A Study into SAP HANA’s TCO (Intro) (2017)

Executive Summary

  • SAP is proposing that HANA should replace Oracle and IBM, and one argument is that HANA has a lower TCO than Oracle and IBM.
  • SAP paid Forrester and other media entities to promote the idea of HANA’s lower TCO.
  • We created an independent TCO.

Introduction to HANA’s TCO

This is the first study of its kind. It is the first study into the reality of HANA’s TCO.

SAP has made many statements about HANA lower TCO. SAP has proposed lower TCO for both HANA (the database) and S/4HANA (the ERP system). yet, every single statement about HANA TCO by SAP is supported by a single study into the topic, a study paid for by SAP and produced by Forrester. In this article, we will evaluate the support for SAP’s claims regarding HANA TCO as well as provide our own TCO calculation.

Hasso has routinely argued that SAP HANA is not expensive. Typically Hasso will use the example of compression that is available in column-based databases to reduce the footprint. However, discussing the topic with people a little closer to the ground will provide a very different impression. If you talk to SAP account executives or to account executives in SAP partners, they will routinely tell you that SAP HANA is expensive. They will also inform you that HANA is very hard to position, for this reason, once the price tag comes back, the customer often balks.

It is a simple thing for Hasso to propose in interviews how SAP HANA could in some hypothetical sense be not too expensive. But all other sources point to HANA being quite expensive. And you will not be buying HANA from Hasso but an SAP account executive. Hasso’s accuracy lately has been off, and I don’t see analysts or the traditional IT media outlets recording this inaccuracy or commenting upon it. I have performed a detailed analysis of Hasso’s statements on HANA.

However, up until now, there has been no published study on TCO that has been free from SAP’s influence. And only one study published (under SAP’s influence) which is the Forrester TCO study.

Executive Summary

SAP HANA’s TCO is much different than proposed by SAP (and repeated by SAP surrogates). It is not lower than competing alternatives and there are rather obvious reasons as to why. These reasons can be expressed in a general sense, but it is important to perform a mathematical estimated with a full explanation of each of the line items of HANA’s TCO as well as a full explanation of these assumptions.

Most of the assumptions explained in this study are not explained anywhere else that we could find when we performed a literature review prior to performing this study. While there has been an avalanche of claims about HANA, there has been extremely little actual research performed on HANA, and none of it would be able to meet what we consider to be of sufficient quality to be used in decision making regarding HANA.

Paid Research Explanation

This article you are reading will provide some of the details about the research, however, the bulk of the article is paid research. Researching HANA, validating SAP’s claims, checking with many sources in many parts of the world is time-consuming and requires funding. While there exists a great interest in selling HANA and HANA consulting services, there has been close to no interest in determining the accuracy of SAP’s statements regarding HANA. This is a problem. The funding for research very strong tends to flow in one direction — towards promotion.

It is recommended to purchase this document to get the only credible information available on the market the TCO status of HANA. Being a new product still being developed, it is of the highest importance to become aware of the experience of early adopters. Given that SAP research and development has run into various limitations in developing new products going back to after R/3 was released in 1992, HANA has a high probability being less than projected by financially biased promoters of HANA.

Navigating the Framework and Verbiage of HANA

HANA has unfortunately been confusingly explained to customers. Often HANA is referred to as a platform when it is, in fact, a database. There have been a number of products that have HANA in the name (which are sometimes changed to have HANA removed) but these are not HANA. Along with the similarly named S/4HANA, this can make it confusing what is actually being discussed.

The following marketing graphic is a good example of this.

One could spend quite a lot of time critiquing this and other HANA graphics. For example –

  • Pretty much any data stream can be made to be real-time or batch, so the description of these items is odd. HANA has been heavily marketed as being entirely real time. Hasso Plattner has stated that HANA eliminates all batch processing.
  • HANA is almost never connected to Hadoop.
  • Hadoop is open source and has its own open source analytics engine.
  • HANA is not particularly related to “network devices.” So this is a rather strange item to have on this type of graphic.
  • What database cannot accept information from cloud sources?

