ISG Provider Lens: SAP Hana Services
Hana Press Release

ISG Provider Lens: SAP Hana Services

If you consider a company’s stock price as an indicator of the viability of announced products, SAP Hana will certainly contribute further to ensure the success of the German company. In February 2015, when S/4Hana was announced, the SAP share price was less than 55 EUR and has increased since then continuously to more than 90 EUR when this study was published. ISG's Provider Lens offers a unique insight into Germany's SAP Hana Services market. The following article is the executive summary for the complete study.

At least the investors have confidence in SAP’s new flagship product; users and IT specialists, too, are convinced of this new technology by SAP. According to reports from ISG clients, more than half of user organizations are already migrating existing SAP systems to the new technologies or are
developing respective strategies for migrating to S/4, and the number is increasing.

However, about 75% of these companies will have to conduct lengthy discussions about the funding for these migrations, which are certainly not coming at a cheap price. Considering the fact that nearly all companies that are planning such migration do not only want to switch to another technology, but also want to revise their data resources and processes, migration cost may quickly reach amounts in the two-digit million range.

Project durations of more than two years, from planning to going live, will certainly be no exception. To be able to master such mammoth undertaking, an increasing number of companies is planning a hybrid migration approach. While in 2013, only about 15% of all user organizations had plans to set up a parallel infrastructure, this number has increased to more than 35% in 2015, and today, nearly half of all companies is getting ready for such “bi-modal” approach.

Changing the lone wolf approach

It is, however, not only the technology that attracts attention. In early 2016, SAP and Accenture announced their cooperation to develop applications for S/4. While such announcements are nothing special, the ISG experts perceive a much broader development: On the one hand, SAP’s development department, formerly perceived as
rather uncooperative “lone wolves”, is evolving into a collaborative, partner-driven organization; on the other hand, SAP again positions themselves as a “cloud first” supplier.

Besides the higher performance through new technologies, SAP clients’ who use these business applications have come to realize that current installations should be migrated or even transformed accordingly. During the last few years, various database providers have established the in-memory technology, where, as opposed to traditional technologies, a large part or all relevant application data are stored in the memory of the respective hardware in use. A direct benefit is a drastically accelerated access to data and, thus, much faster applications. First use cases often related to data analytics applications. Meanwhile, the focus shifts to novel business processes in transactional applications, based on the drastically improved performance.

Within this context, SAP’s Hana technology offering probably has the strongest impact, since this technology goes beyond mere infrastructure aspects to
address the broad SAP application portfolio; also, it can be combined with data management optimization approaches (data aging) and improves the integration of data analytics with transactional systems.

Radical simplification leads to significant demand for support

SAP’s latest S/4 product radically simplifies database structures with the SAP Business Suite. Sales figures published by SAP suggest that many companies have concrete plans to migrate to this technology or have already initiated respective migration projects.

Expected related challenges will probably lead to a significant, continuous increase of the demand for competent support to help companies design and implement Hana, based on suitable services. Local technology and service providers are preferred, since in-depth industry-specific and technology know-how is required accordingly.

Users’ trust into the involved people and the provider’s local presence are more important than cheap prices. As opposed to new products released by SAP in previous years, Hana and related implications not only allow for a comprehensive transformation of SAP-based system landscapes; rather, such transformation is recommended to benefit from respective potentials.

Significant infrastructure investments ahead

This implies a technological redesign, for instance with respect to transactional functionality in relation to analytics functionality, and also provides the option to use the extremely fast database access for completely new functionality and business processes. For instance, it is much easier to integrate Hana-based SAP
ERP systems with time-sensitive IoT applications.

Respective implications are a great challenge for all players in this market, last but not least for SAP themselves. As already mentioned, significant infrastructure investments are required, which is often perceived as problematic by decision-makers who are used to continuously declining infrastructure expenses.

This is one reason for the sometimes hesitant or reluctant decisions for Hana implementation. In the beginning, the only available option was to implement Hana-based systems separately on appliances and to give up respective efficiency gains through virtualization, which has delayed implementation considerably. Meanwhile, the technology has been advanced to at least ensure virtualized storage and server capacities, and as a result, the significance of appliances is diminished significantly.

What about data?

Virtualization also enables providers to offer managed enterprise clouds, anapproach that is already pursued accordingly. Still, a key cost driver is the need to provision in-memory capacity for respective payloads. This increases the importance of effective data management to limit data volumes, based on suitable technical and organizational measures and to better control costs accordingly.

This includes data aging and data tiering approaches, nearline storage for rarely used data, which need not be kept permanently in the memory, and effective archiving processes. All these aspects reflect the high requirements of the Hana technology to be met by respectiveservice providers.

A new set of rules

Business process implementation know-how or respective qualified resources alone are not sufficient anymore to be successful in this market. Therefore, this study had a strong focus on providers’ ability to cover the multitude of requirements to provide a reliable decisionmaking basis for prospects accordingly.

It should also be noted that unlike in previous studies and benchmarks, and based on these enhanced requirements, resulting evaluations and ratings cannot be compared directly. Also, the number of relevant providers was reduced to ensure stronger differentiation and increase the relevance of respective recommendations. As a result, the number of leaders has also been reduced significantly and some companies were not included in ISG’s analysis anymore.

The full report is available directly from ISG Germany. For further information and the whole report, please contact:

Vanessa Scheffer, vanessa.scheffer[at], +49(0)561-5069-7535

ISG Germany
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