Top 6 Questions To Ask Before Taking the Slow Road to SAP (S4) Hana

Author: Michael Welsh

Hana Belt Road

There is a beautiful highway in Hawaii affectionately known (at least to honeymoon tourists) as ‘The Road to Hana’ on the island of Maui.  I remember the road well as it was pretty exciting with all its switchbacks, cliff views, hills and waterfalls.  But I also remember the journey taking several hours longer than we thought it would – and really started to question the journey to begin with (the road trip – not the marriage).  Ironic then that SAP chose a similar name for its product of the future – S4 Hana.  As we are finding out with clients and associates, you should question when you are going to take this ‘Road to Hana’ – or whether organizations should instead adopt the Missouri state motto: ‘Show Me’.

Here are our Top 6 Questions to ask when considering the ‘Road to Hana’

6) Why has Jefferies Financial just downgraded SAP’s rating from a ‘Hold’ to ‘Underperform’? 

Because SAP’s cloud strategy is still – well, cloudy.  The opening line in the article from The Street says it all, “SAP is struggling and analysts know it.”  They are underperforming because their move to the cloud is a slow one, which is what Hana is supposed to help them achieve.  In the meantime, SAP is getting taken to school from other cloud providers who have a huge head start without all the messy legacy entanglements.  SAP’s S4 Hana will eventually be the basis of the “digital core” of the new platform but in the near term, the only quasi-native SAP offering available in a viable form is BPC (Business Planning and Consolidation), which is added to the acquired “cloud” solutions provided by SuccessFactors, Ariba and Concur.

5) Have you been offered a carrot in the form of an ‘Extension Program’?

SAP has launched what it refers to as “extension” programs for both on-premise solutions and cloud based solutions.  These are essentially purporting to provide a path to replacing unused legacy shelfware with solutions that can be gainfully deployed.  While the official program is a step in the right direction, it appears to reinforce SAP’s flawed demagoguery regarding the inability of clients to properly manage their own SAP licensed assets, which are factually inaccurate as NET(net)has demonstrated to many of our clients.  There really is no reduction or even credit involved with the official SAP programs, as they require the legacy annualized obligation to be completely replaced by the go forward annualized obligation.  Based upon the early reviews, this extension program is only slightly less advantageous to SAP customers than the prior migrations, which claimed to provide customers with “trade in” credit as they upgraded from one platform to the next.  Under the extension, there is no credit provided but there is also no carry forward of the legacy support.

4) Who is Oracle’s largest customer again?

Oh right – its SAP!  So not only is Hana a way to migrate clients to the cloud, it’s also the path to reduce and eventually eliminate SAP’s reliance on Oracle’s database.  Hana relies on SAP’s own in memory database, so the road to Hana is paved with database migrations galore – which can be an added layer of cost and complication when contemplating a move.  We can see why this makes sense for SAP however, as they are paying Oracle support on Limited Use Licenses for a large sum, and due to all the bad blood between these two organizations, that cost is not likely to significantly reduce itself anytime soon without disruptive action from SAP.  The irony of this cannot be missed.  All that money that SAP pays to Oracle for database support has likely fueled Oracle’s litigious fervor resulting in a virtually non-stop parade of Oracle lawsuits against SAP.

3) Are you an open heart surgeon?

Early S4 Adopters at a dead end.  Those that adopted S4 Finance (the first release of S4) will have to migrate again in order to expand outside of S4 Finance.  The S4 platform is now being referred to as the “digital core” which set up SAP’s approach to charge – even exiting support paying customers for the “upgrade” to their “new” platform as a service.  As mentioned in #4 above, migrating your business to Hana we liken to performing open heart surgery on yourself.  Why do it if your heart is beating just fine at the moment?  Unless you enjoy being on the ‘bleeding edge’ of massive tech migrations, what are the compelling reasons to move?  Do you really need the promoted benefits of SAP Hana’s in memory promises?  Are you dealing with such massive amounts of data, that you have no choice but to move because your current systems can’t process database reads and writes fast enough?  Are there no other ways to do this today rather than to rip out your backend database?  Are there not other options that may cost a fraction of what it will cost to make this ‘upgrade’?  So far, only the largest customers are finding the reasons – which is why SAP’s business is sagging.  Yes, there are improvements in the technology to be sure, like an ‘in memory database’, less ‘code bloat’ which should improve processing speed and performance, and a few other upgrades.  But in the end, the risk/reward for many is too high (along with the TCA or Total Cost of Acquisition).

