Brightwork Advice for Vendors: How to Compete Against SAP on Their TCO Claims During the Sales Cycle

Executive Summary

• SAP makes a number of grand claims regarding its TCO.
• We offer how to challenge SAP on their claims.

Introduction

SAP has a long-established pattern of misleading its customers on the TCO of SAP software. As a matter of routine, SAP will make claims of low TCO about its products that are the highest TCO in enterprise software. These claims are made both by SAP and by the SAP ecosystem.

We will begin by analyzing an article on SAP HANA’s TCO by an SAP consulting firm named the Proceed Group.

Observing the Flaws in a Typical SAP TCO Claim

Notice if you can see anything peculiar in this quote.

HANA has dramatically improved the database industry by combining database, data processing and application platform capabilities in a single in-memory platform. HANA also provides libraries for predictive planning, text processing, spatial and business analytics – all on the same platform. It’s simple and fast, and processes massive amounts of data and provides access to important data that business users can act on in real-time.

Simply put – HANA is the platform for building and deploying next-generation, real-time applications and analytics.

SAP and IntelR engineers tested the scan speed of a HANA database across a variety of Intel CPU processors. These tests achieved results of 3.19 billion symbol scans per second, per core.

HANA hardware appliances are ideal for large enterprises and companies that require on-site hosting. These appliances are available for industry-leading hardware Partners. HANA cloud options range from basic, entry-level instances to enterprise-class managed cloud offerings suitable for running ERP and business-critical applications. Cloud-based deployments are ideal for smaller deployments, start-ups and independent software vendors (ISVs) and for situations where a pay-as-you-go model is preferred over larger capital expenditure. – Proceed Group

Does this sound convincing?

Well, everything printed here is false. And most likely, the individual writing this has no idea if this is true. SAP consulting firms repeat what is released from SAP marketing, which has little relationship to SAP’s products and the realities of SAP environments.

Secondly, this quote above confuses TCO with ROI. Three-fourths of the way into the article, it finally gets into the topic of TCO.

SAP, with its partners, set a new record for the world’s largest data warehouse using the HANA platform and SAP IQ software. The data warehouse is 12.1 PB of data – four times larger than the prior record. Approximately 50% of the data used in the data warehouse is structured and 50% is unstructured, representing today’s typically complex data warehouse. The data compression rate is approximately 4 to 1.

Removing business complete data will significantly reduce your SAP HANA TCO. This reduction in TCO is the key aim of rightsizing data in readiness for SAP HANA migration. If you’re planning to migrate to SAP HANA – or you’re already using it – we offer rightsizing for SAP HANA services that will simplify your SAP HANA journey. Have a look at our guide on the cost benefits of rightsizing data in preparation for SAP HANA migration. – Proceed Group

These paragraphs deal with shrinking the footprint of the data. However, why would that reduce TCO? The only reason is that SAP HANA is the only database priced per the size of data managed or per GB. We explain this in the article HANA and S/4HANA Pricing. As a reader, you don’t have to get into this level of detail, but we provide the supporting information that explains that topic in detail. 

If you buy Oracle or any other database, the data size is independent of the license cost. Oracle DB, for example, is priced per processor. Hasso Plattner of SAP has been obsessed with the importance of compression in databases. In our view, Hasso Plattner has done this because Hasso Plattner did not know enough about databases to design a database. He is a technical poseur and set up design parameters for HANA that it was never able to meet. Hasso is more of a “big picture” executive.

However, this topic is very close to irrelevant with any except for HANA. This is because storage is inexpensive. It is only HANA’s pricing that makes this a necessity. Notice that this fact is not acknowledged anywhere in the article.

Reviewing the Logic of The Lower TCO Claim

Let us review the logic of lower TCO in sequence because there are multiple problems with what has been presented in the article.

Problematic Logic #1: The TCO or the Acquisition and Hardware Cost?

The two things that the size of the data managed impacts are the license cost and the hardware cost. But what about the other aspects of TCO? This type of selective coverage of costs is widespread in SAP TCO claims and TCO claims from software vendors in general. There are four categories of TCO for software.

1. Acquisition Costs
2. Hardware Costs
3. Implementation Costs
4. Maintenance Costs

The two cost categories that SAP claims to have reduced are the two smallest aspects of TCO.

What about the other two?

Problematic Logic #2: The TCO of HANA Versus HANA or Another Database?

This article claims that HANA lowers TCO, but the only point of comparison is two different sizes of data managed by HANA. This is misleading because that is not “lowering TCO.” That is only lowering TCO if one decides to use HANA. However, the statement makes it sound as if HANA lowers TCO versus competitive offerings.

We estimate that HANA has the highest TCO of any database in its class. This is because it has a very high acquisition cost and high maintenance cost (as it relies on many supporting components and has been buggy since its introduction. For example, it has problems with CPU consumption). HANA’s implementation cost is also far higher than competing options. So the only thing that HANA lowers in TCO is a smaller HANA instance versus a larger instance (due to compression and archiving). This is a feeble case for lower TCO.

