Conservative SAP Walldorf to West Coast – Complex or costly choices – S/4 HANA ?
As an experienced IT professional working in the ERP / SAP platform solution area for 20+ years, after a number of recent Client CTO / CIO level interactions I felt compelled to inform of this community of the highly assertive approaches I’m observing.
This input aggregates my experiences over a number of large Enterprise SAP Clients where SAP sales and commercial teams are naturally seeking to drive early SAP HANA and/or S/4 HANA platform and/or license deployments.
A significant cultural shift from Walldorf to West Coast?
These observations are outside of my prior experience and represent in my view a significant shift in culture and behavior patterns from the prior relatively conservative and considered SAP SE in Walldorf we respected, enjoyed partnering and working with.
What are the sort of behaviors and situations are being observed, and why does it make any difference with potential multi million upside or downside IT budget impacts?
If you have observed a similar shift and want a consolidated set of observations and links to useful sources of data please review my blog entry, this item follows a prior well structured item and considered input on this CIO Forum from Anthony Biju
The Ugly Truth about SAP Fiori and How to Avoid Hidden Fees – Sept 17th 2015
It may help you and/or your CTO, Enterprise / SAP Architects save many millions ?
The primary issues I’ve observed seem to arise when particular scenario’s apply as below:
a) Clients that express a clear desire to retain an AnyDB choice vs early HANA adoption
b) Clients that have indicated a desire to invest in alternative 3rd party SaaS based Systems of Innovation, Engagement and Insight.
Where these are alternative IT Investment strategies create a low or no growth outlook over prior often significant SAP based “Systems of Record” investments, naturally in turn this then creates a stable or no growth outlook of their SAP Application Value (SAV) and consequential SAP license maintenance fees.
c) When the client commences testing of viable BW + SAP HANA alternatives (for example IBM’s DB2 BLU or indeed Oracle 12c)
It seems at this point or shortly afterwards one or more of the following incentive driven HANA adoption “encouragement” techniques may be observed:
1) To initiate an audit of “SAP Indirect License Access” License fees
Recommended reading Gartner Research Paper G00261950 – 31st July 2014
SAP Indirect Access License Fees Can Be Significant and Unexpected
2) To suggest that the Client will not benefit from future SAP application enhancements & optimization after years of SAP ERP / ECC investments and maintenance fees.
Whilst on occasions withholding information on the extension of SAP NetWeaver support for specific AnyDB’s choices until 2025 in addition to avoiding the topic of ongoing SAP NetWeaver 7.40 (& 7.50) Core Data Services (CDS) optimization with revised and HANA optimised SAP ABAP application code over viable, proven scalable SAP AnyDB alternatives.
Recommendation fully understand SAP NetWeaver CDS and it’s benefits.
Also recommended reading Gartner Research Paper GG00275097, 24th February 2015
SAP S/4HANA Is a Transformational Shift for SAP and Its Users, but Hold on to Your Wallets for Now
3) To complete a “Tight day 1” sized SAP HANA systems that then get the Enterprise SAP client firmly “onto the HANA license and project hook” irrespective of later license and/or hardware capacity upgrade costs, please refer also to:
The Ugly Truth about SAP Fiori and How to Avoid Hidden Fees – Sept 17th 2015
4) Overall there are a number of SAP HANA licensing / TCO tool kits to help Clients to safely navigate this complex commercial, TCO, technical and solution maze
Including the Gartner Toolkit: Successful Migration to S/4 HANA Foundation Requires Answers to Critical Licensing and Contract Term Questions – G00275208 24th April 2015
Overall all of the Enterprise SAP ERP Client CIO / CTO’s I meet typically and naturally seek to maximize the value of their prior significant SAP ERP investments, whilst of ensuring these are properly licensed.
They are naturally cautious about the effective principle of being asked to buy again functionality that they have previously licensed and paid annual maintenance fees for with SAP ERP / ECC NetWeaver (APO/SCM, BW, PI etc) as the classification and uses change.
They want to understand the real risk, ROI and delivered value, in this case faster reporting may or may not be essential vs reliable, fast order processing or invoicing, efficient MRP runs that integrate into existing IT landscapes and production systems.
