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After SAP revealed that it would launch a new version of its SAP Business Suite exclusively on its SAP HANA in-memory database, the company's most audacious effort in decades seems at once logical and smart. After all, rewriting 400 million lines of code to create the new SAP Business Suite 4 SAP HANA -- a.k.a. S/4HANA -- will result in dramatically simplified data models for customers that promise to be one-tenth the size they manage now.
In addition, SAP's effort to help its customers "run simple," promises a whole new world of lightning-fast processes and analytics, all of which can be delivered via on-premises, public cloud, or a fully managed private cloud. And yet, turning this vague roadmap and value proposition into a reality is far from simple. As industry analysts talk to their customers and work through what SAP has revealed, the only clear message is that SAP has a lot of work to do.
"The launch of SAP S/4HANA creates more questions for SAP users than it answers, resulting in road map uncertainty," said Nigel Rayner, a vice president of research for Gartner. "Consequently, we recommend that existing and prospective clients should press SAP for additional information before committing to any of the SAP S/4HANA editions."
Caution advised when considering S/4HANA move
Rayner cautioned that no organization should rush into a commitment to SAP S/4HANA -- even early adopters -- until SAP provides answers to core questions on availability, licensing, migration and integration with other SAP solutions. "The situation is evolving because SAP is starting to clarify some of these questions," he said, "but Gartner is still hearing many conflicting statements from the field."
In fact, Gartner's core analysis and research report on the subject doesn't pull any punches. Its title? "SAP S/4HANA Is a Transformational Shift for SAP and Its Users, but Hold on to Your Wallets for Now."
"The biggest single question I keep getting is how much of the existing ECC 6 suite or capability is going to end up in S/4HANA and when? That's the core question that everyone is asking," said Joshua Greenbaum, principal analyst at Enterprise Applications Consulting. "SAP is starting with Finance, they'll add Logistics, and they'll be rolling out other pieces later. Ariba and SuccessFactors will come out ... next year some time."
Greenbaum said a CIO needs to know when certain features will be available to properly plan for them. "SAP has been vague about some of these issues," he added, noting that "all eyes will be on SAP at SAPPHIRE NOW" in May in hopes that SAP will reveal more detail.
In the meantime, SAP has been releasing bits and pieces of S/4HANA details. For instance, in "What Is SAP S/4HANA? 13 Questions Answered," SAP reveals that the availability of S/4HANA depends on how a company wants to deploy it -- for example, SAP has stated that S/4HANA is available today for on-premises customers and that SAP Simple Finance gives customers SAP's new simplified finance system, but SAP also said that the next major piece of S/4HANA, SAP Simple Logistics, won't come until the end of this year. So "available now" isn't exactly available now.
S/4HANA licensing questions abound
Fortunately, finance and logistics cover most of the functions in the ERP system, SAP said, which means that by the end of this year, much of the core ERP functions in S/4HANA will be available for on-premises deployments. SAP said it will simplify its project system, quality management, and sales and distribution functions in 2016.
If you're a customer hoping for a particular sales and distribution function, for example, 2016 might seem a little vague. But it gets even more confusing. Consider SAP's cloud offerings. SAP said that customers can "get the entire solution at one go" when it releases a public cloud version in early 2015 and a version for its managed cloud in the second quarter.
On the surface, the cost of S/4HANA seems relatively simple. SAP said that S/4HANA is a new product so it is not free of charge for existing SAP Business Suite users who are paying maintenance for SAP Business Suite. Will customers grumble and pay anyway? Hard to say, but SAP has made two things clear: 1) S/4HANA is SAP's strategic path forward, and 2) SAP has extended its maintenance commitment to SAP Business Suite customers until at least 2025 -- so SAP isn't exactly forcing their hands toward an S/4HANA move.
Still, SAP seems keen to move customers to S/4HANA. Customers who have licensed the SAP HANA platform for SAP Business Suite -- which numbers more than 2,000, SAP said -- are eligible to upgrade to SAP S/4HANA licenses at no charge via a license promotion that will last through the end of the third quarter of 2015. Plus, those enterprises that buy now can save 15 percent.
Licensing for new customers is much simpler because there are no maintenance or legacy contracts. As for the cloud, SAP has not announced any cloud-based licensing for S/4HANA other than to reveal that it will be "subscription based."
AnyDB to HANA? What about IBM, Microsoft and Oracle?
For most SAP customers, buying into S/4HANA won't be done in an SAP-only vacuum -- most large enterprises have a mix of IT investments, not the least of which is an investment in a third-party DBMS, most notably from Oracle, Microsoft or IBM. In a move to S/4HANA, CIOs will need to figure out how to exit an existing DBMS license or wait for their license term to end. Inevitably there will be some overlap in costs, which might also be problematic if a DBMS license is enterprise-wide; that is, used for non-SAP solutions, too.
