- There is a shortage of TCO calculation in SAP decision making.
- We explain why Brightwork TCO calculators are so valuable to vendors that compete with SAP.
In previous articles, we have covered very little in TCO calculation used to inform IT decisions.
Gee….Who Would Have an Incentive to Hide TCO? – Anonymous
Step Up Gartner, Deloitte, etc..
Companies like Gartner and Deloitte don’t want their clients to know the TCOs of various applications. Deloitte, as an example, has built an enormous revenue stream from SAP consulting. Gartner receives a disproportionate amount of its vendor income from the largest vendors with the highest TCO. They are not about to let that cat out of the bag.
Hiding TCO naturally leads to applications and databases with the highest TCO to complete on an unfair footing with applications and databases with lower TCOs.
How The Brightwork Research & Analysis Calculators Work
We have a large number of articles that explain our approach to TCO.
Our Unique Offering
We are the only independent research entity that has a full complement of TCO calculators available online.
See one example for your self with the SAP ECC TCO Calculator.
Moving from Proof of Concept to a Usable TCO
These calculators are what we call a proof of concept. This is because a TCO calculation or estimation must be customized for a specific situation to be useful. Let us take one example. At one company, lead by the SAP sales team expectations, the customer assumed that they could eliminate close to sixty-five custom programs by moving to their application.
Knowing the application and reviewing the custom applications, we could tell that this would not happen, and very few of the applications would go away.
Consider how different the TCO calculation would be just based upon this single factor.
And what was SAP trying to get this customer to do? To underestimate the cost and duration of and maintenance of the purchase. The BIG surprise would have been on the customer, but only after the purchase was made and the project was underway. SAP customers get these types of surprises constantly.
And projects nearly always have these complications that make a TCO calculator inaccurate before the actual modeling accuracy of the core TCO components is considered.
The Solution: Customized TCO
This is why a pre-existing model must be adapted to the customer’s specifications, like the one we use. Brightwork Research & Analysis has the most accurate information on SAP and the various components that go into TCO.
We also have a significant SAP functionality database, which means we can produce TCO calculations based on real-world factors. SAP applications and databases will always significantly exceed the expected TCO — SAP is continually stating that its new application or database reduces TCO and increases ROI and never bothers presenting any evidence to this effect. SAP has never performed any work in estimating costs for its customers.
And one reason for this is they do not care.
SAP consulting companies deceive their clients about how SAP will reduce costs, while SAP’s costs are perpetually the highest in the industry. Truly, Deloitte or WiPro and (fill_in_the_blank) SAP partner will say anything to make a sale, and that is where we can come in and provide some dose of reality.
Provide SAP TCO Calculation to Your Customers: By Licensing Our Custom TCO
We provide TCO calculators to buyers and vendors.
This process begins with obtaining project and customer information from the customer or through the vendor (who passes on our online survey). We know the questions to ask, and all that is necessary is to pass on the link that we send you. In some cases, we need to go back and ask follow-up questions, but we have the process quite smooth at this point.
Each question allows for elaboration, and these explanations help us tune the TCO model.
Based on this, we adjust our calculator and wrap it up in its own TCO calculator web page. This page is protected and something you can share as a link, as well as the passcode with your prospect. All TCO calculators are served from the Brightwork Research & Analysis website.
Why It Works
- Entity Independence: This provides an independent entity hosted at a separate site producing the work, increasing the calculators’ credibility.
- Customizable Results: TCO models change depending upon account size and other factors. There are a few ways to lose credibility when presenting TCO calculation, and one way is to present an estimation that is not customized per the account. As you can see, the TCO calculator for SAP ECC has adjustable features. Still, it is not possible to develop a single adjustable model that can account for all of the significant factors. For example, you can’t just scale a model from 400 development objects up to 3000 without adjusting the model, or what amounts to tweaking the parameters within the model. Non customized models come off as very “salesy” and present a generic feel to prospects and clients.
Can Vendors Create TCO Calculations Themselves?
