6 Considerations for Hosting SAP with a Hyperscaler

Hyperscalers have recently been a topic of much discussion and debate among SAP customers, and why wouldn’t they be?  Especially considering that in May, SAP announced project “Embrace” where they teamed up with AWS, Microsoft Azure, and Google Cloud to encourage customers to (you guessed it) embrace hyperscalers.  Even SAP themselves have begun to leverage hyperscalers to underpin their cloud strategy (e.g., Hana Enterprise Cloud).  These actions have further legitimized the hyperscalers’ as an option to host SAP and continued to fuel the conversation.

While cloud revenue will continue to be a critical focus for SAP, they do not have a significant cloud infrastructure presence to protect so they are free to leverage the hyperscalers as an integral part of their overall customer investment strategy.

As SAP and their customers continue to look to hyperscalers to host their ERP workloads, it has become clear that traditional SAP hosting models are becoming obsolete.  There are several key themes that highlight this shift:

  • Digital Transformation Enablement – As the differences between private and public cloud become greyer, IT leaders’ reservations with the hyperscalers have lessened and they have begun to see ERP hosting as the catalyst to enable their digital transformations, lower infrastructure costs, and realign their workforce to become more proactive and nimble to changing business priorities.
  • Rapid Innovation – Competition between AWS, Microsoft Azure, and Google Cloud has led to rapid innovation cycles which outpace those of traditional SAP hosting options and provide unexpected scalability, agility, and integration gains for customers.
  • Simple Economics – Hyperscaler’s infrastructure-as-a-utility model allows organizations to better balance cost and value compared to the old model that required them to oversize their SAP environment based on a three-year utilization projection.
  • Traditional SAP Hosting Providers Augmenting Their Suite of Services – As hyperscalers’ SAP offerings gain maturity and the pace of the revolutionary advancements they are driving hastens, traditional SAP hosting providers are reassessing their market offerings around “managed support”. Expect to see a continuing trend of traditional providers acquiring niche, managed public cloud support providers to bolster their services offerings and stay competitive.
  • Capture S/4HANA Benefits – Rapid innovation and various SAP-certified architecture models are especially ideal for S/4HANA customers as they allow them to unlock the analytics capabilities within the application. Bear in mind that S/4HANA is SAP’s answer to digital transformation.
  • Licensing Model(s) – Hyperscalers provide a bring-your-own-license (BYOL) model which allows customers to maintain the benefits of their perpetual license base and even leverage the platforms to avoid SAP’s forced march to subscription licensing.
  • Availability Improvements – As their SAP service offerings have improved, the provider’s offered availability service levels have also improved (99.99% vs. the standard 99.95%) – and that’s beside the typical maintenance windows that are shortening and, in some instances, not required.

Whether the goal is to expedite their S/4HANA migration, enable their digital transformation, or lower infrastructure costs, there is no denying that IT leaders are increasingly setting aside their reservations with the public cloud and turning to hyperscalers such as AWS, Azure, and Google Cloud Platform (GCP) to host portions or all of their SAP workloads.

However, while the technology and financial benefits of such a move are well-documented, an area that lacks focus is how to develop an appropriate SAP hosting and sourcing strategy.  To find success with a hypserscaler hosting model that truly balances the needs of your organization, I recommend you remember the following as you analyze the hyperscaler market:

1. Start early

Hosting considerations were once an afterthought, a necessary evil within an ERP implementation or technical refresh that normally resulted in organizations (or their partners) buying physical assets just-in-time and hosting them in data centers.  However, with today’s rapid innovation cycles spurred primarily by competition for cloud dominance among AWS, Microsoft Azure, and Google Cloud, the hosting decisions are becoming a strategic enabler for IT and should be taken into consideration early.

2. Understand your hosting and support options

There are endless options out there.  AWS, Microsoft Azure, and Google Cloud offer various delivery models for SAP including environment sizing options (which include bare metal) to meet customers’ specific needs.  However, their support services only extend so far so each have developed a suite of partners to assist in planning, deploying, and managing both the infrastructure environment and hyperscaler accounts.

Infrastructure services are generally delivered by the hyperscalers and managed public cloud services are generally delivered by a third-party provider.  Customers should analyze these two markets (hyperscaler and cloud service providers) to ensure they select the optimal mix aligned to their target outcomes.

3. Know the limitations of your team

While these platforms offer many advantages, they still require highly skilled resources who have platform and new technology knowledge.  The providers will encourage customers to leverage a partner to minimize overall customer/provider risks and increase the likelihood of success.

Thus, customers should consider the capabilities of their teams when devising their sourcing and vendor management strategy to ensure any gaps are mitigated.

4. Mind the architecture

Hyperscalers allow you to quickly spin up and infinitely scale your environment but the architecture needs a lot of care and feeding to ensure it’s also designed to be cost-effective.  The hyperscalers will provide various commercial options to reduce your unit costs as you baseline your utilization, but if you do not mind the architecture and structure your commercial agreements accordingly, you may find that your business case is upside down.

5. Consider your current and future SAP licensing strategies

SAP will continually strive to force customers into a subscription-based model where they’ll provide limited transparency into the basis for the key cost components.  This emphasizes the need to understand the interplay between your licensing and hosting terms so you can architect the path that best suits your needs.

6. Evaluate the impact on existing market norms

With SAP openly embracing the hyperscalers and traditional SAP hosting providers bolstering their service offerings around the hyperscalers, customers should pay attention to how these new market dynamics could impact their decision process.  Some key considerations worth noting:

  • How will traditional SAP hosting providers balance their existing infrastructure hosting investments with their new hyperscaler service offerings?
  • What will happen to SAPs existing channel partnerships and their Hana Enterprise Cloud offering?
  • Could the traditional Tier 1 SAP hosting providers be too big to keep pace?

No matter what happens, customers will have to seek alternative points of view to ensure the recommendations they receive align with their organization’s goals rather than with the provider’s attempts to maximize underutilized assets or force them into a model that only serves SAP or the providers.

Given the pace of change in the hyperscaler market, keeping these six recommendations in mind will ensure your sourcing and vendor management strategy is well-positioned to support your SAP hosting objectives now and into the future.

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