Too Good To Be True?
According the Nucleus report: "Publicly-held SAP customers have an average ROE (return on equity) that is 20 percent lower than their industry peers."
SAP is not very happy about this counter-claim.
"When you really look at the shoddy effort by Nucleus, you have to question the validity of their broad claim that the best run companies don't run SAP," said SAP's Bill Wohl, head of Product & Solution public relations.
Nucleus looked at 81 publicly traded SAP customers and compared their published ROE numbers against their industry's average. SAP based it's 32% number on research it commissioned from Stratascope, a market-research firm, which evaluated 550 companies traded publically on the NYSE and NASDAQ.
Adding fuel to the fire is SAP's refusal to release the Stratascope report for review, said Ian Campbell, CEO of Nucleus.
"I want to be really clear," said Campbell. "We're not making any kind of association between ROE and SAP software. We're looking at whether their ad campaign can be validated because SAP is the one that came out and said that if you run SAP software you are 32% more profitable than your peers. And we said, 'Geez, that's a big claim let's see if we can validate that since SAP refuses to release their report.' Right now it's false advertising until they can prove it."
This has SAP defending its position vehemently. Nucleus' finding are inaccurate at best, said Wohl.
He said the company will not release the report because it is basically a "Who's Who" of SAP customers. He did, however, provide CIO Update with a Word document outlining the methodology behind the study and provide contact information for Stratascope. When asked to provide the full report in embargoed form, he declined.
Wohl went on to attack the validity of Nucleus' research methodology, stating the company's true goal was publicity.
"We have nothing about this study to hide at all but we're certainly not going to give our competition our list of customers anymore than our competition is going to give us their list of customers. That's just simple business," said Wohl. "(Nucleus) are not interested in real research they're only interested in drawing attention to their small, third-tier research firm. Nucleus did this on the back of envelope and they are an embarrassment to the research industry."
The Yankee Group's Laura DiDio, herself a controversial analyst from time-to-time, points out that looking strictly at ROE numbers doesn't tell the whole story. "(ROE) can look more negative on paper than it is in reality."
Why? Because so many factors effect a company's ROE there can be no correlation between ROE and any one factor such as a software application.
But this is also Nucleus's position, said Campbell.
"If you looked at a broader study, it's probably going to come out that you are no better off if you use SAP; if you use any technology software," said Campbell. "Because, frankly, let's face it, there's probably not a correlation between software and profitability. What we're saying is SAP's advertising campaign is suspect."
To be fair, even SAP isn't saying its software is making its customers more profitable, even though the ads are intended to leave you with that impression.
"We have not the made the claim that if you run SAP that you are automatically going to be more profitable," said Wohl. "I think what we said in the ad is pretty clear: That those companies studied happen to be more profitable than those companies not running SAP. The advertising reader takes the conclusion from that. It's a conversation starter."