Overall due to the heavy marketing focus on HANA material, virtually every contention about HANA must be validated with sources outside of SAP. To keep this research article from being to lengthy and meandering, we describe areas that are necessary and pertinent to TCO.

Who is Brightwork Reseach & Analysis?

Brightwork Research & Analysis is an independent research entity. We specialize in researching SAP. We have first-hand experience implementing SAP, something which differentiates us from most other research entities that cover SAP.

SAP leadership perceptions are the result of a global orchestrated powerful ecosystem all with vested interests. System integrators, CIOs/CFOs, analysts and IT media defend the perception of SAP leadership to preserve their interests, which have been valued in trillions of dollars. (See the book SAP Nation and SAP Nation 2.0 by Vinnie Mirchandani for a fuller explanation of the financial implications of SAP’s ecosystem.) According to Gartner, Accenture has 46,000 SAP consultants, IBM has 36,000, can you count on their neutrality to give you advice on SAP? They clone what SAP says with no research or verification, what SAP says they repeat. This leads to zero objectivity and what should, logically at least, amount to zero credibility as to the viability of HANA.

Obviously, SAP is pro-HANA, but many SAP consulting companies are also pro-HANA. And their evidence? That can be found in billing hours. Getting behind SAP HANA maintains their income streams. The more money customers invest in SAP, the better these consulting companies do. Most media entities, who take money from SAP, are also pro-HANA and SAP has distributed large amounts of information that is directly from SAP marketing and is unfiltered by the media outlet since HANA and S/4HANA’s introduction. SAP has distributed large amounts of money to media entities for what is called “paid placements.” These are undeclared advertisements, usually written by SAP, and can be found in Fortune, Forbes, ComputerWorld (owned by IDC) and many other IT media outlets. All of this has led to a general misimpression as to what has actually been happening on HANA implementations.

Our lack of financial relationship with SAP has allowed us to publish this study without external influence.

The Background on HANA

Before getting into the case studies of HANA, it is important to have a full frame of reference as to what HANA is. Along with S/4HANA, HANA is one of the largest initiatives on the part of SAP ever undertaken. It is one of the largest current development projects at SAP and has been for several years. SAP went public in 2011 with the announcement of HANA. HANA maintains a natural connection with the S/4HANA database, as currently S/4HANA, the ERP system can only run on the HANA database. The two products have the same term “HANA” in their title. This is quite unusual as it is either extremely rare or completely unique to include the database in the name of the application. SAP’s reason for doing this is primarily for marketing related.

S/4HANA maintains an artificially exclusive restriction with the HANA database. SAP S/4HANA runs only on HANA. Customers are being forced to replace Oracle and IBM and Microsoft databases with HANA. And that is really just the tip of the iceberg as at a wide variety of accounts SAP is pushing HANA into various applications using usually some type of compatibility argument. That is only HANA support x, y or z in the application, and therefore, HANA should be purchased.

HANA can be evaluated from many dimensions, and the overall topic is complex. These dimensions all have impacts on the TCO of HANA. We address these issues as necessary to explain our TCO estimates for HANA.

Intent of the Study

  • This study was intended to determine the TCO of HANA.
  • This study was not undertaken to determine the implementation status of HANA. That would mean using a case study approach, which is not what we did in this study.
  • Some TCO estimates are created to arrive at a total dollar figure. All of our TCO calculations up to this study have been exactly that. However, this study was designed to validate the proposal by SAP that the TCO of HANA is lower than that of the databases that it aims to replace. For that question, developing a fraction or multiple is the obvious approach. If HANA’s TCO is less than one compared to competing databases then SAP’s claims would seem to be more valid. Conversely, if HANA’s TCO is greater than one compared to competing databases then SAP’s claim would seem to be invalid.

