. The Sybase acquisition in 2010 brought a lot of mobile expertise to SAP which I think puts them in a strong position if they have a customer friendly mobility strategy. I have seen many cases where SAP has built strong products but the licensing model has scared customers away and I think mobility is to important of an area to have this occur.

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  1. Kevin Grove

    Well written summary of the state of the SAP mobility. The new infrastructure also requires new skills and training that must be added to the time and cost to implement the solutions. Is it possible that SUP and SAP Gateway would be good candidates for Platform as a Service for SAP or partners?

    Perhaps a good discussion can result through the comments on your post.



    1. Jarret Pazahanick Post author
      Thanks Kevin as it was a blog I had in my mind for awhile and thought it was important.

      You bring up some good points and hopefully someone will respond to your question. The bottom line is customers want mobile solutions that they can build a business case around and can be deployed without a lot of complexity.

        1. Jarret Pazahanick Post author
          Hi Chris

          Thanks for the comment and although I dont know much about the pricing of the Capgemini offering I cant see how bundling SAP licensed products and putting their margin on top of that is going to be beneficial for SAP customers.  I think the whole model needs to be changed.



  2. John Moy
    Hi Jarret,

    Great blog as usual, and you raise some very important and relevant points.  One thing I have learned about mobility is that the evolutionary cycle of innovation in this area is several times faster than that of the traditional SAP world.  Just look at the pace of evolution of iOS and Android.  And customer expectations are following this trend.  So one year after the acquisition of Sybase, customers are expecting SAP with it’s significant resources at hand to have developed a large number of compelling apps.  Especially if the platform is as easy to develop on as the blogs by Eric Lai suggest.  A large pool of quality apps would serious drown out the offerings by competitors. As Dennis Howlett suggests, perhaps the answer is an open apps store to leverage developers from the SAP ecosystem, with an appropriate pricing mechanism.  I feel the need to write a blog about this myself.



    1. Jarret Pazahanick Post author
      Thanks for the kind words John and you bring up some great points as the speed of innovation is many times faster than in the traditional SAP world and customers have high expectations.

      I think Dennis Howlett has a great idea but the key is providing value added and cost saving applications but it could be a real win-win for both SAP and Customers. I hope we hear more about the app store as it was initially mentioned many months ago but quiet since and my guess is SAP is struggling with the pricing model for that as well.

      If this blog causes you to write a blog than I will consider it a major success 🙂

  3. Fred Verheul
    Thanks Jarret for writing this great blog post. It might be another controversial one, but luckily you’re not one to shy away ;-).
    Couldn’t agree more with regard to the licensing model, and I honestly don’t understand why SAP is not responding to the community about this. May be they will this time…
    Keep up the good work!

    Cheers, Fred

    1. Jarret Pazahanick Post author
      Thanks for the kind words Fred and I know many customers are not pleased with the current model (at least the ones I talked with).

      I initially thought this could be controversial but it is going to be hard for someone to defend why a large customer needs to spend millions of dollars to get a platform especially given the number of apps that are currently available.

      I hope we get some good discussion and insight from SAP with what I have wrong as it is a very important topic.

  4. James Ibbotson
    I also think SAP as missing the point and developing an overtly complex mobile landscape that is required to access these new mobile applications.

    The requirement for SAP Gateway is understandable, however the requirements for Sybase is causing SAP to lose out on a lot of revenue in my opinion.
    I look after a SAP system with 6000 ESS/MSS and SRM users.

    We have WIFI throughout our organisation and VPN access that’s available from anywhere.

    I’d love the new SAP iPad and mobile apps to be available for purchase from the Apple app store for a few ££, then get users to point them at out Gateway or EP server, so long as they are on our VPN, and then that’s it job done.
    With 6000 potential customers using iOS devices SAP could charge £10 for an APP and have potential revenue of £60K, now roll that potential additional income stream across their ENTIRE user base.
    As a system admin I really don’t what to have to install setup and configure yet more technology in the form of Sybase.
    It’s this additional cost and overhead that will stop companies from buying into SAP’s mobile strategy.

    WIFI – VPN – corporate network is already an option for most users in organisations now which enables them to work from home. SAP needs to simplify its mobile strategy to take advantage of companies existing infrastructures, rather than trying to foist more technology upon them.

