Proceedings of the 53rd Hawaii International Conference on System Sciences | 2020 How Do Enterprise Software Providers Adapt Their Strategies to the Cloud? An Analysis through SAP Hana Journey Based on the Evolution of SAP’s Discourse (2010-2018) Lise Arena Lapo Mola UCA, CNRS, GREDEG, France UCA, CNRS, GREDEG, SKEMA, France [email protected] [email protected] Nicolas Remond Frantz Rowe UCA, CNRS, GREDEG, France LEMNA, IAE de Nantes, Nantes University and [email protected] KTO, SKEMA Business School, France [email protected] Abstract The transformation of ERP vendors from software providers to platform’s governors has deep business and This paper seeks to provide a better understanding strategic implication [8]. Platforms are not purely of software business providers’ strategy when adapting modular systems; as the level of interaction, to the emergence of cloud computing markets. Based on interdependency and imbrication of the different a longitudinal case-study and on a historical content platform’s components produces lock-in effect that is analysis of SAP’s discourse, it highlights four main worth being investigated further [8, 25, 28]. While periods of adaptation, since 2009. The analysis of these cloud-based applications’ opportunities are increasingly four periods emphasizes the existence of an initial discussed in the literature; challenges are less known so far as the few existing publications focus on privacy superior technology (HANA) on the ERP market when policies’ reception and confidentiality concerns [14]. referring to cloud-based solutions. Overall, the Yet, early results consider switching costs, legal evolution of SAP’s strategy is understood as a change restrictions and organizational change as the main from a high level of control over the administration of challenges in the adoption of cloud-based enterprise its technological environment to a more flexible strategy systems [26]. that gives alternative options such as Platform-as-a- In a world where collaborative standards Service (PaaS) and Infrastructure-as-a-Service (IaaS) development process enables downstream innovation, mode. Content analysis shows that SAP’s discourse new forms of value capture impacts the profiting from gives an increasing importance to agreements with third innovation [32]. To a large extent, this shift in platform parties in order to mitigate the perception of the boundaries and these new sources of profit addressed perceived lock-in effect. new questions to software providers who faced the choice: proprietorship and customization versus more 1. Introduction open architectures to capture value. This choice cannot be understood in isolation from the evolution of global The evolution of ERP (Enterprise Resource organization of digital innovation and the emergence of Planning) systems and, more generally, of the enterprise disruptive technologies. The development of cloud software industry has been largely discussed by computing reflects this tendency as it has two main historians of computing [2, 9] and scholars in functionalities: flexibility of computing architecture and management of information systems [27, 4]. Overall, more collaborative business. Put differently, it has the the enterprise software industry developed at the same potential to radically change the ERP environment; time as firms moved from in-house designed shifting from data housed on-premise to data hosted by information systems to modular, scalable and tailor- vendors who provide real-time access to the application. made integrated systems. This increasing complexity of As a result of these recent changes, cloud computing is organizational structures and information flows meant to reach a degree of platform openness enabling continuously offered new challenges to ERP vendors, platform boundary resources to support complements. who aligned their strategies with the emergence of Up to recently [30], IS research has been of limited platform economies and their ecosystems [15]. help to understand vendors or partners’ challenges and URI: https://hdl.handle.net/10125/64421 978-0-9981331-3-3 Page 5523 (CC BY-NC-ND 4.0) coping strategies with the shift to the cloud. Yet, During the 1990s and the acceleration of e- paradoxically, as soon as 2014, bibliographic studies of commerce, the enterprise software industry added ERP research had shown that this issue, identified as a modularity to enterprise systems with “extended ERP gap, had to be considered as a future area of research in systems”, enablers of inter-organizational dynamics the field to better understand related phenomena [12, [27]. This extension has been made possible thanks to 13]. The research question addressed in this article is: the modularity of ERP systems. ERP systems, by design How do enterprise software providers successively are multi-platform and multi-database. The architecture create a technological reference, diffuse it and adapt of ERP allowed firm to choose the most suitable their strategy to the client’s reception? To provide a operating system environment (i.e. Unix, Microsoft better understanding to this question, we analyze the Windows, Linux) as well as the data storage shift in SAP’s strategy 2025 - According to the German environment as they can operate on multiple relational firm, all clients had to migrate from the existing version database such as Oracle, IBM DB2, Microsoft SQL or the ERP (R/3, mySAP, etc.) to the latest version: SAP server etc. This flexibility allows firms to integrate the S/4 HANA - based on the analysis of its organizational data of the daily operations managed within the discourse over eight years (2010-2018). This historical boundaries of the ERP systems with the data produced analysis results from the collection of 9 SAP’s annual by the best of breed solutions focused on specific reports and is complemented by independent blogs on processes (such as CRM systems, SCM systems, IT and Enterprise Systems (ES). Transportation systems etc). While the evolutionary paradigm shows that lock-in strategies inherently come from the physical attributes 2.2. Recent developments: Application services of technologies [2], our paper seeks to nuance this result providers and Cloud-based applications (2000s) by looking rather at the evolution of the organizational The rise of ERP systems has provided firms the discourse as a trigger to market disruption and to lock- choice between developing internally software solution in strategies. to manage business processes and buying packaged software solutions by external vendors. Over time, the 2. ERP systems: From MRP to cloud-based choice of buying packaged systems (ERPs) became the applications only option. However, the internal IT departments kept developing ad-hoc solutions to integrate standard ERP The aim of the ERP is to integrate the data used modules or customizing specific functionalities of the throughout the entire organization [11] in order to have installed ERP System. In the early 2000 then, the all the data of all functions in a unique logical database. availability of internet connection, along with its The evolution of ERP systems can be summarized in reliability and affordability, allowed software vendors four main periods: closed MRP/ERP systems (1960s- and firms to develop new forms of governance of their 1990s); extended ERP systems enablers of inter- ERP systems: ASP (application services provider). organizational dynamics (1990s-2000s); ERP as The last decade had seen a significant change ERP application services providers (2000s-2010s); ERP as system with the integration of cloud-based applications cloud-based applications (since 2010s). and new solutions for data storage and management. New challenges arise in terms of ease of migration, enhanced by a reliable path between the cloud, the 2.1. The origins: from MRP to extended ERP enterprise data center and eventually, between different systems (1960s-1990s) clouds. It is now often argued that in the long-run, ERP The roots of ERP systems are found in the 1960s vendors that push their clients to conform exclusively to when American large corporations developed their standard will find it increasingly challenging to centralized computing systems to automate their capture existing customers and to find new ones [3], as inventory control systems. While the 1970s witnessed those strive to mitigate their risks including lock-in the expansion of material requirements planning (MRP) effects [6]. systems, the 1980s Manufacturing resources planning The move to cloud is not a mere technical choice. (MRPII) were developed to extend their scope to other Moving from on-premise software to cloud services activities such as distribution; finance; human resources affects all business model components [4], as well as and project management. One has to wait until the late way organization manage their process [5]. On top of 1980s to see the emergence of modern ERP systems, that, the cloud architecture transfers the control from the designed as integrators of business processes able to client domain to the ERP vendor [30] to a lesser or provide increased accessibility and unity across the greater extent depending on the type of cloud options organization [26]. [6]. SAP’s 2025 strategy can be interpreted as a platform strategy [24] also involves a new role of SAP in the ERP Page 5524 market as it moves from a traditional software provider choices, like the development environment and the to a technological change advisor. Aiming