S/4HANA is the next version of SAP’s widely implemented ERP system. SAP has put an enormous effort into marketing S/4HANA. Yet many of the aspects of S/4HANA are not well covered by SAP. For example, important implications for a S/4HANA implementation are left out, particularly if those implications are not positive.

For all of the effort expended by SAP on socializing and popularizing S/4HANA, it can be said without a doubt that S/4HANA is generally poorly understood. But beyond misunderstanding the components that make up the solution, there is an even greater misunderstanding regarding the implications of S/4HANA.

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Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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Research Updates

Most research is static. However, the plan is for this and for other Brightwork Research & Analysis research to be updated. As new case studies come forward, they will be added to this research. As things changes with respect to HANA, we will update this research. Companies have the option of having the research renewed every 6 months (at a reduced rate) so that they can be kept up to date on recent changes.

How to Understand Our S/4HANA Implementation Study (Intro)(2017)

Executive Summary

  • This is the only independent S/4HANA implementation study every published.
  • The research method we followed which required interpreting S/4HANA public case studies and private case studies.
  • Implications of the research and future research

Introduction

This is the first study of its kind. It is the first study into the reality of S/4HANA implementations not produced by an entity that is in some way connected to or funded by SAP.

The study has not relied upon SAP for information about S/4HANA implementations, as SAP is an unreliable source for unbiased information on the state of S/4HANA at its customers. We instead relied on direct sources. The study found SAP S/4HANA case studies and to determine the state of these implementations as well as the future plans that the implementation companies have for S/4HANA.

Probably the closest thing to this study is the ASUG Member S/4HANA Adoption Survey which is carried out yearly.

When performing this research and then comparing it to the ASUG S/4HANA Adoptions Survey, it became clear that the ASUG survey cannot be considered a study that can be relied upon for accurate information on what is really happening on S/4HANA projects. For example, in the private case studies that this research paper was able to acquire, it shows a number of halted or failed implementations. In the ASUG study, on the contrary, no projects show as halted or failed. That is quite simply impossible.

Executive Summary

This research document provides information regarding the implementation of S/4HANA. The research reviews two categories of case studies.

  • Public or Published Case Studies: These are case studies that have been released to the public and consist of massaged information designed to in many cases lead to more implementations of S/4HANA for consulting companies.
  • Private Case Studies: Information provided by these case studies is from people that have either worked on or had some type of exposure to S/4HANA implementations.

Many companies are trying to determine if they can improve their condition by moving to S/4HANA. And the problem with coming to this determination is that just about every entity that offers views on S/4HANA makes money from either selling S/4HANA or S/4HANA services. The top 18 system integrators such as Accenture, IBM, Deloitte, Cap Gemini combined have 240,000 SAP consultants.

To say they have a bit of a financial bias would be an understatement.

The Problem with Financial Bias

Listening to people and entities that have a financial bias in one direction or another, is generally not a good way to come to an accurate conclusion on any topic. However, almost every entity that provides information about S/4HANA (and SAP products generally) either draws an income directly from SAP implementation (in the case of SAP consulting companies) or is paid by SAP (as in the case of IT media entities like Forbes and ComputerWeekly). This biases the information provided in favor of SAP.

For example, in performing this research we came upon information that a particular customer, which is a very public case study and is showcased on SAP’s website as a great S/4HANA success is actually a very problematic installation for the customer. This customer will not communicate anything but positive things about its S/4HANA implementation. Furthermore, in addition to the normal disinterest in publishing reality-based information about projects, SAP customers sign NDA with SAP which hinders the customer from communicating any negative facts about SAP.

The purpose of this study was to get to the truth of S/4HANA implementations up to this point.

Paid Research Explanation

This article you are reading will provide some of the details about the research, however, the bulk of the article is paid research. Researching S/4HANA, validating case studies, checking with many sources in many parts of the world is time consuming and requires funding. While there exists a great interest in selling S/4HANA and S/4HANA consulting services, there has been close to no interest in determining the true state and activities of S/4HANA. This is a problem.