    1. Jarret Pazahanick Post author
      Hi James

      It is great to hear the perspective from a customer point of view and you make some great points.

      At the core you would like to see a more simplified process on the technology front following the consumer model that Dennis Howlett laid out on the pricing front.  I agree that is where the real opportunity lies for SAP as well.

      Hope some SAP Mobility folks chime in to tell us when the current model is the “right” approach.



      1. James Ibbotson
        Hi Jarret,

        That’s correct, for example i’d love to be able to download a SAP ESS Application on my own ipad, connect my iPAD to our corporate VPN, which i’m able to do.

        And then just point the ESS application at our gateway or EP server.

        The same principal should apply to SRM applications.

        SAP could start making money now selling iOS applications that are designed for WIFI and vpn use only. 

        Yes its not perfect, but they could start generating revenue off these applications now ! 

    2. Dennis Howlett
      @james – yours is the exact argument I used with Bill McDermott at SAPPHIRE Orlando. He ‘sees’ it but it seems SAP can’t get away from its one hit, $million deal addiction. I can even see this as a service SAP offers on a subscription basis.
    1. Jarret Pazahanick Post author
      Thanks Vijay as I took a little more time with this blog than normal as I figured it “might” be controversial but it doesnt appear that way.

      My guess is that SAP understands they need to modify the pricing strategy and are still ironing it out internally.

  5. Stan Stadelman
    Thanks to everyone for their thoughts here.  It is accurate that a large number of packaged applications are being released in the first wave this quarter (I noticed EAM) went RTC earlier this week, and SAP will continue to add to the count in 1H next year. SUP2.1 went GA on the Sybase price list on Wednesday (Oct 12), and should also be available thorough SAP Service Marketplace shortly.
    While I don’t necessarily disagree with the concept proposed by the initial post–everyone knows about ‘razor/blade’–a better way to look at this is ‘xBox’– the successful gaming console system from Microsoft that added innovation like the Kinect to the living room.
    SAP is not only delivering the Mobility Platform for it’s own applications. Our strategy is that I the target balance SAP should deliver only 20% of the applications on the platform, while the remaining 80% are partner-delivered. This actually discounts the currently large portion which are developed in-house by customers. So the object is to deliver a solution enabling the certification, delivery, and management of applications from 3 developer constituencies:  SAP Dev, Partner SI/ISV, and Customer.
    Therefore, there is a great deal of value in providing standards and common infrastructure which enables the ecosystem to flourish–the xBox, xBox Live, Kinect, and the SDK.  This is an exciting space, our customers are engaged, and we see the platform as a shared resource for SAP and Partner packaged applications alike.
    -Stan, PM Enterprise Mobility Group
    1. Dennis Howlett
      @stan – this misses the developer point. No small dev shop is going to pony up for servers and the like – they represent the bulk of where mobile innovation is going to come from.

      It seems to me that SAP is so afraid of leaving money on the table NOW rather than realizing the opportunity cost of NOT providing the infrastructure is enormous.

      SAP simply won’t see the innovations it craves with the current model.

    2. Jarret Pazahanick Post author
      Stan thanks for jumping into the conversation and be curious to get your thoughts on Dennis’s comment as well as your thoughts on exactly how SAP will get their partners to build 80% of the apps as I think it will be a challenge with the current model.
  6. Jarret Pazahanick Post author
    Comments on this article from the Linkedin Technology group.

    Lisa Rowan • To my knowledge, Jarret, most other HCM vendors are not charging additionally for mobile capabilitiies. I know Workday is not. It is a different UI accessing capability buyers are already paying for.
    4 days ago•

    Naomi Bloom • Confirming Lisa’s comment that Workday is not charging extra, but they are also not charging separately/extra for talent management capabilities. On the other hand, and mentioning no specific names, some vendors are charging/do plan to charge something extra for their mobile capabilities when they view then as not just a different UI but fundamentally different capabilities, e.g. if they’re delivering analytics and processes geared to execs. If I had to guess where we’ll be on this six months to a year down the road, I think market pressures will force vendors to give much to all of their mobile capabilities away except when they are fundamentally delivering new applications. Sounds like we need some survey research.
    4 days ago•

    Jarret Pazahanick • Thanks for the insight Lisa & Naomi and with the pace of innovation within mobility and the HR technology providers it is going to be exciting to watch unfold and strong competition and products is always good for the customers.
    4 days ago

    Ivan Harding • In the world of Oracle EBS, a similar model to SAP is being followed in that some non-trivial (and paid for) server software is needed to support mobile applications, which are then ‘free’ (I think).

