How Accurate Was John Appleby on HANA TCO for Cloud vs On Premises?

Executive Summary

  • John Appleby made bold predictions on HANA.
  • How accurate was his analysis of the TCO of HANA in the Cloud Versus on Premises?

Introduction

John Appleby’s article on the SAP HANA blog was titled 10 SAP HANA Predictions for 2015 and was published March 6, 2014.

The Quotations

HANA Cloud TCO is a No Brainer?

What fascinated me is just how impressive the TCO is for the HANA Cloud. It’s a no brainer. I took the on-premise pricing from this publicly available presentation.

Let’s look at a simple customer scenario. They have a data mart that they would like to build, and let’s say they need 256GB of HANA per year, growing linearly over 4 years. Let’s assume they can do HANA Platform Edition, or HANA Base Edition in the cloud, because they don’t need advanced engines.

But notice Appleby’s logic for the TCO.

“This is an extremely simplistic TCO and it doesn’t take into account the operational costs of running HANA on-premise, just the hardware and software cost for a productive system (not including Dev/Test). Those will skew running HANA on-premise even further. It’s also slightly unfair to HANA Platform, because the HANA Cloud has some limitations, but for many scenarios, the customer doesn’t care.”

An “Extremely Simple TCO”?

An extremely simple TCO, is not a TCO, it’s a PCO (partial cost of ownership). If Appleby checked our TCO calculators, he would find that maintenance costs are roughly 60% of the total TCO. So Appleby is leaving out the largest cost component of TCO.

Appleby’s Work Capability?

Apparently, Appleby is not interested in putting work into his articles, because this is not a TCO. And there is another problem, at this time the SAP Cloud was extremely immature, and in 2019 is still barely used by anyone. Therefore, if SAP customers had listened to Appleby they would have gone with an ineffective cloud solution which we covered in How Accurate are SAP’s Claims Around SAP Cloud?

There is no attempt by Appleby to validate the actual quality of the SAP Cloud — this is just an incomplete cost comparison.

Conclusion

This article scores a 1 out of 10 for accuracy. But really falls down when the outcomes of following Appleby’s advice are followed.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

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References

https://blogs.saphana.com/2014/03/06/a-no-brainer-the-tco-of-hana-cloud-platform-vs-on-premise/

TCO Book

 

TCO3

Enterprise Software TCO: Calculating and Using Total Cost of Ownership for Decision Making

Getting to the Detail of TCO

One aspect of making a software purchasing decision is to compare the Total Cost of Ownership, or TCO, of the applications under consideration: what will the software cost you over its lifespan? But most companies don’t understand what dollar amounts to include in the TCO analysis or where to source these figures, or, if using TCO studies produced by consulting and IT analyst firms, how the TCO amounts were calculated and how to compare TCO across applications.

The Mechanics of TCO

Not only will this book help you appreciate the mechanics of TCO, but you will also gain insight as to the importance of TCO and understand how to strip away the biases and outside influences to make a real TCO comparison between applications.
By reading this book you will:
  • Understand why you need to look at TCO and not just ROI when making your purchasing decision.
  • Discover how an application, which at first glance may seem inexpensive when compared to its competition, could end up being more costly in the long run.
  • Gain an in-depth understanding of the cost, categories to include in an accurate and complete TCO analysis.
  • Learn why ERP systems are not a significant investment, based on their TCO.
  • Find out how to recognize and avoid superficial, incomplete or incorrect TCO analyses that could negatively impact your software purchase decision.
  • Appreciate the importance and cost-effectiveness of a TCO audit.
  • Learn how SCM Focus can provide you with unbiased and well-researched TCO analyses to assist you in your software selection.
Chapters
  • Chapter 1:  Introduction
  • Chapter 2:  The Basics of TCO
  • Chapter 3:  The State of Enterprise TCO
  • Chapter 4:  ERP: The Multi-Billion Dollar TCO Analysis Failure
  • Chapter 5:  The TCO Method Used by Software Decisions
  • Chapter 6:  Using TCO for Better Decision Making