How Does the TCO of SAP’s Products Keep Declining With Each New Version?

ByShaun Snapp

Executive Summary

  • SAP claims that the TCO of its new products continually declines.
  • We cover how and if this is possible.

Introduction

SAP makes a curious claim regarding every new version of their products — that the product reduces TCO. However, SAP never provides evidence that this is true and instead makes assertions about how its products work to reduce TCO. This statement is repeated throughout the SAP ecosystem.

Is this true, or is there at least some evidence to support the contention that SAP’s TCO continually declines from version to version?

What Does SAP Say About its Ever Declining TCO?

Even though SAP seems to take more of its customers’ IT budget every year, with each new product release, SAP reflexively states that the new items “reduces TCO.” SAP hired the research analyst Forrester, which created a study that we have analyzed that does not say that SAP HANA reduces TCO. Instead, it stated that SAP HANA might reduce TCO. Forrester did not have any evidence to point to because the study was performed before there were live instances of HANA.

  • When SAP used the marketing study, they stated that the Forrester study had demonstrated a reduced TCO for S/4HANA.
  • S/4HANA is a separate product from HANA.
  • As soon as SAP began to say this, SAP’s consulting partner also began saying it.
  • This was widely distributed by the SAP ecosystem, even though there was never any evidence for it.

What Has Proven to be The Reality of HANA TCO Years After the Forrester Study?

  • HANA has been and currently has the highest acquisition cost of any relational application database (a database that an application sits on top of) in the market.
  • Due to maturity and complexity issues with HANA, the database has, in our estimation, the highest TCO than the database it was replacing (in most cases Oracle).
  • It also has the highest TCO of any database is used for the purposes that HANA is directed towards.

SAP’s Presentation on TCO

SAP’s presentation on SAP TCO is very straightforward. According to SAP, any new product they introduce reduces SAP TCO over the previous product it replaces. SAP never presents any evidence for lowered SAP TCO, yet of all the enterprise software vendors, they talk about it the most. This is interesting because SAP is not known for having a low TCO. The primary reason why Deloitte, Accenture, IBM, and others recommend SAP, even when the particular application in question does not meet their customer’s requirements very well, is to make more money on SAP implementations than any other software. They always have some excuse for doing this (it is important to stick with SAP, integration costs will be lower, SAP’s functionality is weak now, but it is growing).

The Illusion of Lower SAP TCO

SAP receives benefits from continually talking about lowering TCO but never actually doing so. The TCO of SAP applications has been steadily rising as SAP moved into software categories to bring out uncompetitive products. This includes business intelligence, advanced planning, MDM, CRM, etc.

We know these things as we research this topic and have first-hand experience in SAP, but observe how these topics are virtually invisible if you perform Google searches. All you will find is the false claims about a continually lowering TCO by SAP, SAP consulting firms, and media entities funded by SAP.

The Reality: Why SAP Has No Basis for its TCO Claims

SAP does not provide evidence for its TCO claims, and neither does the overall SAP ecosystem. This is for good reasons.

  • SAP is the most recommended software application by the largest consulting companies because SAP has the highest TCO versus alternate vendors.
  • A part of this TCO is SAP’s very high implementation costs, which serve as the revenues for SAP consulting companies.
  • SAP does not know what the TCO is for its earlier applications or its later applications.
  • What is known is that SAP has the highest TCO of any vendor in each of the application categories that we have calculated.

Why Would SAP Want Their TCO Accurately Calculated?

It should go without saying that the highest TCO vendor would not want its TCO accurately calculated.

This is the type of information that can be used against SAP. We have extensive calculators for SAP, as well as competing applications available.

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Conclusion

SAP never provides any evidence of its TCO or that every new version of an SAP product reduces TCO further. All of SAP’s TCO claims are marketing constructs, and in all of our research into SAP’s TCO claims, we have never found any evidence that SAP has lower TCO or that its TCO is declining with new versions of products.

SAP’s claims around TCO come directly out of SAP’s marketing department without any work done to support any of their claims.