I’ve also heard of a number of examples where Clients seeking to extract and leverage their Systems of Record data via SAP BW Open Hub technologies into 3rd party solutions have also run into similar license issues as the “indirect access challenge”
Seeking a ROI from prior significant SAP ERP / ECC investments and roll outs
However for many of these clients, and in particular the clients who have or are just completing significant, broad and deeply customized SAP ERP deployments with standardized Global or Regional SAP templates (SAP ERP / ECC, Financials, Sales Order Processing, MRP, APO/SCM, BW, PI functions etc) mapping a safe phased and cost effective forward path to S/4 HANA is a complex task that is likely not helped by hidden commercial, technical or license bear traps.
Indeed whilst these may involve a “start out all over again” strategy with a brand new simplified SAP S/4 HANA “read optimised “ application template and aligned simplified business processes with a new universal journal, or they may also involve some form of TCO additive SAP S/4 HANA Simple Finance “side car” deployment vs existing SAP ERP systems & ledgers.
Understanding that a number of the prior SAP HANA platform “commodity” data storage and platform TCO reduction claims really don’t really hold water in the cold light of day when compared to modern functionally rich and proven alternatives (like DB2 BLU).
Indeed recent results from a DSAG (German Speaking SAP User Group) S/4 HANA adoption survey highlighted that whilst the respondents were interested in digital transformation, more traditional analytics and reporting acceleration, that are important to the financial community, these seem to be a lower priority for the business vs surveyed 3-5% S/4 HANA (and/or SAP BW + HANA) early adoption rates.
For some IT Executive teams and/or key business stake holders this may look a little like financial reporting and/or ERP open heart surgery, only to be approached with a very experienced theatre team, consultants and excellent post operative care!
Incremental Innovation – Evolution vs Revolution – A fine balancing act
Normally from my prior experience business and mission critical “Systems of Record” IT systems and business processes needs to be incrementally upgraded in a safe, low risk evolutionary way over much more risky revolutionary change.
In particular for Industries that are facing new and emerging digital competitors and channels from adjacent industries that are clear strategic IT investment priorities & competitive threats compared to replacing and upgrading prior ledgers and SAP / ERP platforms.
In this area for the Financial Services Industry (and other industries with complex, extended, collaborative supply chains) it is the rapid emergence of Open Source Ledger technologies like Blockchain may well have a much more profound effect and should be watched and understood carefully from 2017/2018 forward.
Indeed Gartner’s 2015 Hype Cycle for Information Infrastructure (G00277727 – 13th August 2015) indicates on Page 4 that almost all new successful infrastructure technologies emerge into market productivity as incremental vs disruptive technology transitions.
Naturally SAP SE position and claim that both HANA and/or S/4 HANA is an incremental vs revolutionary change, some may beg to differ.
Where “In-memory” columnar OLAP analytics capabilities from Oracle 12c with their “in-memory cache” and/or IBM ‘s DB2 BLU’s in-memory columnar capabilities incrementally build on proven, robust and mature rdbms platform foundations.
There is also excellent 2008/9 Harvard Business Review (HBR) paper on what is now being called two speed IT (or similar), but was then called “Factory and Innovation IT” that can be subscribed to reference – www.hbr.org
Search for Product #10316 ISBN 978-1-4221-6247-7
Aligning Technology with Strategy – Harvard Business Review
Most companies waste billions of dollars on technology. Don’t be one of them.
“If you need the best practices and ideas for unleashing technology’s strategic potential but don’t have time to find them—this book is for you. Here are eight inspiring and useful perspectives, all in one place”.
Overall I found the above mentioned Gartner Guidance, prior Bloor Research and the recent, prior item by Antony Biju very logical and practical advice for Enterprise SAP clients who maybe experiencing a very different and much more assertive (some might even say aggressive) SAP SE than before.
Platform Choice – SAP as a prior Open Architecture – Is this still valuable?
Additionally I noted an interesting comment in Michael Doane’s “The SAP Blue Book” A concise Business Guide to the World of SAP – Galileo Press – ISBN 978-159229-412-1
Which clearly attributes on page 22, under 2.2.2 – Open Systems Architecture the prior rapid growth of SAP ERP solutions to what is summarized as an open architecture that enabled the clients to both protect their prior IT investments, operational skills and platform choices through a broad choice of SAP ERP rdbms platforms, server technologies and operating systems.
If this platform choice still has a value to CIO/CTO’s, this will require robust conversations with SAP representatives in my view on future AnyDB choices with S/4 HANA.
Is there a risk of jumping from the frying plan into the fire? – 100% Yes
Commonly I hear that Enterprise SAP clients are seeking viable and proven alternative to prior Oracle SAP rdbms platform choice, however they don’t want to jump from one frying pan straight into another fire in either license, commercial leverage or TCO terms.