2) What kind of value are you getting for support, and why does it matter?

SAP themselves have signaled the diminishing value of support by suspending any charges above 22% until the year 2020 for many of the applications in their on-premise Business Suite.  They have repeatedly touted their support and loyalty to legacy customers and systems, but are candidly making it easy to stay put.  Putting a hold and cap on support pricing for legacy products is a clear signal to…not do anything?  This business case basically writes itself for many organizations.  Unless you can implement Hana and realize tremendous business process improvements, and significant factors of TCO value, why would you do it?

1) If you’re planning a migration, how much did you budget (spoiler alert: probably not enough)?

  • Skillset – To facilitate Hana adoption, SAP has become the hosting of last (only) resort. Hana hosting is core to SAP’s Platform as a Service.  Do you have the right in-house skill set to manage this and or did you budget for it?
  • Database Migration – We ask, because it’s going to cost a lot more than you may have been planning for. If you are on a legacy service, you are running on an Oracle database that will no longer run on Hana…you will need to now buy it from SAP.  You may also need to pay additional fees to a 3rd party to help you implement it.
  • CapEx to rebuy and re-implement

In summary, we would say make sure you have the answer to all these questions before you take ‘The Road to Hana’.  If SAP’s history of forcing customers to rebuy things they already owned simply to make the upgrade, then why would Hana be any different?  You already know you’ll have to buy a new database and migrate it, you’ll need to make sure you have the right in house skillset to get the most out of it, you’ll have to be ready to take a huge gulp of acquisition cost, and the reward for all of this is to be sitting on the bleeding edge.  If you are unsure on the answers to any of these questions, call us for quick chat on your situation – and we’ll lend you our opinion based our Federated Market Intelligence from 14 years as a category expert in this area, resulting in tens of billions of savings for our clients.

In case you missed our recent previous articles on SAP:

Savings Opportunities with SAP:

http://www.netnetweb.com/SAP_Q4_2015

Top 10 Audit Crazy Suppliers (SAP #6):

http://www.netnetweb.com/software_audit_crazy_suppliers

Contact us direct if you need help with SAP – or any other strategic supplier:

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2 Comments

  1. kalika says:

    What do you say if it is not a migration exercise, but a new installation of S4 HANA finance . We are currently not a SAP shop but evaluation products to replace our GL, AP, AR functions

    • Dexter Siglin says:

      SAP’s roadmap is in a state of flux at the moment and early adoption is risky in its own right. It’s a big concern to think that a new installation of SAP’s S4 Hana (Simple) Finance will not be fully compatible with other modules like Asset Accounting (FI-AA).

      All we have to do is ask the early adopters of S4 finance about this risk. While they thought they were buying into SAP’s new platform direction, SAP has since orphaned that original S4 release. Who is to say they don’t do it again? We can’t.

      Hana itself is also a bit of an outlier. The skills that it requires are unique and presently in short supply that generally translates to expensive. Acknowledging this skills shortfall, SAP has become the de facto hosting provider of last resort. SAP has had a checkered history with being a hosting provider and SAP is rarely cost competitive in most of its services offerings.

      Given the current complicated backdrop for SAP’s Simple (S4), we would recommend considering alternatives even if only as a stop gap measure waiting for SAP’s S4 vision to crystalize which SAP’s own action suggest will be 2020 or beyond. There are many viable SaaS solutions on the marketplace which can be adopted today. We help organizations evaluate alternative platforms all of the time and could quickly identify the list of viable solutions and prospective costs for a ready to deploy SaaS solution.

      If you have already purchased SAP’s S4 licensing, while pricey in their own right, that is the least expensive element of an SAP deployment. Selecting the right system integrator, managed services and hosting providers can be an order of magnitude more than the initial purchase. We can assist with making sure the remaining agreements to support your SAP decision are professionally negotiated for optimized cost and minimized risk.

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