How to Best Understand ASUG on S/4HANA’s Cloud Relaunch

What This Article Covers

  • What is the Background of the Article?
  • Pizza Chain Takes S/4HANA Leap?

Introduction

In this article, we will review ASUG’s article on the S/4HANA Cloud relaunch.

Quotes from the ASUG Article

“While S/4HANA in all flavors appears to have had a successful sales start, with SAP now claiming 6,000 customers having purchased its next-generation, in-memory-centric ERP, those buys have primarily come in the form of on-premise or managed cloud deployments.”

That is misleading. According to ASUG’s own S/4HANA Study of 2016, only 350 customers are live on S/4HANA. Brightwork’s estimate is that the number is quite a bit lower than 350 live customers. Many of the S/4HANA implementations are either demo type systems or offline systems. ASUG knows that the 6,000 customer number is a gross exaggeration, but they published it anyway. This is covered in the article How SAP Controls Perceptions with Customer Numbers.

“The public cloud, or software-as-a-service (SaaS), edition, which was originally announced alongside the other two versions originally, has not picked up the same steam—with SAP having set a goal of 30 S/4HANA Cloud customers by the end of 2016 last May.”

And is ASUG going to explain why that is? Why does SAP have so few public cloud customers on S/4HANA?

The answer is very simple. S/4HANA is not now and will not be in the future a good fit for the public cloud. The reason is that history shows us that 92% of customers either moderately or aggressively customized ECC. However, you can’t customize a public cloud application, because at that point it ceases to be multi-tenant. And therefore, it becomes private cloud.

It is curious that ASUG does not explain this to its readers.

“Since August, however, SAP has put a renewed focus on S/4HANA Cloud by creating a dedicated division led by Darren Roos, who told a roundtable of analysts and reporters at SAP Capital Markets Day in New York City this week that the vendor signed up more S/4HANA Cloud customers in the Q4 of 2016 than it had in all previous quarters combined. He declined to give specific numbers, but the goal by the end of 2017 is to see the customer numbers “in the hundreds.”

SAP effectively re-launched S/4HANA Cloud this week. To be clear, this is not a new offering but rather the maturation of the product that was announced in early 2015. What the announcement does signal is SAP’s clear dedication to growing S/4HANA Cloud.

“We are gaining good momentum,” says Roos.”

That is quite doubtful, for reasons that were just covered.

SAP needs to continue to present a brave public cloud face for Wall Street. However, S/4HANA is not inherently designed for the cloud as is covered in this article.

Pizza Chain Takes S/4HANA Cloud Leap

SAP is targeting the mid-market—businesses with above 1,500 employees but not quite at enterprise scale—with S/4HANA Cloud. Most of the S/4HANA Cloud customers thus far have been net new SAP ERP customers, Roos says.

SAP may or may not be targeting this segment, but it won’t matter. S/4HANA public cloud so far has only attracted the smallest customers. This is because some small customers can get by without customizing S/4HANA. That will be the market in the future that will work for S/4HANA regardless of who Roos wants to target.

“One of those net new customers is MOD Pizza, a fast-casual pizza chain that launched in 2008. MOD is currently two months into its S/4HANA Cloud Core Finance module implementation, with about another two months of work before go-live.

MOD’s commitment to S/4HANA Cloud is an encouraging sign for the product, which had previously been targeting at professional services firms that could implement, then help their own customers do the same. MOD, instead, is a 3,000-employee consumer-facing organization with hundreds of locations conducting thousands of transactions every day.”

Why is S/4HANA targeted towards professional service firms? S/4HANA is an ERP system, why would a professional services firm deal with the expense and overhead of S/4HANA unless they were managing a physical product. Actually, there is one reason why that it is covered in the article, The Problem with S/4HANA Consulting Company Case Studies. 

“So why did MOD go with S/4HANA Cloud above other options on the market that may be currently more mature? One major reason was a belief in SAP as a stable organization committed to growing its product.

“Some other alternatives were more advanced than where S/4HANA is today,” says Bob Barton, chief financial officer at MOD Pizza, who also spoke at roundtable in New York this week. “But it wasn’t about where they are today, but they are going to be. The ultimate selection came to the fact that SAP is a real company with a real set of solutions that has been there and done that before.”

