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Is There Really a Shortage of SAP Skills?

Every time I get back from Sapphire or TechEd, one story remains a constant: What are we going to do about the so-called SAP skills shortage? Or, if we want to push SAP on this a little bit, we could say, "What is SAP doing about the skills shortage?"; I have a problem with this line of thinking. Not because the skills demand isn’t real - it obviously is. But a simplistic view of the "skills shortage" doesn’t serve anyone in the SAP ecosystem very well. In this blog entry, I’m going to call attention to a few misconceptions that surround this skills debate, and then, with any luck, we can have an engaging back-and-forth about this issue in the comments section of the blog, because I certainly don’t have all the answers.

Let’s start with the basics: At the board level, SAP takes the skills shortage issue seriously. I see less and less "doubletalk" when it comes to acknowledging the reality of this problem. The real discussion point is not whether SAP recognizes the skills needs of their customers, but whether SAP is doing enough to solve the issue.

  This topic came up at Sapphire in a couple of different ways. First, SAP hosted a panel based on a sponsored report by the Economist Intelligence Unit (EIC) that documented the increasing need for certain kinds of enterprise-level skills, based on a survey of 587 SAP customers (you can see a PDF of this report here). This report was not SAP-specific, but the EIC’s projection of the skills that are most in demand on the enterprise level reads like an exact match of the types of skills that the SAP BPX community is working to define and support.

I appeared on that EIC panel at Sapphire, and you can see a link to the EIU Competing on Talent panel on the bottom right of this page. Soon, I’m going to write a separate, longer piece on this EIC skills report that incorporates some follow up conversations I had with SAP executives on how this report ties in with SAP’s own skills development goals. But for now, I wanted to get the links out there for those of you who want to get some background on this EIC data. At Sapphire, I talked to another analyst who told me that he felt SAP was intentionally obscuring their own skills shortage by using the EIC report to call attention to an industry-wide need for certain business-process-oriented skill sets. I don’t see anything that diabolical in the release of this report.

My feeling is that SAP has to be judged by the totality of its own response to the skills issue, and the EIC report is just one piece of the puzzle. In my view, it’s a helpful one. SAP will be issuing its own press release on how it is responding to the skills gap on May 13. If I can, I’ll include a link to that press release in the comments section when it comes out. The issue of the SAP skills shortage almost always comes up in the post-keynote press conference, and this year was no exception. At last year’s TechEd, I was one of a couple writers who broached the issue, and at Sapphire this year, David Foote of Foote Partners, first raised the question. David Foote has a deep background in analyzing ERP skills trends, and his company, Foote Partners, is engaged in an ongoing effort to gather SAP skills data from more than 600 SAP end customers. Foote’s updated findings are issued on a quarterly basis to their subscriber base. Here’s some excerpts from David’s question:

Both Bill McDermott and Leo Apotheker responded to David’s question. For the purposes of brevity here, I’ll focus on Bill’s response. Part of Bill’s response was as follows: "I’ll talk about North America, and then maybe Leo can comment on the global strategy that he actually enacted in the company to recruit and encourage our partner ecosystem to recruit, train, certify, and prepare these professionals for the customer. We in Canada, as an example, have more than doubled our consulting workforce in the last two years. We have recruited heavily from university; have trained from within; we have certified, and we have also expanded the ecosystem in North America quite dramatically. You are right - there is a huge demand out there for SAP platforms and various components of it, and it is critical that we continue to add capacity. At the global level, there is a complete initiative to do this, to add several thousand trained, certified consultants to deal with this ongoing challenge. It’s obviously a byproduct of the huge success and the continued gains we’ve had in market share. But we are also sharing resources in North America across lines, so from the U.S. to Canada, we are allocating our resources to larger Canadian projects. I would say, if you were to poll the customers there today, or even in the United States, I am not aware of a single customer that was not able to move forward with a project because of the lack of resources."

Leo went on to acknowledge the global demand for SAP talent, and to discuss SAP’s solutions to add to global skills capacity, focusing on the University Alliance program.

As for my own take on Bill and Leo’s responses to David’s question, I’m not going to go into much detail on that here. I find that these brief press conferences are never really adequate for something this complicated anyhow.

I do think that the University Alliance program tends to be over-emphasized in SAP’s responses to the skills question, only because if I were an SAP customer, I wouldn’t want to see another round of young and inexperienced consultants swarming over my project the way they did in the mid-90s when we had a genuine, across-the-board, R/3 talent shortage in the U.S.