It is recommended to purchase this document to get the only credible information available in the market the status of S/4HANA. Being a new product still being developed, it is of the highest importance to become aware of the experience of early adopters. Given that SAP research and development has run into various limitations in developing new products going back to after R/3 was released in 1992, S/4HANA has a high probability being less than projected by financially biased promoters of S/4HANA.

Description of the Different Versions of S/4HANA

In reading this research one will come across a number of versions of S/4HANA. S/4HANA is different from other applications in that there are multiple versions of the application even at one time.

Description of versions of S/4HANA are as follows:

SAP’s Ridiculous Release Schedule for S/4HANA

SAP releases are the most confusing of any releases that we have ever tracked. There are both cloud and on-premises releases, with the cloud release being significantly behind the on-premises release in terms of functionality, and with the cloud releases being far more frequent. There is version 1503, 1508, 1511, 1511 FSP01, 15100 FSP02, 1605, 1608, 1610 and 1709. However, all of the releases have hazy details on what is actually included in the release. For example, release 1709 states that “parts of finance, warehousing, sales, manufacturing, transportation, and CRM” are included. For example, both 1610 and 1709 declare releases within manufacturing. Obviously, manufacturing functionality was not completed in version 1610. However, it was also not completed in 1709. What is the difference between 1610 and 1709? Well, that takes a little research project.

And sometimes releases that were supposed to be released on specific dates were not released on those dates.

To explain these releases, we consider the following to be the most important.

  • S/4HANA Simple Finance (now renamed Finance)
  • S/4HANA 1511 Inventory Logistics
  • S/4HANA 1610 Sales, Service, Warehouse, Manufacturing, Transportation
  • S/4HANA 1709 (more) Sales, Service, Warehouse, Manufacturing, Transportation

These are all on-premises releases. SAP spends a lot of marketing effort describing S/4HANA cloud, however, we have very reliable sources that tell us extremely few customers use S/4HANA in the cloud. These tend to be the smaller companies. For this reason, we won’t spend much time talking about S/4HANA in the cloud.

Considering the “Simplification List”

There are details listed in the Simplification List related to the release, which is a list of what is included in a release that is not actually a simplification as much as a long explanation of the release inclusion. For details on the Simplification List, see our article titled How to Best Understand the S/4HANA Simplification List. Then there is a further question — which is which of the stated functionality that is released actually works as stated in the Simplification List.

Tracking and validating the development in S/4HANA is an enormous job, and in our estimation beyond the research funding of most companies that will purchase and implement S/4HANA. However, we have used our research into when S/4HANA released what functionality in order to validate the public case studies published by SAP.

Who is Brightwork Reseach & Analysis?

Brightwork Research & Analysis is an independent research entity. Brightwork does not take money from software vendors for research and has no financial reason to be in favor or against SAP, or any other vendor for that matter. In the case of S/4HANA, it is not material to us whether S/4HANA does well or whether it never becomes popular. We offer advice on S/4HANA and HANA and other SAP topics as well to our clients. But we sell advice, not licenses or implementation services. This separates us from the vast majority of information sources on S/4HANA.

SAP leadership perceptions are the result of a global orchestrated powerful ecosystem all with vested interests. System integrators, CIOs/CFOs, analysts and IT media defend the perception of SAP leadership to preserve their interests, which have been valued in trillions of dollars. (See the book SAP Nation and SAP Nation 2.0 by Vinnie Mirchandani for a fuller explanation of the financial implications of SAP’s ecosystem.) According to Gartner, Accenture has 46,000 SAP consultants, IBM has 36,000, can you count on their neutrality to give you advice on SAP? They clone what SAP says with no research or verification, what SAP says they repeat. This leads to zero objectivity and what should, logically at least, amount to zero credibility as to the viability of S/4HANA.