This is a fairly ridiculous statement. Intacct and FinancialForce, which are two far better choices for a professional services company, are also real companies with a real set of solutions. And they have also been there and done that before.

“Barton also cites the support and commitment received from SAP in the selection process, saying “it felt like we were doing them a favor” and that SAP was there to answer any questions, offer creative pricing to ensure affordability and promises to implement quickly.

Of course, MOD is doing SAP a favor. Being an early adopter is never an easy task, but MOD saw that as a positive, adds Barton.”

MOD is doing SAP a favor. S/4HANA is still not ready to implement and MOD won’t be able to get much value out of S/4HANA, but it will be a boon to SAP to be able to use them for propaganda purposes. Which is really the entire point of the ASUG article.

“If we got in early, we could influence where the product is heading,” he says. “It’s a great opportunity. We’ve got an SAP-based product, a new product that is going to evolve.”

Tiny little MOD will not be influencing where the product is heading. And S/4HANA is not a new product. It is roughly 93% identical in code to ECC. But I can see that SAP told them that it was new. Rod Enslin, head of SAP Sales apparently tells clients that S/4HANA is a totally new product.

Conclusion

As with any ASUG article, it is difficult to tell how much of it was written by SAP, but this is a rather standard piece of SAP propaganda that has been released by ASUG. The nice thing about writing for ASUG is that SAP writes most of the article for you.

This ASUG article receives a 3.5 out of 10 on the Brightwork Accuracy Scale.

See our The S/4HANA Implementation Study. for real story and details on actual S/4HANA implementations.

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

  • Have Questions About S/4HANA & HANA?

    It is difficult for most companies to make improvements in S/4HANA and HANA without outside advice. And it is close to impossible to get honest S/4HANA and HANA advice from large consulting companies. We offer remote unbiased multi-dimension S/4HANA and HANA support.

    Just fill out the form below and we'll be in touch.

References

https://www.asug.com/news/sap-re-launches-s-4hana-cloud-aims-for-significant-growth-in-2017

The Real Story on ERP Book

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion

Risk Estimation and Calculation

Risk Estimation and Calculation

See our free project risk estimators that are available per application. The provide a method of risk analysis that is not available from other sources.

project_software_risk

Why the SAP Cloud Platform is Not an Open PaaS Platform

Executive Summary

  • SAP’s Statements on the SAP Cloud Platform
  • Is the SAP Cloud Platform an Actual Platform?
  • Reviewing Throwaway Phrases from SAP on the SAP Cloud Platform

Introduction

In previous articles, I explained why the SAP Cloud Platform, is specifically designed to perform both cloud washing and HANA washing. However, something else that is misleading about the HANA Cloud Platform is that it is not a PaaS. In this article, we will cover why.

SAP’s Statements on the HANA Cloud Platform

“SAP HANA Cloud Platform, the in-memory Platform-as-a-Service offering from SAP, enables customers and developers to build, extend, and run applications on SAP HANA in the cloud.”

*SAP changed the name of the HANA Cloud Platform to the SAP Cloud Platform, which is what we refer to it as in this article. But the video below was created before that change.

Here is SAP’s video.

Reviewing Throwaway Phrases from SAP on the HANA Cloud Platform/SAP Cloud Platform

As you can see SAP is stating that the HANA Cloud Platform/SAP Cloud Platform is easier and less expensive than the way things “used” to be done. The voiceover states that you can..

“Rapidly develop and deploy solutions for greater innovation

Reduce total cost of development or ownership

Scale applications to meet your changing needs

Innovate quickly

Leverage existing investments

Out of the box integration*

Reduce risks and costs while improving ROI”

Throw Away Phrases

These are all just throw away phrases.

SAP declares the same thing on pretty much every product but never proves any of these statements. This is just designed to fool the executives into thinking something special is going on with HANA Cloud Platform/SAP Cloud Platform.

If we look at one of the promises from the video such as…

“out of the box integration”

that is a routinely stated and false promise that not only SAP makes, but that most other vendors have also used. It is a throwaway sales line. It is very close in credibility to the following.

“the check is in the mail.”

An extra reason why it is not to be believed is that SAP does not offer any new technology with the SAP Cloud Platform. SAP Cloud Platform’s capabilities are replicated by any number of development environments.