    On top of that, the challenge around mobile for these on-premise ERP systems is getting customers used to the idea of exposing their in-house ERP to the ‘dangers’ of the outside internet. That’s a culture shock and the configuration is an IT expense in itself. That’s the big reason why getting mobile uptake on SaaS platforms is a heck of a lot easier; you’ve already broken through that mindset that corporate data is held and accessed via the cloud.

    Jarret, your point about increased licence count is very interesting. For example, I know a lot of Public Sector customers really interested in mobile due to the majority of their workforce being ‘frontline’ (Street Cleaners, Social Workers, Waste Management etc). I would say I see only about 30% of employees in these organizations able to access PC Based Self Service – the rest are still on paper based forms and letters. Massive savings to be had. And whilst I know these organizations would love these workers to be able to enter time cards and view payslips via their mobile phones, you can bet they’ll baulk additional Self Service licence charges. A typical UK PS customer would pay for, say, 10,000 Core HR and Payroll licences and only 3000 Self Service licences. I know it’s a different licence model for Peoplesoft – not sure about SAP – but it’s a great point; I wonder if those monolithic ERP licence agreements actually cope with this new way of accessing the system.
    3 days ago•

    Naomi Bloom • Ivan raises several really important points here. First, there are other cases where some “non-trivial (and paid for) server software” must be bought to support mobile applications after which the actual apps are free, some of which cases are among the so-called SaaS talent management vendors. Second, many licensees of PSFT/ORCL/SAP NEVER bought enough self-service licenses to service their entire workforce, and doing so now would be a huge expense for a self-service experience which is not consumerized to the extent that we now expect. Third, the “behind the fire wall” argument must be replaced by a secured data argument because we live in a world of online banking, for starters. Would love someone to create a chart of how vendor by vendor is unleashing mobility and at what cost to their customers.

  7. Jarret Pazahanick Post author
    I got some comments and feedback via back channels regarding this article and one came from a long time SAP employee who recently left SAP. He was okay with me sharing this and I think it adds to the overall conversation.

    “One of the ‘truths’ of the software industry is that it always sells the future…the next release, the new functionality, etc.

    This is true in the technology industry. If we continue with the Apple example, they just released the iphone 4s…why not the iphone 5?? I would suggest that it offers Apple another upgrade step. The 4s is targeted at iphone 3 and iphone 3s users not net new, the iphone 5 (which should be released next year…) will be targeted at net new users. The 3 and 3s users still have phones that work but they ‘want’ the latest functionality…and…their two year contacts with their wireless provider has recently lapsed (there are switching costs and lock in economics similar to the software industry).

    Apple is both a hardware and software company…SAP is a software company. For Apple their revenue stream is the device, itunes is a distribution channel for the content, the content (songs/apps) are primarily provided by 3rd parties. (As an aside, did you know that everything behind the itunes gui is SAP…all the way back to cutting the royalty checks to the artists…). The iOS, which is part of the Apple revenue stream, is also the development environment that facilitates the 3rd party ecosystem.

    I would suggest that for SAP the SUP/Gateway is the iphone4s, targeted at users already using SAP but want the latest functionality. Whether or not SAP creates its own apps store or continues to use itunes/android market as its distribution channel is yet to be seen. I would suggest that they continue to use the existing itunes/android markets as that is where the mobile device users currently go…

    In your model, where is the incremental revenue for SAP? If SUP is a cost to SAP, like itunes, and apps are provided primarily by 3rd parties…what is in it for SAP?