But to be fair, I have been told that many SAP customers are excited about the University Alliance program, and the way it is set up now, it should have a different result than the problem of inexperienced "Big Six" consultants in the mid-90s, because in many cases, SAP customers themselves are teaming with local universities to ensure that the talent being developed is a direct fit with their industry. That’s very different than certifying a bunch of college grads and tossing them onto projects across industries. At any rate, my own view is that SAP’s University Alliance program bodes well for addressing the skills shortages of the future predicted by EIC, but it may not be sufficient to fill the gaps in the present.

Obviously, with Bill McDermott saying he has not heard of any customers in the U.S. or Canada who have had to delay their projects due to skills shortages, and with David Foote saying that he has talked to SAP customers who tell his team the exact opposite, there is a difference of opinion on the feedback loop here. I’m not going to try to resolve that discrepancy, but the first misconception on my list may explain part of it.

1. If you are willing to pay for it, the skills are there. One of the problems I have with the so-called "SAP skills shortage" is a matter of perspective. In the mid-90s in the U.S., there were many cases where companies couldn’t get experienced SAP talent - no matter how much they were willing to pay. Now, in almost every case, if a company is willing to pay a premium, they can get an appropriate subject matter expert from SAP directly, or from any number of SAP partners that work with SAP to staff project sites.

Perhaps that explains the gap in perception between McDermott and Foote. Most of Foote’s data is based on permanent employee staffing, and that has a different dynamic. On the other hand, if you are an SAP customer willing to pay by the hour for a platinum-level resource, you can generally find them. Whether you are happy with that rate is another matter entirely. Don’t get me wrong - overly-high bill rates are a legitimate beef, but that’s a very different matter then the impression we are sometimes given that these skills are just not available on the open market.

2. Hiring permanent employees is a separate and important skills issue of its own. Some SAP customers want to minimize their reliance on outside consultants and cultivate more in-house talent. I suspect it’s this type of customer that is more frustrated with the current skills shortage. It’s definitely not easy to get an SAP professional who is working in a cutting edge area of SAP, whether it’s the new General Ledger or SAP HCM/Talent Management or the Mobile Development Kit, to "go perm".

The consulting market rates are too tempting in these "hot" areas. I suspect that may account for some of the frustration of the customers that are venting to David Foote, and it may also explain some of the perception gap between Foote and McDermott. Perhaps David Foote will chime in with a comment to this blog entry and clarify his point of view on this.

3. SAP skills demand is not across the board, but in targeted product areas. Because there is a need for SAP skills across many product areas during this "ERP 6.0 upgrade wave" there is the perception that all SAP skills are equally in demand. That is simply not true. Although many SAP customers have upgraded to ERP 6.0, a sizable portion is still running on flavors of 4.x. In particular, when we look at the 4.6 release, which was a dominant release for a long time, there is an ample supply of SAP professionals for most skills needs within 4.6. And believe it or not, many companies are still chugging along on 4.x releases and hiring SAP skills tied to 4.x releases.

To get a better grasp on the real SAP skills shortfalls, we have to understand that each skill area within SAP is impacted differently. SAP project staffing really involves a series of related labor markets, each with their own supply and demand dynamics. That’s why I find that the "SAP skills shortage" is too generic a phrase to lead to a very insightful discussion. By understanding the different technology trends in play, such as the transition from a transaction-focused system to one that extends transactions over the Internet to customers and suppliers and leverages that entire data stream for reporting and strategic business planning, we can get a much more accurate view of why these skills shortages are occurring.

4. Globalization profoundly affects SAP skills demand, and not just for ABAP programming. One of the things I found most interesting about the EIC report is that all of the skills that the EIC forecasted as being most in demand (strategic thinking/business process/soft skills) are skills that are almost impossible to outsource. There is the perception that outsourcing has only impacted ABAP programming, but in fact, some kinds of SAP development projects are easily outsourced, but other, more complex technical projects, especially those using the latest NetWeaver and eSOA tools, are not. On the other hand, we know that some "base configuration" projects on the functional side, especially those involving core HR and Financials, can also be outsourced.