Illusory Benefits

Almost all of the benefits declared in this video are illusions, because the SAP Cloud Platform has no advantage over other development environments. Secondly, SAP has no history creating development environments, so the SAP Cloud Platform’s likelihood of success is very low.

Unending Falsehoods

This video is just packed full of falsehoods. First, it implies that only SAP offers APIs. secondly, it states that the SAP Cloud Platform makes it easy to integrate to non-SAP applications. However, SAP has always made it difficult to integrate to non-SAP systems, and deliberately so. Using the SAP Cloud Platform is the opposite of freedom, it is yet another tool that SAP will use to make their customer’s SAP-centric and to block out other vendors. This is why using a PaaS from either SAP or Oracle, two companies that for decades have blocked out other vendors is such a dangerous proposition.  The voice in this video is friendly, but that is not how SAP operates.

Customers should look to SAP’s history for clues as to its future behavior.

How SAP Intends to Use the SAP Cloud Platform to Maintain Control

SAP uses a proprietary language called ABAP. ABAP is an inefficient language, but it is preferred by SAP because it allows for control over their accounts. We covered this in the article Why SAP Customers Followed SAP’s Advice on Coding in ABAP. The dominance of ABAP is declining inside SAP (partly because of SAP’s cloud strategy). Now, instead of opening the ABAP stack for any platform like an on-premise App server, SAP offers to use other languages but on SAP Cloud Platform. That is rather than controlling the language they want to control the runtime platform. However, when SAP presents the SAP Cloud Platform to customers, it does not tell them any of this. Instead, it tells them that the SAP Cloud Platform is completely open and invites comparisons to AWS. That is laughable, but it will trick some people. SAP’s system is closed for a fundamental reason.

SAP must keep its system closed into order to retain its margins. Accepting open programming would have meant opening SAP. Moreover, this is unacceptable to SAP. This is because once you don’t control the development language, you lose control of what the rules are for interfacing with other systems. SAP management knows that it is uneconomic to try to bring ABAP into the modern world. Therefore they have moved the control to the cloud.

Is the SAP Cloud Platform an Actual Platform?

The last word in the product’s name is “platform.” However, is the SAP Cloud Platform a platform? Well, no because the SAP Cloud Platform is a development environment. However, if you use SAP’s IaaS service called HANA Infrastructure Services, then you are using a platform.

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

  • Have Questions About S/4HANA & HANA?

    It is difficult for most companies to make improvements in S/4HANA and HANA without outside advice. And it is close to impossible to get honest S/4HANA and HANA advice from large consulting companies. We offer remote unbiased multi-dimension S/4HANA and HANA support.

    Just fill out the form below and we'll be in touch.

References

*https://www.amazon.com/SAP-Nation-runaway-software-economy-ebook/dp/B00Q5MW21C

https://en.wikipedia.org/wiki/Comparison_of_integrated_development_environments

What SAP Moving to the SAP HANA Cloud Means

What This Article Covers

  • Eliminating the on Premises HANA Instance?
  • SAP HANA Cloud vs. HANA Battle for SAP Marketing Message Supremacy
  • How Hosted Solutions Work
  • The Productivity Advantage
  • A Primary Ingredient to Productivity
  • SAP HANA Cloud in the Background?
  • SAP HANA Cloud Costs?

Introduction to the HANA Cloud

There is a lot of information of questionable accuracy given out on the topic of HANA. Some of the information is difficult to verify as one does not either have access to the HANA application in question. Or in other cases, one cannot test the HANA system. This is because of a lack of skills, bandwidth, etc.. However, other information is easy to observe as incorrect because it is simply not logical or conflicts with other information.

This article will describe this second type of information.

Conversation on HANA

I was recently interacting with someone on who was proposing HANA for a client. At one point I brought up the expense and complexity of HANA as factors to consider. The person I was speaking with had two very strange responses.

  • His first response was that I should not be focusing on cost because HANA was so much better than everything in the market.
  • His second response was that complexity should not be a focus because SAP is going to move to the cloud.

Eliminating the on Premises HANA Instance?

I don’t understand this second comment at all, and in fact, I find it quite disturbing, because while SAP talks up its SAP HANA Cloud plans, very few native SAP implementations are actually in the cloud – the exceptions being for products that were already cloud products as they were acquisitions like Success Factors.