    Regarding the monthly subscription pricing and it gets board level attention there are a number of issues ranging from revenue recognition, to public company valuation”

    My response:

    Excellent points and as you can tell this is not a simple situation which may explain why SAP has struggled and been very quiet about the pricing model as it is still in flux.  At the core asking customers to pay for an ERP license, a SUP license, Gateway license and in many cases a 3rd Party provider license is not going to make it tough for many SAP customers to make a viable business case especially given the amount of apps that are available.  In a perfect world I like Dennis Howlett’s suggestion of SAP charging for their apps ie $10 a month per person and if you multiply by the size of the SAP install base even with a 5% adoption and 20 apps the numbers can be very large.  The key is true value added or cost saving apps for this model to work.  That said given that SAP pre-announced their earnings this morning and said they had a 500M mobile pipeline maybe the current model is working just fine.  I will wait to see the detail on Oct 26 as there is a disconnect between what the large customers I interact with and those numbers are saying.

  8. Jarret Pazahanick Post author
    A very good article was recently published called “Risks and Opportunities with SAP’s Mobile Platform Economics” and very relevant to this topic.


  9. Tom Cenens
    Hello Jarret

    As always great blog. I have talked about mobility to several customers and here are a few pointers I got back:

    The technical infrastructure needed is large and when they have to start paying additional license costs besides costs like additional hardware, training and maintenance costs it holds them back to go for it on IT side.

    On business side SAP comes in and shows mobile applications and waves away the need for technical infrastructure (IT department will handle that it’s no problem).

    Customers that do have mobile devices in place already are using their existing infrastructure to manage those devices.

    I think we will see more own initiatives pop up instead. One of our customers uses blackberry devices and they also have the  infrastructure needed to manage those devices (secure, remote wiping etc).

    I think it’s more likely they will have their developer(s) creating apps for their mobile devices using the infrastructure which is there.

    If SAP could provide them the necessary components for free (book it on the maintenance fee?) the story might be very different.

    Kind regards


    1. Jarret Pazahanick Post author
      Hi Tom

      Thanks for the kind words and great insight.

      I have seen several very large customer do exactly what you mentioned and had developers create apps using the existing infrastructure and figure out a work around. They would like to use SAP products but the licensing and infrastructure costs with the current model there is no way they could make a business case.

      I find it frustrating to see every mobility presentation talk about the great ROI or using SUP/Gateway etc when I believe that is only the case for companies with 100’s of mobility apps and an in-house team that will build more (aka VERY VERY Large).

      I am hoping that some of the recent articles that have put some focus on the mobility pricing are having SAP take a second look at their go-to market strategy.

      On a side note none of the articles have talked about infrastructure…..might be a good idea for a blog for you on what would be needed from that perspective at an average client to set up SUP/Gateway etc 🙂

      Thanks as always and enjoy your blogs and tweets.


  10. Sascha Wenninger
    Hi Jarret,

    the four pillars described by Matt in your blog strike me as a little peculiar. In particular, I would have thought that by far the biggest pillar should be something customer-facing like: Delight your customers by providing them with a mobile experience which empowers them (to bring you more revenue of course :-).

    Instead, all of the pillars were very inward looking towards the kind of stuff corporate IT usually occupies themselves with. If this is the strategy, then I’m not surprised most of the examples I see have to do with workflow approvals.

    It’s doubtful SAP will get to touch 1 billion people without an explicit focus on something along those lines.

    I realise I’m missing the context in which these 4 points were explained, so maybe my concern is actually null and void due to the context in which these were made. It’s still odd though and makes me ponder again Frank Scavo’s recent blog (http://fscavo.blogspot.com/2011/10/risks-and-opportunities-with-saps.html).



  11. Abdul Raheem


      It was very nice blog. Do you have any update related with SUP runtime licencing model as mentioned in the blog.

    Thanks and Regards,

    Abdul raheem

    1. Jarret Pazahanick Post author

      Thanks for the kind words Abdul and unfortunately SAP has not made any substantial changes that relate the mobile licensing for SAP HCM apps since this article was written 15 months ago. I have had several discussion recently with SAP on this topic and optimistic that changes will come sometime in 2013.

      On a side Sharon Ruddock who is COO of Mobility at SAP wrote a solid blog called Demystifying SAP Mobile licensing in Q4 that does a good job of explaining the current state.


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