When SAP ERP can communicate with just about anything…
[Updated 11/22/17 – We recently launched our ultimate guide on SAP Indirect Access which can be seen here]
That’s actually a very serious question that SAP is facing at the dawn of the Internet of Things (IoT) age. If every device that interacts with SAP requires an SAP Indirect Access license, the industry’s liabilities…and SAP’s potential revenue…are humongous!
Take light bulbs for instance.
There are over 2.5 billion light bulbs produced each year. Increasingly, they are of the LED variety which can be wifi enabled. If bulbs are wifi enabled than they can easily communicate with a supplier letting them know when it’s time to be replaced. Just ask Amazon’s Alexa how that works. If that supplier is running SAP, which is probably the case since the world’s largest light bulb manufacturers all run SAP (GE, Osram Sylvania, Phillips), those replenishment requests become SAP Indirect Access License liabilities. And that’s just light bulbs. Add every other product in every industry that could benefit from communicating with a supplier for repair and/or replenishment requests and you have a mind boggling licensing challenge, and from SAP’s perspective, a ginormous revenue opportunity.
Let’s take this hypothetical light bulb example one step further.
It’s theoretically possible, albeit highly improbable, that someday SAP won’t be able to resist the allure of getting into the light bulb business. After all, 2.5 billion is a lot of light bulbs and there is precedence for software companies getting into the hardware business…Microsoft sells laptops and Google sells phones…so why wouldn’t SAP consider selling light bulbs? If those 2.5 billion bulbs come pre-wired to communicate with an SAP ERP system, SAP benefits in several ways.
- They can profit from selling the light bulbs themselves.
- They will increase their consumer brand awareness in the market…everyone has to buy light bulbs. That probably will attract more attention than having Reggie Jackson or Derek Jeter on a Sapphire stage :-).
- They enhance the value of their core ERP brand because of the innovative things that they’re doing.
- Lastly, because SAP is now vertically integrated from the light bulb all the way back to the ERP system, they develop a competitive edge against all other light bulb manufacturers.
It’s a win-win-win-win strategic move for SAP!
But what about those pesky SAP Indirect Access questions?
Well, for people who buy SAP light bulbs, there are no questions.
It seems obvious that one of the benefits of buying an SAP light bulb is that you won’t get charged SAP Indirect Access fees. But what about those who dare buy light bulbs from other manufacturers…because maybe those bulbs are better, or last longer or are cheaper? Their purchasing decision just got a little more complicated. They will have to have a conversation with their SAP Indirect Access saber rattling salesperson who will probably not be able to resist using his “ace in the hole” sales tactic:
“Buy SAP light bulbs and there is no indirect access obligation. Buy from “the other guy” and we’ll have to perform a license audit and you’ll have to pay us a fee for every light bulb that communicates with your SAP system. So what’s it gonna be?”
And that’s how SAP will wipe out their light bulb competition and come to dominate the light bulb market.
The only problem with this scenario is that it is ILLEGAL!
If SAP wants to get into the light bulb business, they need to figure out how to make light bulbs that people want to buy and then compete on a level playing field. If light bulbs will require indirect access licensing in order to communicate with an SAP ERP system, than all light bulbs, including SAP’s, will have to pay the fee. So, aside from figuring out how to manufacture and sell light bulbs, SAP has to do two things if they want to succeed in the light bulb business:
- Come up with a clear definition of, and reasonable pricing model for, indirect access licensing.
- Rein in the over zealous salespersons who will resort to illegal tactics to meet their ever growing quota for light bulbs.
So that’s hopefully the illuminating story on light bulbs.
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