For example if prior Oracle SAP ASL terms are combined with proposed SAP S/4 HANA (BW and/or prior SoH) costs it is relatively easy to experience an “overlap” period of 24% or more of your SAP Application Value (SAV), in some cases this maybe higher than 30%
Additionally we have observed situations where rdbms costs for viable, low risk, functionally rich alternative AnyDB choices were increased by 9% to match target S/4 HANA costs (at 15% now vs 20% for SoH + BW before).
SOA Principles, Service Encapsulation, Separation of Duties and Layers
In the past the SAP NetWeaver AnyDB choice and defined architectural layers provided clear benefits for example to SAP IS Retail deployments over Retek / Oracle Retail, by retaining a strong degree of isolation and SQL driven standardization between the retail application and rdbms tier.
This helped to avoid complex solution and application / rdbms Oracle PL SQL interdependencies that can make future application platform upgrades both very complex and costly to plan and execute, it was basically performance / choice / ease of later platform upgrade trade off.
Hence even with SAP CDS (Core Data Services) now creating enhanced structure around the SAP strategy to drive and functionally exploit push down into the rdbms layer typically for performance (or functional) reasons, this push down, can in my prior experience, unless managed very carefully, turn out to be a bit of a mixed blessing, in particular in a functionally rich scenario where a significant platform lock in risk exists for multi year upgrade cycles with significant unwelcome commercial leverage, choice and future IT life cycle / version upgrade cost impact.
This is a particular issue when other significant areas of the information management platform market are rapidly embracing open source solutions: Spark, Hadoop, Open Data Platform (ODP), where it’s likely no single vendor will predominate.
Speed to Value, Application and Solution Simplification – S/4 HANA Objectives
I must stress that the principles of application simplification, faster speed to value with enhanced FIORI and/or mobile based user interfaces as described by the S/4 HANA vision are all completely logical and should in the longer term reduce SAP customization effort and maintenance, assuming critically the business adopts aligned simplified processes.
For me individually the very worst of both worlds would be deploying existing deeply custom SAP ERP / ECC solutions over SAP HANA rdbms platforms – For me it’s basically a miss match in platform and rdbms technology.
Personally I’m just not sure if a very significant shift from multiple SAP rdbms choices (AnyDB) to a single combined HANA HTAP platform choice, which was originally designed and conceived to optimally service OLAP workloads is the right answer?
These are a very complex set of IT choices, mostly in my view a significant “Technology” driven distraction from the business of processing orders, manufacturing plans and raising invoices in a cost effective and reliable way at scale.
In particular as in time the described and proposed advantages of “in-memory” databases (if these are indeed real for your specific SAP workload and application template) will largely have become business as usual functions and not competitive differentials for most businesses.
Where these business are seeking to increase strategic IT investments in the digital front office and Systems of Engagement and Insight areas.
Seeking to effectively counter disruptive new business models, competitors and channels in their industries in preference to complex, costly and relatively painful and high risk refresh or migration activities for their core back office Systems of Record / ERP workloads.
Just maybe the SAP AnyDB pendulum choice needs time to settle naturally back between the middle of two extremes multiple choices vs no choice S/4 HANA = HANA only?
Where to Invest Limited IT Resources for best ROI?
Ultimately CEO’s, CFO’s, CIO’s and/or CTO’s need to balance IT investments for competitive advantage and revenue growth (say in the Digital Front Office, Channels and/or Business Innovation, Mobile and/or Analytics driven Insight enablement) vs the costs, risks and ROI of further “Systems of Record” ERP rationalization and/or S/4 HANA simplification over time. For sure Systems of Record will need to support Systems of Engagement & Insight.
This is a very complex jigsaw in particular for large Enterprise SAP Clients who may have invested many millions in the roll out of deeply customized Global or Regional SAP templates with broad and deep functional exploitation and aligned business processes.
The choice to transition these systems to S/4 HANA will be both long term and cautious
If you are looking for a vendor independent view, I’d also recommend Philip Howard at Bloor Research:
The views expressed in this item / blog reflect my personal experiences and views (they do not reflect IBM corporate views).
I’ve no doubt others will have very different views and experiences, which for me is a very healthy thing, allowing open, balanced and informed Client choices and discussions.
Trademarks and copyrights are respected with original sources referenced for interested readers.