Let us review more quotes from the article that follow the one we just analyzed.

A dual OLTP-OLAP architecture reduces the data footprint, which saves on storage costs.

Eliminating the need for data extraction and transfer from OLTP to OLAP saves time and resources. Forrester projects 37% cost savings over four years when migrating to SAP Business Warehouse (BW) powered by HANA in year one, SAP Enterprise Resource Planning (ERP) powered by SAP HANA in year two and using HANA for custom application in year three. – Proceed Group

So we have addressed the storage issue. Any database but HANA will make the reduction in data footprint irrelevant for TCO.

As for the claim that follows this, it is not clear that with HANA, OLTP to OLAP is eliminated. This part is a bit involved, but most companies migrate to HANA as their database for SAP BW keeps the same InfoCubes. That is only one reason, and there are several others.

Forrester Understands Databases Sufficiently to Validate or Contradict SAP’s Claims?

A second problem with the study is that Forrester’s analysts lack the technical knowledge of databases to know if any of SAP’s claims are true. If you review the Forrester TCO study on HANA, which we did and which you can read in the article How Accurate Was Forrester’s TCO Study on HANA?, Forrester repeated the information that SAP gave them in this study. This did so without questioning any of it. It is not a “study,” rather it is a restatement by Forrester of marketing documentation provided by SAP.

Forrester’s Study or Forrester’s Projection?

Finally, when Forrester performed this TCO study, they would have had no live HANA implementations to work from to make these estimates. SAP commissioned this study when they were first introducing HANA to be used in sales pursuits. However, they had no real information to share with Forrester.

Everything Forrester states are based upon a projection. That is, if every single one of SAP’s assumptions provided to Forrester turned out to be true, then the projections made by Forrester would be true. Observe that nothing in this article by Proceed Group states this about the Forrester study.

Once you analyze our article on the study, you will see the study is a bit of a joke. But SAP has been using that study for over five years to make a false claim about HANA’s TCO.

What This TCO Article Represents

It is important to consider that this is very typical of an article on SAP TCO. We did not cherry-pick a particularly bad article.

The article makes many assertions but only points to one supporting piece of evidence, a study by Forrester, which is easy to disprove. Easy is for us, as we have a large amount of research in HANA, but not so easy for an SAP customer to figure out. SAP relies on this fact.

Secondly, the article almost entirely stays away from any math or calculation. That is standard SAP. SAP makes big claims regarding TCO, but we have yet to come across them backing up these claims with calculation. The only calculation that is performed seems to be performed by Forrester (they have a few SAP TCO studies), but Forrester’s math is of extremely poor quality. The studies only seem convincing if you refer to them, but you don’t actually read them.

Why SAP Wants to Assert Lower TCO, Not Get Into the Details

SAP normally does not try to get into details because for a few reasons.

1. The SAP employees that deal with TCO only operate comfortably at a high level. They are not used to being challenged on assertions regarding TCO and don’t know how to calculate TCO.
2. The differential between SAP’s TCO claims and reality is enormous. Therefore, SAP always endeavors to keep its customers from looking into the claims they make in detail. Instead, they tend to switch to unfalsifiable supports like “our customers are seeing these lower TCO costs.” It is simply one assertion after another. The strategy is that the customer cannot check on so many assertions.
3. Thus, the right response from a vendor would be,

“Let us get into the calculations and the assumptions.”

Which IT Analysts Will Tell the Truth on SAP?

No IT analyst will tell the truth about SAP TCO because they seek to keep SAP or gain SAP as a customer.

This is where Brightwork comes in to play. We have the most detailed and experience-driven TCO calculators. In fact, we can even claim to have some of the only TCO calculators, as in our review of the availability of SAP TCO, we could find virtually no calculators that were even complete. We call this “PCO” or partial cost of ownership.

Support for the TCO Calculators

We can offer remote presentation/support for our TCO calculators, answer questions, etc. There can also be remote questions answered by email, where Brightwork then points to supporting articles and can even create new ones to answer questions. Brightwork does many TCO studies. See this article for the full list of The Public Brightwork TCO Calculators.

About the TCO Calculators

• All of the studies are done the same way.
• They are based upon regression formulas.
• They are adjustable, but only with a range. For example, a very large implementation requires a separate calculator from just a large implementation.

Conclusion

SAP provides false information to their customers and prospects about SAP’s TCO, and they always have. In evaluating all of the information we could from SAP and SAP consulting firms on SAP TCO, we could not find any intellectual property produced on the topic anywhere. One might say that the IP level is zero, but in reality, it is less than zero because the information that is provided by the entirety of the SAP ecosystem on SAP TCO is negative.

We produce realistic TCO calculations for SAP (and many other applications) that contradict the claims of SAP and its ecosystem. We not only can support our calculators with evidence, but we are familiar with all of SAP’s TCO claims and know how weak are their arguments regarding SAP’s low TCO.