A study by the IT software management vendor SolarWinds quantified what was widely recognized across the IT industry: Hybrid IT has become the de facto computing model.
More than 80% of organizations run both core on-premise systems of record in tandem with cloud platforms and applications, the SolarWinds survey found. The remaining 20% is split about evenly between all-cloud organizations and those that continue to run only on premise systems.
By moving functions like sales force automation, HR, customer service, and more, to the cloud, SAP licensees are innovating around the edges and forging new systems of engagement.
Digital Transformation Ahead
Hybrid IT paves the way for digital transformation with faster processes, greater productivity and lower costs, and it opens opportunities to take advantage of the Internet of Things.
But two key barriers are preventing organizations from fully capitalizing on hybrid IT, the study found — the need to continue supporting core applications, and budget limitations.
Those pain points are especially acute for SAP customers. Each year, licensees spend more than $300 billion to support SAP ecosystems, according to research by SAP Nation 2.0 author Vinnie Mirchandani.
All told, SAP licensing, support and third-party consultants consume an inordinate share of the IT budget. That imposes the budget limitations that throttle innovation in hybrid IT.
In effect, SAP ERP is a foundational element of hybrid IT with a substantial support price tag that’s at odds with infrastructure cost reduction, the #1 objective for hybrid IT identified in the SolarWinds study.
The cost is higher still when SAP customers devote internal resources to troubleshooting customizations and optimizing performance, not covered in an SAP support contract.
Funding Hybrid IT Innovation
What options do SAP customers have to make the most of hybrid IT? One option may be to gamble on S4, which SAP bills as its “next-generation business suite.” So far, however, reception has been lukewarm. Just 5% of SAP’s UK customers have implemented S4 for example.
Furthermore a recent study by Nucleus Research found that nine of 10 SAP customers had no interest in moving to S4.
Dismissing the false premise of a “digital core,” many SAP customers would prefer to leave their robust, stable on-premise ERP in place while they continue building out hybrid IT with cloud applications.
That could involve cloud technologies that SAP has acquired, such as Concur, SuccessFactors and Ariba. SAP’s cloud roadmap remains unclear, however, and many customers are looking beyond SAP for best-of-breed cloud applications.
For hybrid IT to live up to its potential, SAP customers need to find a way to reduce costs and channel those savings into the more cost-effective cloud, as well as modern mobile, social and big data technologies.
That’s why a growing number of SAP licensees are ending their costly SAP maintenance contracts in favor of independent support.
One key impetus is that SAP support is no longer delivering the value it once did. A decade ago, for instance, licensees looked forward to new functionality in an upgrade. But innovation in the established ERP platform has dwindled in comparison to the big bet SAP is making in S4.
A second reason is sheer cost savings and value. SAP customers can save up to 90% on their total maintenance costs, while benefiting with support for customizations, direct access to senior support engineers, and tax, legal and regulatory updates.
SAP licensees really can have the best of both worlds.