SAP’s Potemkin Cloud

It is a long-standing SAP tradition that ERP infrastructure receives little attention. From R/2 to ECC 6.0, SAP customers could choose from a wide variety of servers, operating systems, and databases. The individual components were supposed to be certified by SAP, but there were hardly any purchase recommendations from the ERP vendor. Ultimately, SAP grew through licensing fees, and those were not dependent on the infrastructure customers used.

Now SAP seems to be discovering its love for cloud computing. Collaborations with hyperscalers and its own offerings such as the Business Technology Platform could lead the community to assume that SAP wants to become a cloud company. No need to panic! Everything is still the same: SAP will continue to have little to no interest in ERP infrastructure in the future. SAP’s existing customers will have to take care of that themselves. Whether their systems remain on premises or rise to the cloud, SAP doesn’t care. It’s not about the cloud – not really, anyway.

Real costs in a fake cloud

What is SAP’s transformation about, then? Higher revenues. It is exclusively about revenue growth, about expanding market dominance. SAP’s cloud is a Potemkin village, but the new licensing models are real. SAP CFO Luka Mucic’s ambitious growth projections for the coming years can only be achieved with higher licensing fees for existing and new customers.

Mucic’s trick is ingenious: He fakes a cloud strategy. He sets up a Potemkin cloud, hiding the price increase in the conversion costs. Regardless of product or contract conversion, the SAP community can expect 20 to 50 percent additional costs when an existing customer migrates from on prem to the cloud.

Before existing customers can embark on their cloud journey, however, they must upgrade their legacy systems to the latest release version. RISE with SAP only accepts the latest ECC 6.0 versions.

Only take a small backpack with you

Is there a cure for CPEA credits (Cloud Platform Enterprise Agreement) and SAP FUE (Full User Equivalents)? Is there a magic spell against additional costs in the Potemkin cloud? Yes! SAP customers can defend themselves against the real dangers in the fake cloud. Before starting the journey, it’s important to consolidate the “marching pack”. Do all users and engines really need to be transferred to the cloud? Perhaps there have been optimizations and reorganizations in the company over the past few years, so that fewer or different user types are now necessary. Maybe Digital Access has led to a reduction of NetWeaver engines? Optimization potential is limitless.

Those who pack a small backpack for the journey to SAP’s Potemkin village will be rewarded in terms of cloud costs. Initial calculations show an average cost reduction of up to 20 percent if customers consolidate their licensing portfolio before transitioning to the cloud.