Which brings us to this important realization: because the SAP skills market is dictated by supply and demand, those skill areas that can be tapped into globally will be much more affordable ratewise. On the other hand, those skill areas that are not easily outsourced, whether it’s cutting edge NetWeaver BI or MDM work, composite apps development using NetWeaver CE tools, or extending functional processes using the SAP Business Suite and Portals-based user access, will be in higher demand. (Obviously, I write frequently on which SAP skills are in demand on

Of course, that’s why the EIC report found that the business process expert type of skill set, heavy on strategy and soft skills, would be much more in demand than generic administrative or IT functions. So we have yet another case for why the SAP technical person needs more business savvy, and why the functional consultant needs more light technical skills, such as exposure to eSOA-based process modeling tools.

Needless to say, not every company is in a position to manage an offshore operation, so that’s why some companies may find, even at this stage in the market, that hiring an on-site ABAP programmer is not so easily done. But as a general rule, any skill that can be easily outsourced will not be a skill area that SAP customers complain, either in terms of rate or availability.

5. SAP customers have an education process they need to go through in terms of SAP hiring. This is one of the least-discussed points in this skills discussion, but one that I think is important and that many SAP consultants have complained to me about. David Foote and I got into a conversation about this at Sapphire and I hope to work this topic into a podcast with David down the road.

I don’t want to generalize about all SAP customers here, because many are quite sophisticated in their recruitment and management of SAP talent. But to this day, I find that too many SAP customers unnecessarily limit their access to SAP talent by defining the SAP skill set too narrowly, often in a way that excludes very senior SAP professionals.

Over the years, I have lost count of how many great SAP consultants were turned away from SAP jobs they were eminently qualified for because they were not a perfect match with some kind of boilerplate job description that became an overly rigid means of screening applicants.

Let’s take the current example of ERP 6.0 project work. Often, I see companies involved with ERP 6.0 implementations insisting on only hiring SAP professionals who have been through a full 6.0 install. Obviously, that shrinks the supply of consultants for such a position severely, though less so these days as more 6.0 projects are completed. Such companies also run the risk of hiring a less qualified consultant who has some 6.0 skills over a much more experienced SAP professional who lacks the 6.0 piece of the skill set.

Am I saying that a 4.6c consultant can walk into a 6.0 install without missing a beat? That depends. Some functional areas, such as those involving the new General Ledger, are very different in 6.0. Others are very similar to 4.x environments, albeit with some GUI changes. But even in the case where there are some cosmetic differences in the GUI, a one or two day orientation is sometimes enough to get a senior SAP professional up to speed.

I have seen a lot of very solid contributors on the outside looking in because of overly strict job orders that are not a thoughtful match with the skills that are needed. And if there is such a profound skills shortage, why not consider the small investment in training needed to bring such a person up to speed? I know some applicants who would even foot the bill for such an opportunity.

This also fits into a hot topic in the EIC report, which is: talent management has become enough of a C-level concern that it cannot be left to HR alone. Indeed, the entire approach to talent management may need to shift if companies want to keep their "high performers" in house. It seems clear that HR departments will either become a partner in this transformation or an impediment to it. In SAP terms, I feel there needs to be a better alignment between HR and all departments regarding the kind of SAP talent that is needed, so that hugely talented applicants are not screened out by ill-thought and inflexible "requirements".

And yes, I do believe that SAP can do a better job of helping its own customers understand, for example, which areas in ERP 6.0 require a seasoned ERP 6.0 consultant, and which can be handled by a senior SAP professional who has not yet picked up 6.0 experience. Whenever you can broaden the qualified applicant pool, you save customers money and reduce outcries about skills shortages. And in this case, we’re not talking about university-level talent that needs some years to develop fully, but folks who can hit the ground running and add senior-level value.

My point here is not to blame the SAP skills shortage on SAP customers. Rather, I want to call attention to the continued need for the entire ecosystem to educate itself on the best ways of hiring both contract and permanent SAP talent. Sometimes that means throwing out generic assumptions about job orders, whether that assumption is "must have ERP 6.0 experience or, alternately, must have five years of SAP which might exclude someone who has several years of SAP combined with many years of highly relevant industry experience in a particular area.

Even in the last few weeks, I have seen such screening techniques knock out excellent talent on paper, ruling out any kind of interview. I’m not sure how you can do that and then claim there is a shortage of SAP skills out there.

"Solving the SAP skills shortage" is a discussion that has been pretty much non-stop ever since I joined the SAP marketplace in 1995, with the exception of a brief break around 2000/2001. It’s a valuable discussion, one that all parties in the SAP world have a responsibility to come together and address. I do believe, however, that we need to move beyond generic and breathless assumptions about the nature of this shortage in order to solve it.


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