Software vendors often think they can produce their own TCO calculators for use as sales collateral.
What is the problem with this idea?
Let us review some of the issues with vendors performing and presenting TCO calculators.
Issue #1: The History Vendors Performing TCO?
Can you think of a vendor who has been successful in doing this?
Our research into TCO calculation could not find examples of credible or even good TCO calculators produced by vendors. This brings up the topic of why some vendors think they can do this themselves.
Issue #2: The Obvious Bias Issues
Vendors want to sell their software. This means that any comparative information provided by a vendor is going to be taken with a grain of salt by prospects. Just imagine a scenario where the entity selling an item is responsible for telling you the TCO. Is there a car dealership in the world that produces a reliable TCO for its vehicles?
You are probably laughing or at least chuckling at what I just wrote, but the same thing applies to software vendors.
And in this specific scenario we are discussing (SAP TCO), it is even more problematic, as the dealership would be claiming to estimate the TCO of cars that compete with the car they want to sell you.
Let us review another example. Let us say we perform a survey of 100 vendor salespeople with a question on their major products, who has a lower TCO? Then I give the same survey to 100 salespeople from the vendor they are competing against.
How close will these two survey results match one another?
This is a situation where the more the vendor tries to incorporate the estimation internally, the less effective the TCO calculators become in terms of their impact. Vendors should want to put distance between their brand and the calculators. More control simply translates directly to lower effectiveness.
The SAP Expertise to Create a TCO Calculation?
A second question that the prospect can ask is why a vendor has sufficient expertise in another vendor to be in a position to offer a TCO calculator. Let us say that SAP produces a TCO calculator, take a guess what the TCO calculator will say? Every new version of SAP is said by SAP to lower TCO and increase ROI.
When a vendor provides the BR&A TCO calculators there is still an issue with bias. However, we overcome this by not only being an independent entity but also because of our established history of doing SAP research. We are able to answer questions from vendor prospects as our knowledge of SAP is quite deep. We also show significant detail that most other TCO calculators do not have.
Issue #3: Costs Versus Effectiveness
There is a cost for vendors to do this. The costs may be less than what BR&A would charge, but the actual determining factor should be costs versus effectiveness. It is not possible to estimate exactly how much more effective an independent TCO calculator produced by BR&A and a research entity? But here is a calculator that allows you to estimate the improvement in deal closure.
Let us review a few scenarios for the sales benefit from using BR&A TCO calculators.
Sales Closing Improvement Scenario #1
Let’s be conservative and say that it is .05 more effective than a TCO produced by the vendor. Let us just use a 5% improvement in the closure rate times a $5 million deal. This is $250,000.
Sales Closing Improvement Scenario #2
Let us go more conservative still. Let’s make it only 3% more effective than an internal vendor produced a TCO study. That is $150,000.
Think through the right percentage difference between an internally produced TCO study and one produced and presented by BR&A to see what makes sense to you. But by virtually any reasonable percentage improvement, isn’t it a loss to the vendor to try to create and maintain its own TCO calculators, which is not motivated by effectiveness, but instead simply motivated by the desire to try to save money?
Issue #4: Costs Versus Effectiveness
If you are a vendor you might want to ask the following questions.
- Does your company have a large research database on SAP that you can present in conjunction with the TCO calculation to provide context for your TCO calculator?
- Does your company have many years of experience in TCO across many applications, independence, large research database on SAP ready to be used right now?
- Will your company ever be able to function as a research entity, something that BR&A is already?
Considering all of these factors, how is this a competitive decision for vendors to do this work instead of relying on BR&A?
Why let SAP continue to mislead your prospects as to their TCO? Hasn’t SAP cheated enough companies and cut enough vendors out of opportunities where they could have outperformed SAP in value?
We think so.
Our TCO calculators are offered as a SaaS service, which means that you keep access to your TCO calculators, and we continually create new calculators that you can use to show your prospects the reality of SAP costs, rather than the fictional view presented not only by SAP but by every single one of their immense partner network.