Understanding the SAP Cloud ROI
KCloud managed SAP HANA IaaS provides managed cloud infrastructure to host SAP ECC or HANA applications enabling customers with innovative ways to build, operate and consume technology. This blog helps the CXO understand SAP Cloud ROI
CXO’s are keen to establish and pursue a cloud strategy as studies indicate 85% have one. Also, studies indicate by 2020, 80% of organizations will migrate applications from their own data center to public cloud IaaS to achieve meaningful cost savings. CIO’s are constantly evaluating the best approaches for their organizations and some of the points mentioned here are based on my several such conversations.
Customers investing in a data center are also fostering phased approaches to shift workloads to the cloud. New installations are pursuing the cloud first policy unless otherwise due to regulatory requirements on data classifications or residence.
This blog will assist you to quickly establish a business case for Managed SAP Cloud ROI.
(The following details are purely considering SAP specific infrastructure and costs are indicative based on our engagement in multiple customer conversations.)
TCO drivers for on-premise SAP Infrastructure
The following are the high-level cost drivers considering an SME customer with basic requirements of high availability with standard security and data protection requirements. (Standard offering considered for SAP greenfield implementations)
Initial investment (CAPEX)
- Datacenter space, power, cooling, and racks
- Network, compute & storage hardware
- Virtualization, Operating system, back-up, management and antivirus software
Operational Expenses (OPEX)
- Management resources (manpower)
- Direct Internet access
- Support & maintenance subscriptions for HW and SW
TCO drivers for Managed SAP IaaS
Initial Investment (CAPEX)
- Set-up & Migration costs
Operational costs (OPEX)
- Monthly recurring fixed costs for Infrastructure and management services
Sample ROI calculation
To better illustrate the ROI, refer to the below calculation (image) which was provided to one of our prospects. for SAP greenfield implementation deliberating on-premise vs cloud. The on-premise cost inputs were provided by the customer based on the offers received from his suppliers. In short, all figures are real data and the above details are to set the context right for your judiciousness.
(Opportunity profile – SME segment, manufacturing vertical, middle east region, S4HANA core solution + additional application components)
In most cases this range from 25% to 50%, also one must consider the additional benefits as listed below:
- No initial investment (except set-up cost, in this case, USD 20k)
- 24×7 support + monitoring (NOC & SOC)
- Uptime guarantee, SLA on the application availability
- Flexibility to upscale or downscale
- High-security standards
- High data center standards
- Better data protection, back up in redundant sites
- Highly skilled certified resources for security, networking, OS, VM, SAP HANA, storage & back-up
- Backed by 700+ SAP consultants
The above trend of ROI is very applicable to most scenarios, but we had cases where ROI was not as attractive, especially with customers who had excess capacity in his existing datacentre. We have seen every installation, circumstances and requirements are unique, we can support you with such analysis that fits your scenario.