"The database license issue is always an interesting one -- it's been very complex ever since SAP started down the HANA road," Greenbaum said. "Obviously for greenfield implementations it's not on the table, and for customers who bought their Oracle or DB2 license from SAP essentially through an OEM engagement, that's a non-issue -- that's on SAP [to deal with] -- but if you bought, say, Oracle on a site license that you extended to SAP, it's not a no-brainer because there will be some real contract negotiations that will need to take place ... and you can be certain that Oracle is not going to make it easy."
Greenbaum said he would like to see SAP have frank discussions with the market on the potential long-term savings of S/4HANA vs. the cost of early termination with other solutions. For example, "If you're getting out of an Oracle database by moving to S/4HANA in the cloud, your IT infrastructure costs, your database maintenance costs and database license costs will all be drastically reduced, and as a bonus, you'll get much faster throughput and all the great things an in-memory database will do. These costs and benefits are something that I hope SAP will articulate better," he said.
Even if SAP is able to help provide use cases, case studies, and favorable ROI calculations, the HANA advantage might not be an enterprise fit for every customer for years to come.
"As much as SAP loves to position HANA as the silver bullet, SAP will need to recognize that not all data needs to 'fly first class,'" said Holger Kisker, vice president and research director for Forrester. "Companies will need to implement flexible data management solutions that combine technologies including RDBMS, HDFS, streaming, and in-memory database systems like HANA. In-memory is important, but it's just one key technology in any future hybrid data architecture," he noted.
Meanwhile, some analysts say that the database industry is tilting away from traditional relational database systems altogether. "I believe that the time of the standalone RDBMS is now over," said John Appleby, global head of SAP HANA for Bluefin Solutions. "The fast-growing solutions of today are application-platform solutions that include application and data platforms. This includes SAP S/4HANA, Oracle Fusion, Salesforce and Workday. They all use an integrated platform and in time, this will mean the standalone RDBMS is a shrinking market."
Integration and migration paths for S/4HANA
One of the wild cards for SAP will be how well it can help its existing enterprise resource planning (ERP) customers migrate to S/4HANA. One of SAP's new SAP S/4HANA FAQs shares the basic integration and migration paths, noting that, for example, an SAP ERP 6.0 customer would migrate from any database to SAP HANA and then deploy an exchange innovation (the new code) to get to S/4HANA. If a customer is coming from SAP Business Suite powered by SAP HANA, they only need to deploy the exchange innovation to get to S/4HANA.
Plus, along the way, customers can choose to move separate installations within their landscape to S/4HANA and run in non-disruptive mixed environments. As for modifications for SAP's cloud-based S/4HANA customers, SAP said customers can deliver modifications via the SAP HANA cloud platform as extensions.
All-in-all, success with S/4HANA is hardly written in stone. "Most other ERP vendors that have attempted a major rewrite of their core system have not been successful. But let's assume SAP can do it," said Frank Scavo, president of Strativa.
"For existing customers, there is going to be a lot of resistance to change. Oracle saw this with its Apps Unlimited program -- many customers have simply not wanted to migrate to Fusion. So Oracle had to promise to keep investing in its legacy E-Business Suite, JD Edwards, E-Business Suite and Siebel systems. As far as I can tell, SAP is not making a promise to forever support the Business Suite on anything other than HANA. At some point, customers will need to make the migration. This will not sit well with customers, especially when there are new licensing costs," Scavo explained. "So, if SAP has any chance at all of converting existing customers, it has to make the upgrade revenue-neutral, but as a public company, that will be difficult, as investors are not a patient group."
Free test drive of S/4HANA suggested
For Greenbaum, SAP seems to be missing an opportunity to easily prove the value of S/4HANA -- freely -- through a sandbox test drive sort of model. He said that an SAP ECC 6.0 customer can load a production copy into the S/4HANA cloud and run their existing system on S/4HANA in a "try before you buy" mode.
"SAP should just make an S4/HANA sandbox available to everybody free," Greenbaum said. "That's the test track -- you know, take the keys, take the car out with your family, and come back in a week. When it's such a new driving experience -- I know my metaphor isn't perfect -- you kind of want to do that, take it for a test drive. And the sandbox provides SAP the chance to showcase not just that HANA is faster, better and cheaper, but also showcases the basic functional richness of HANA in the cloud environment," Greenbaum said, adding, "And with that functional richness comes a true picture of the future of computing -- not that the datacenter or mainframe disappears -- but a future where you see more and more companies standing up mission-critical applications in the cloud."
Despite the many questions surrounding S/4HANA, Greenbaum's optimism seems readily shared among analysts that follow SAP and its customers.
"S/4HANA is the right thing to do, and it's a transformational time in enterprise software," Appleby said. "It's a multi-year opportunity. Given that support runs out in 2025, I expect a 10-year transition from laggard customers. But it's the first time I've been excited about the SAP market -- it's going to be an amazing time."
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