SAP continues to focus on ERP in cloud, on-premise remains important

Get a free Techzine subscription!

For SAP, the next few years will be dominated by the development of S/4HANA into the standard for ERP. However, before the majority of users are left, there is still something to be done. The dream of SAP and many IT administrators will be to run the cloud version of the system. At the recent SAPPHIRE conference, a lot of attention was paid to what SAP software can mean in the cloud, the place where SAP sees the future. In the meantime, the necessary attention is also being paid to on-premise, as many customers continue to prefer on-premise.

The fact that SAP expects a lot from the S/4HANA Cloud is already a foregone conclusion, seeing from what will happen in the coming period. From 2020, there will be a monthly release for this ERP version, so that the number of functionalities for users will continue to increase. In addition, S/4HANA Cloud will also be able to run on Google Cloud later this year. AWS and Microsoft Azure will follow in 2020.

If we look at the general motive of ERP vendors towards the cloud, the great advantage is being able to offer a shared environment. As a result, more powerful tools are offered than on-premise. The cloud, for example, increases performance, while the cost of hardware decreases. For ERP, the cloud also means that systems can be implemented faster, and updates can be implemented more quickly because the systems have the same core.

On-premise as an option

However, ERP running in a local environment also offers a number of things that cloud ERP does not offer. At SAPPHIRE, for example, we spoke to several SAP users who were mainly in charge of the security prices. If the cloud is chosen, you have to trust that the ERP supplier has the security in order. Therefore, SaaS, IaaS and PaaS suppliers make security a top priority, as does SAP. However, some users find their own data and the customer’s data too confidential and important to actually move to the cloud.

SAP is aware that many customers prefer on-premise for whatever reason. The company will therefore not force its customers to switch from the old on-premise ECC to S/4HANA Cloud. The message that has now been presented to customers is that ECC will continue to be supported until 2025 and that S/4HANA can also be run on-premise. By the way, 2025 does not mean that a customer has to be satisfied by then, but that SAP will no longer officially offer support. At SAPPHIRE, however, we spoke to SAP users who expect that 2025 will be pushed ahead because there would still be too many users on ECC. So those noises did not come from SAP people themselves.

In this respect, the company itself wants to demonstrate that the transition to the newer version is indeed smooth. For example, it now speaks of 11,000 S/4HANA customers, although these are licensees who are not necessarily over the top. It is not known how many customers there are actually live. This is somewhat defensible because of the time and resources that the step takes. ECC is made-to-measure, giving it many unique functionalities for the user. In addition, companies have seen their critical data within the ERP system grow every year. A company needs to reconsider what it takes to S/4HANA, but also how it takes it with it. That takes time.

HANA database is at the basis

Users who switch to S/4HANA will use the in-memory database HANA, just like new customers, something that highlights SAP as a major advantage. At the moment, ECC is still largely dependent on the Oracle database, which HANA needs to change. With its database, SAP claims a significant performance boost for ERP, such as 20 times faster material planning. This number seems to us to be based on the most favorable situation, as we could not really get it verified.

SAP has built HANA in this way to process large volumes of data, regardless of whether it is unstructured data or structured data. HANA has sufficient computing power and machine learning and analytics functionalities to process all this data. In practice, for example, HANA now processes 100 million transactions a day for one customer.

Link everything to the database

According to SAP, the database is, therefore, the desired basis for companies that use many different types of software. ERP may be SAP’s largest business and require a good database to process the transactional data, but the German company is increasingly profiling itself as a party that has a SaaS solution for a variety of business problems. Billions of acquisitions are made on a regular basis in order to add a new type of software that complements ERP to the portfolio.

For some customers, the expansion of the software capabilities is to their liking. They told us that they were considering buying more SAP services. In addition to ERP, they use, for example, the HRM system SuccessFactors and the Ariba procurement software. For CRM, they then use software from another supplier. By also using C/4HANA, a more uniform software suite and user experience will be created. This is partly due to the underlying database with which the data can be shared between the SAP solutions, but also partly because SAP is working on the mutual integration of its solutions. Applications from other software suppliers can also run on HANA.

SAP customers can benefit from the use of HANA, although some users also have some fears. For example, the vendor lock-in that threatens to arise as a result of the choice of HANA is a complaint from some users. A company that switches to the database first pays a large sum of money, after which the freedom to switch somewhere else is limited. In all honesty, we don’t think vendor lock-in is up to date anymore.

Making it available to everyone

The capabilities of the database currently mean that SAP is working hard on what HANA can do in the cloud. With the new SAP HANA Cloud Services, the product is offered ‘as a Service’, so that every company can use HANA. So it shouldn’t matter whether you are a large enterprise organization or an SME. The new service has the ability to scale up and down used resources to keep it all affordable, and there is an SQL data lake as a storage layer “at minimal cost”. HANA Cloud Services will have the same core components as SAP HANA. It must be able to work with cloud-based and on-premise products from the software giant. As a result, all S/4HANA customers will eventually be able to use HANA Cloud Services.

SAP will launch several services under this flag. A Cloud Services service is currently being developed with Data Warehouse Cloud. This brings together heterogeneous data in one place so that all company data can be converted into values for the specific scenarios of the organization. However, not much is yet known about the exact operation, as the Data Warehouse Cloud is still at an early stage. The company does emphasize that several principles have been emphasized, such as security and making it affordable by means of a ‘pay-as-you-go’ model.

The step to S/4HANA cloud must also be simplified.

In addition to making HANA more accessible to more users, a lot of attention is paid to Project Embrace as part of the cloud transition. Within Project Embrace, the company is working with AWS, Microsoft Azure and Google Cloud to facilitate the transition to S/4Hana Cloud. Project Embrace looks at the specific industry of the customer to recommend specific SAP services and a hyperscaler that best suits the industry.

In order to achieve this, SAP, together with the hyperscalers and global strategic service partners (GSSPs), looked for the best possible roadmap towards S/4HANA for the specific industries. For example, a tailor-made technical blueprint can be created with components from SAP and the cloud provider that are needed for the step to S/4HANA Cloud.

Taking steps in a challenging period

The German software giant is at least taking steps to make the cloud more accessible and more interesting for its users. ERP and other SAP software offer more possibilities when delivered from the cloud. It is up to the users to choose this option. This can be a long and costly migration that will ultimately deliver the necessary benefits. However, from our discussions with SAP users, we notice that not all of them are fiercely enthusiastic about making the investment. All in all, SAP is taking steps to make its ERP system S/4HANA and database HANA the norm for the market. This will continue to happen, as there are still quite a few customers who can switch to the newer SAP technologies. We are therefore curious to see what the company has in store for the coming period.