If we look at Success Factors or Hybris 0r Concur or Ariba or ByDesign or BusinessOne — SAP applications that are sold in the cloud, HANA would not do much for these applications requests as they are naturally low in processing usage and memory overhead.

ByDesign no longer sees development. BusinessOne, often thought to be a native to SAP, was acquired a long time ago, as was Ariba (both of which would be a waste to put on HANA). Four of these (not Ariba or Hybris) are low priced products and are not the core of SAP in any shape or form.

And most of the HANA applications that are sold are still marketed as on-premise.

So given all of this, let us look at the logic here for a moment of not working about the extra complexity of HANA because SAP is moving to the cloud.

  • If SAP is eventually moving to the cloud, why is anyone buying on premises HANA servers? So they can be decommissioned within a few years?
  • The idea that you can buy applications in the cloud argues against buying on premises HANA solution now.

SAP HANA Cloud vs. HANA Battle for SAP Marketing Message Supremacy

There is an apparent disconnect between SAP’s twin strategies of pushing HANA combined with putting out the vision of the cloud. This is because SAP is both telling customers that the backend is critical to be emphasized while promoting the idea of moving to the cloud, where the backend disappears into the background — or more correctly becomes a service managed by the software vendor or some infrastructure partner like Amazon Web Services.

How Hosted Solutions Work

SaaS/cloud solution providers work fundamentally differently from on-premises vendors. The arrangements change, and the model is subscription based so that the upfront costs are far lower.

Let me provide an example. I use a web host for this website. Occasionally I run into a performance issue. I communicate this issue to my web hosting company, and then they respond that something is out of date or some new software can be installed on the server. I typically don’t know they are talking about, but I approve the change/update, etc… and the performance improves and…well that is the end of the story. The boring story I know. But for me, it is boring in the best way possible because I have no interest in worrying about the infrastructure behind my website. I know just about zero about the web hosting technologies and want to keep it that way.

In a managed environment like I just described, all the customer has to know is that they are unhappy with the performance, and they want a change to occur to improve the performance. This is the same way that SaaS/cloud vendors operate. They take care of the details, and the customer gets to focus on getting value out of the application.

The Productivity Advantage

SaaS/cloud vendors have a huge advantage because they control and tune the environments for all of their customers and the hardware that is used per customer is smaller because of this efficiency.

There are all types of productivity benefits that come from the labor specialization of having on group control application for so many customers, instead of the decentralized model, called on-premises, where the individuals in the client’s IT department maintain substantially a single implementation of many different applications.

This is not discussed much in enterprise software because of economists, by in large, tend not to study enterprise software.(1) However, here is the short version of the benefits of labor specialization, and its relationship to SaaS.

A Primary Ingredient to Productivity

Job specialization is a primary reason for improved productivity in all parts of the economy — from plumbers to web designers to hair stylists. The reason for this is that the more someone can focus on being good in one area, the higher their productivity and their quality.

The SaaS/cloud application model just allows for a greater degree of labor specialization. This is because a team that manages many customers for a single application are far more efficient than the same sized team managing multiple applications for a single client.

All of this is why training your customers on all the infrastructure of your application, how it is differentiated, how you need to have HANA is just a distraction when one moves to a SaaS/cloud application model. 

SAP HANA Cloud in the Background?

In the article titled Has SAP’s Relentless HANA Push Paid Off?, I proposed that HANA should simply become an inherent property of the application, and it is difficult to see why users, functional consultants, and VPs of buying firms should need to go through the litany of details on infrastructure. This is how Tableau and Teradata market their applications (with the support available for discussion, but as a background topic), which I covered in this in the article How SAP HANA vs. Teradata and Tableau Market Backend Technology.

Placing the infrastructure ahead of the application, particularly for a company that is focused on selling applications is…well I think quite strange, and really can’t be successful.

SAP HANA Cloud Costs?

So let us discuss the costs of moving to the SAP HANA Cloud. We can discuss all types of options, but once the costs are included, things become much more clear as to what is feasible.

SAP has declared the total cost of ownership (TCO) of cloud costs, which are TCOs for HANA in the cloud. BlueFin Solutions provided estimates which I think are directly from SAP (through John Appleby who writes extensively on HANA).

