Sean Jennings, co-founder Virtustream told me that their solution offers customers 25-30% saving on existing deployments. That throws an immediate spanner in the S/4 HANA works except in one case – BW on HANA where there are clear benefits in terms of time to value. More to the point, Virtustream can offer clients cost efficiencies based on their MicroVM and the consumption based billing it enables. This is not reflected in the software license but at the underpinning infrastructure layer – an important cost to buyers.
So far, so good. What was not stated by me at the time but is now pertinent is that SAP was an investor in Virtustream. This was not your ordinary SAP Ventures investment but came from SAP North America. Why? The gnomes of Waldorf hated what Virtustream could do that in turn does not require investment in SAP HANA. SAP North America understood the relief Virtustream could bring customers to the point where it put its money where it matters.
When the news broke that EMC has acquired Virtustream my immediate thought was: 'game on.' Why? It's nice that SAP will make a tidy profit from its investment but it is a bittersweet gift. The acquisition now means EMC can partner widely with SIs who might wish to make an alternative case for S/4 HANA. That was much more difficult with SAP as a significant shareholder.
Why would anyone want to do that? There's a couple of reasons.
Despite Jon Reed's eloquent portrayal of a S4 business case, I am struggling to see how it makes sense in the current business context. If I can already get substantial TCO benefits from Virtustream without disrupting my existing deployment landscape then why would I do a rip and replace for S/4 HANA? There would need to be at least a 2x improvement in my cost profile and right now I don't know of any case where that has been successfully made. Feel free to pile in if you know of any proven cases. Yes - I know that SAP claims sales but that's not the same as deployed and proven cases operating at scale.
Next, Reed's business case is very much a 'jam tomorrow' scenario. He says:
The TCO approach Reilly recommends for the initial HANA business case was not exactly the dreamy IT-business collaboration I had in mind, but in his experience, that’s the practical basis that gets these projects live.
Quite. The problem is that IT has to make promises it may well not be able to keep unless there are very firm fixed price deals in place because as his piece demonstrates, an S/4 HANA switch is a significant technical upgrade. That fixed price element is anathema to SIs who continue with the time and materials approach to pricing and exactly the reverse of early BW on HANA use cases where ROI was clear.
Then there is the problem of testing. SAP argues Solution Manager in its continuing 'not invented here' mindset when there are other, better offerings in the market like Panaya, recently acquired by partner Infosys. Even John Appleby, arguably the loudest lover of HANA and widely quoted in Reed's piece admits:
“SAP’s tooling is not state of the art, and that’s a mistake. It’s workable, it moves things forward. But why haven’t they done more with test automation?”
On the Panaya front, I noted:
Influencers among the SAP Mentor community immediately gave it a thumbs up. This from Thorsten Franz on Facebook:
As far as enabling upgrades goes, with Panaya, Infy can estimate, plan, and execute those projects better then SAP. Being able to adopt new technology install upgrades) becomes more and more of a strategic asset for customers, so Infy can in fact claim to be an enabler for strategic missions.
Some inside SAP might wince at such suggestions but they need get over it and recognize that its partner is helping to enable the ‘simple’ mantra.
So what we now have is a battlefield where, on the one side SAP says: 'come to me' to all customers while on the other side, partners can readily make a case for less pain than an upgrade entails. If that wasn't enough, there are numerous compelling cases where customers want to solve ongoing but unknowable problems.
Yesterday for example, I heard of a case where the customer's question sounds bizarre at first until you realize the implications. Here goes: how do I solve for the demonization of certain products that are at the heart of my multi-billion dollar business? The first question from my side: how much of this stuff do you have in stores? Answer: no idea. Right there is a problem that no ERP upgrade will ever fix but for which resource is needed right now and for which I have seen solid CRM related solutions.
More to the point, would I as an SAP customer go to SAP for the answers as my first port of call? Unlikely when I already have SAP bucketed as a back office solution provider.
Finally, while I like the idea that SAP is partnering with user organizations to raise awareness of SAP validated solutions from the startup community, I wonder about the extent to which the 'not invented here' mindset will stifle innovation customers really need and of the kind I noted above.
My sense is that SAP will have to do a much smarter job of persuading customers to make the switch to S/4 HANA than we see today. Whether it can is another matter.