- SAP HANA costs are extremely high, but there is a blackout on this topic as so many entities are aligned with SAP.
- The problematic side of HANA from administration and licensing.
- The TCO of HANA turns out to be so high.
Introduction to SAP HANA Costs
I was recently interacting with a person on LinkedIn, and I brought up the topic of SAP HANA’s costs. This person responded that they did not know why I was bringing up costs!
Wow, what a comment.
A Consistent Theme to Treat SAP HANA Costs as a Verboten Topic
This has been a consistent theme that I have noticed with regards to HANA, where lots of ink is given to discussing the benefits of HANA but so little time is spent discussing its costs. It is almost as if it is a taboo subject. On the other hand, HANA is often presented as reducing TCO. So if that is true, then obviously the first place to start is to figure out what it costs to buy and operate.
SAP HANA Costs
Here is the truth.
HANA is quite expensive. It is expensive in hardware, software as well as resources which bill at the top of the market and which are difficult to find. I have heard of big consulting companies charging roughly $350 per hour for them, and that adds up fast.
HANA hardware alone is typically going to come to $1 million.
SAP has provided some insight into these costs which are not part of the SAP price list (that is not kept private). They have provided total cost of ownership numbers, or TCOs for SaaS. However, these come to:
- $2.7 million for 1TB for HANA Cloud Platform
- $5.9 million for HANA Enterprise four years (these are 2014 numbers).
Now Amazon Web Services (AWS) which provides transparency regarding costs. They offer up to 2 TB of RAM per instance. This means that HANA on AWS can be priced, although the data volumes are necessary to have (AWS has Business All in One, Business One, Business Objects, among others).
SAP HANA’s Misleading Pricing
Now if we move to the applications that use HANA, a Finance purchase and implementation is going to be much more than an FI/CO implementation. I have found this myself, but this is the story I have repeatedly heard from sales reps that sell HANA.
Why SAP HANA’s Pricing is So Misleading
HANA’s price is at first blush straightforward. It is priced per GB and quite expensive. But the problem is SAP proposes ridiculous reductions in the database footprint that will not turn out to be correct (around a 98.5% reduction). Thus almost every HANA purchase is based upon false assumptions. Second, the associated costs make it tough to price entirely. This is particularly the case because it is so difficult for find use cases that can cover HANA’s high costs.
The expense of HANA is a primary reason why HANA has been so limited in its market acceptance.
Details of the Costs Associated with Moving to SAP HANA
SAP often presents HANA as sort of a “slam dunk” purchase.
According to SAP, HANA has a lower TCO than any other competition database.
- It implements faster than any other competing database (even when a database is already installed).
- It has more innovation than any different competing database.
- It has better performance than any other database.
- It has better performance in every dimension than any other competing database.
Is any of this true?
While at Brightwork we hate bursting people’s bubbles, but the truth is quite a bit more complicated than what is commonly presented by SAP and SAP’s surrogates on HANA.
In this article, we will cover the complications of using HANA from the licensing and database administration.
How SAP HANA is Problematic from the Administration Side
SAP’s “new” ERP system called S/4HANA and which is not new, only runs on HANA. However, many large corporations have set Oracle or IBM DB as corporate DB standards, and this restriction of S/4 makes it difficult for companies to streamline administrations.
This is something that is entirely left of SAP’s marketing on HANA.
How SAP HANA is Problematic from the Licensing Side
And many companies have what we called unlimited Oracle license which allows them to use any number of Oracle DB for a predetermined price. Adding HANA will not reduce their DB cost but will, in fact, increases the overall DB costs. That is HANA becomes a “net increase” in license and therefore support cost.
Brightwork Research & Analysis recently performed the first independent study into HANA’s TCO. And this issue complicates the licensing estimations of HANA versus competitive databases.
And for those that purchased Oracle DB from SAP, they will have to continue to pay the same maintenance for Oracle DB throughout even if they want to move to HANA as long as there are any SAP systems still running on Oracle DB.
This translates into double the database maintenance fees during the period of migration which can take years if there are many large SAP systems running currently. However, the average we use is 1.25 years. That is we assume that HANA can be taken live in 1.25 years from when the HANA implementation begins.
The Overall Cost Implications
Long story short, this greatly increases the costs of moving to HANA. This also explains the multiple areas of costs and how HANA uniquely uses, which must be considered to come up with a representative TCO.
The Oracle database or IBM database that the customer is using today is considered sunk cost. Therefore if the customer is to move to HANA, they are the sunk costs that they have incurred previously and rebuying a new database all over again. Something that they could simply save just staying with the Oracle and IBM databases that they already have.
SAP HANA is the Highest Overhead Database
We won’t go into this much in this article, because we cover it in detail in our research A Study into SAP HANA’s TCO, but the amount of complexity that HANA exposes customers to is substantial. The reason for that overhead is predominantly the instability of HANA. This combines with a very high cost of resources as HANA resources charge at the top of the market. This is covered in part by the quotation from SAP Nation 2.0.
“Liz Herbert, an analyst at Forrester wrote about the diversity around the HANA product alone: “clients struggle to keep up with the rapidly evolving landscape of HANA — an ever growing list of solutions that includes HANA, HANA Cloud, HANA Enterprise Cloud, S/4HANA, Simple Finance and others.””
The TCO of SAP HANA
One could see something like the following representing the cost magnitude per cost area of using HANA:
- Costs of Hana DB ($$$$) $0 if staying put on existing anyDB.
- Costs of new hardware Infrastructure ($$$)
- Costs of reimplementation ($$$$$)
- Costs of retraining ($$$)
- Costs of higher downtime ($$$$$$)
We have estimated the TCO of HANA vis-a-vis competing databases in the article A Study into HANA’s TCO.
There is no point in putting off cost considerations and not discussing HANA costs. Yet, so many authors do this. They list the benefits of HANA without listing the costs.
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.
Costs are of course quite important to IT decision making. I cover TCO in depth in the following book.
Getting to the Detail of TCO
The Mechanics of TCO
- 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.
- 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