The TCO for four years are the following:

  • $1 million for 1TB HANA Cloud Base
  • $2.7 million for 1TB for HANA Cloud Platform
  • $4.8 million for HANA Platform
  • $5.9 million for 1TB for HANA Enterprise.

So, it turns out SAP HANA Cloud is quite expensive. I have not compared these costs to the TCO for on-premises HANA because I don’t have the numbers handy.

Moving to the Cloud

SAP wants to move to the cloud, but there are two different areas of SAP that must be considered when analyzing this statement:

  1. The native SAP applications
  2. The acquired cloud-based applications

SAP is not moving HANA customers to the cloud, in fact, SAP is not moving any significant number of clients to HANA in the cloud or on-premises.

SAP may be in for a shock, but cloud applications don’t sell for the same price as on premises, and the majority of SAP’s applications have not been subject to SaaS competition.

This is touched on in this quotation by Vinnie Mirchandani in the book SAP Nation:

“When you compare how nicely IT costs via SaaS application…have dropped in the last few years, you have to ask why those in the SAP economy have not followed that trend.”

I have an answer to Vinnie’s question, or at least I think I do. It is because SAP is protected from marketplace pressures for the majority of the applications that it sells. However, if SAP continues to acquire SaaS applications, and SaaS makes up more of the portfolio, this will change.

Conclusion

I hope this article has successfully made the case that it is not so simple to say that.

“SAP wants to move to the cloud,”

..when we are referring to the native SAP applications. In many cases moving to the cloud is expensive for clients when HANA is involved.

When we are talking about applications that were already in the cloud when SAP purchased them, the story is entirely different. But the two stories cannot be commingled because they are very different situations. What I consider to be “real SAP” are the internally developed applications. I am not sure what to make of these newly acquired cloud-based applications yet, and SAP’s actions seem to demonstrate that they often don’t either.

However, let us circle back to the main point, and that is that the complexity of SAP HANA is still very much an issue that must be considered and evaluated independently for each application because while many options are often discussed during sales pursuits, most HANA is sold as on-premises.

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

  • Have Questions About S/4HANA & HANA?

    It is difficult for most companies to make improvements in S/4HANA and HANA without outside advice. And it is close to impossible to get honest S/4HANA and HANA advice from large consulting companies. We offer remote unbiased multi-dimension S/4HANA and HANA support.

    Just fill out the form below and we'll be in touch.

References

(1) Economists are very focused on financial features of the economy, but few of them investigate manufacturing history, technology, etc.. This is why, in my view, so many critical areas go without economic analysis.

Between Complex Licenses and the Cloud, Microsoft, Oracle, and SAP Have Lots of Ways to Hike up Prices. Here is How to Fight Back. Infor would. Robert Scheier, Jan 13, 2014

*https://www.amazon.com/SAP-Nation-runaway-software-economy-ebook/dp/B00Q5MW21C

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

https://www.infoworld.com/article/2608228/techology-business/update–sap-sees-cloud-revenue-soar–software-sales-drop-in-q2.htmlhttps://www.infoworld.com/article/2608228/techology-business/update–sap-sees-cloud-revenue-soar–software-sales-drop-in-q2.html

I cover how to interpret risk for IT projects in the following book.

The Risk Estimation Book

 

Software RiskRethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects

Better Managing Software Risk

The software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’t

In this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation.

Chapters

Chapter 1: Introduction
Chapter 2: Enterprise Software Risk Management
Chapter 3: The Basics of Enterprise Software Risk Management
Chapter 4: Understanding the Enterprise Software Market
Chapter 5: Software Sell-ability versus Implementability
Chapter 6: Selecting the Right IT Consultant
Chapter 7: How to Use the Reports of Analysts Like Gartner
Chapter 8: How to Interpret Vendor-Provided Information to Reduce Project Risk
Chapter 9: Evaluating Implementation Preparedness
Chapter 10: Using TCO for Decision Making
Chapter 11: The Software Decisions’ Risk Component Model

Risk Estimation and Calculation

Risk Estimation and Calculation

See our free project risk estimators that are available per application. The provide a method of risk analysis that is not available from other sources.

project_software_risk