How Billing Hours for SAP Have the Curious Effect of Making Entities Pro SAP

Obviously, SAP is pro-S/4HANA, but many SAP consulting companies are also pro-S/4HANA. And their evidence? That can be found in billing hours. Getting behind SAP S/4HANA maintains their income streams. The more money customers invest in SAP, the better these consulting companies do. Most media entities, who take money from SAP, are also pro-S/4HANA and SAP has distributed large amounts of information that is directly from SAP marketing and is unfiltered by the media outlet since HANA and S/4HANA’s introduction. SAP has distributed large amounts of money to media entities for what is called “paid placements.” These are undeclared advertisements, usually written by SAP, and can be found in Fortune, Forbes, ComputerWorld (owned by IDC) and many other IT media outlets. All of this has led to a general misimpression as to what has actually been happening on S/4HANA implementations. ASUG, the US SAP user group publishes a yearly survey on S/4HANA. However, ASUG is part of the ecosystem that defends SAP. In fact, ASUG’s media output is remarkably close to that of SAP marketing, demonstrating that SAP and ASUG coordinate their output and ASUG is merely an arm of SAP.

Our lack of financial relationship with SAP or any other software vendor has allowed us to publish this study without external influence.

The Background on S/4HANA

Before getting into the case studies of S/4HANA, it is important to have a full frame of reference as to what S/4HANA is. It is one of the largest initiatives on the part of SAP ever undertaken. It is the largest current development project at SAP and has been for several years. SAP went public in 2014 with the announcement which was the first component of the modernized suite. S/4HANA maintains a natural connection with the HANA database, as currently S/4HANA, the ERP system can only run on the HANA database.

SAP’s reason for doing this is primarily for marketing related.

S/4HANA maintains an artificially exclusive restriction with the HANA database. SAP S/4HANA runs only on HANA. But there is no technical reason for this to be the case. SAP makes many arguments for why, but having evaluated each of them they all appear to be manufactured. Customers are being forced to replace Oracle and IBM and Microsoft databases with HANA.

The two products have the same term “HANA” in their title. This is quite unusual as it is either extremely rare or completely unique to include the database in the name of the application. SAP’s reason for doing this is primarily for marketing and revenue related. SAP tells companies that S/4 will only work with HANA. This has lead to significant confusion as to what is being discussed, the ERP system or the database when referring to S/4HANA and HANA. It is not uncommon, even at this date for people to switch the terms during a conversation. People will begin discussing SAP’s new ERP system, and then say the term HANA, and vice versa. There are no applications in memory that are so frequently interchanged with one another. So while S/4HANA and HANA are linked, they are separate products.

The Intent of the Study

  • This study was intended to determine the implementation status of S/4HANA.
  • This study was not undertaken to determine the implementation status of HANA. In fact, HANA is a database that can be used with many SAP applications, so that study would cover topics outside of ERP systems. HANA’s most common pairing is not with S/4HANA but instead with SAP BI/BW.
  • It is important to understand that HANA is a database that can support a number of SAP applications, not only S/4HANA. Those other applications do not contain the name HANA as does S/4HANA.

S/4HANA is the next version of SAP’s widely implemented ERP system. SAP has put an enormous effort into marketing S/4HANA. Yet many of the aspects of S/4HANA are not well covered by SAP. For example, important implications for a S/4HANA implementation are left out, particularly if those implications are not positive.

For all of the effort expended by SAP on socializing and popularizing S/4HANA, it can be said without a doubt that S/4HANA is generally poorly understood. But beyond misunderstanding the components that make up the solution, there is an even greater misunderstanding regarding the implications of S/4HANA.

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Research Updates

Most research is static. However, the plan is for this and for other Brightwork Research & Analysis research to be updated. As new case studies come forward, they will be added to this research. As things changes with respect to S/4HANA we will update this research. Companies have the option of having the research renewed every 6 months (at a reduced rate) so that they can be kept up to date on recent changes.

Brightwork Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

HANA & S/4HANA Question Box

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