Shrinking Markets Force Customers to Re-Evaluate SAP Hosting Options

As the current COVID-19 recession shrinks the markets from every side, business leaders are being forced into hard cost reduction choices.  Given the high initial cost, many IT projects will be the first on the chopping block.  The market is forcing us all to do more with less, do it faster, and do it cheaper. It is an ideal time to re-evaluate your ERP hosting option both for cost reduction possibilities and increased enterprise agility in this time of uncertainty.

The SAP cloud hosting market has gone through a rapid pace of change even before the current pandemic.  SAP threw their own hat into the ring in 2013 with their bundled service package, HANA Enterprise Cloud (HEC).  In May of 2019, SAP announced project ‘Embrace’ showing that they were willing to ease off their own accelerator.  This built a bridge between them and the three major hyperscaler hosting providers: Microsoft, Google, and Amazon.  Just a few months later, SAP announced a strategic partnership with Microsoft’s Azure cloud allowing their preferred cloud partner to resell bundled SAP solutions with their hosting platform.

Over time, hyperscalers improved and broadened their service offerings, moving towards becoming one-stop shops that offer a full stack of support services rather than strictly Infrastructure.  Third-party providers have been quick to adapt to this new environment as well.  IBM, for example, now offers a full suite of managed services inclusive of SAP licensing.

The recent moves made by vendors of all sizes point to a common trend.  Each of them smells the ‘blood in the water’ surrounding SAP’s plan to end support of their legacy ECC system in 2027, which will force enterprises into tough transformational choices.  You may have seen an extension all the way out to 2030 in some headlines, but the devil is in the details.

Where and How to Host SAP?

Despite the circumstances, the decision of where and how to host your environment is no longer a simple one but a series of choices that need to be made.  Your first considerations should be inward.  Start by asking yourself questions like:

  • What is our SAP license strategy? Perpetual, subscription, or hybrid?
  • What are our architecture needs? Highly customized or standardized?
  • When should we engage vendors in the decision process? (Typically, the earlier the better.)
  • What are the limitations of our own team? Can we support multiple formal RFPs?

As many enterprises make the switch to cloud hosting, even more options present themselves.  For example, would your environment work in a public cloud format or are your needs more suited to a customizable, private cloud option?  Many businesses choose the gray area in between, selecting a hybrid approach, or even a virtual private cloud.

These choices are not ones to be made in a vacuum. Your strategy to select the appropriate infrastructure provider must be informed by the context of the whole support structure.  Every SAP project is supported by the same 4 pillars:

  1. System Integration
  2. Functional AMS
  3. Technical Support
  4. Infrastructure

When deciding who will deliver your infrastructure, you should also understand how you want it to be managed.  If you are contemplating hyperscale infrastructure, your AMS and tech support pillars can be built in many different forms which allow you to select a support structure that will suit your needs best.  Here are a few of your options:


SAP’s offering is a great option for keeping it simple. You have one contract with SAP who sources the infrastructure to a hyperscaler and manages all your services in house.  However, this convenience and ease of use will cost you.

  • DIY (Do-it-Yourself)

On the other side of the spectrum, transforming businesses with high degrees of internal maturity have chosen a ‘DIY’ approach by selecting a system integrator and infrastructure provider and then managing their own services.

  • DIFM (Do-it-For-Me)

In between these extremes lie a couple of alternatives.  The most common strategy we see is to select independent third-party provider(s) to handle your AMS/tech support services and manage all the relationships independently.

  • PRO

DIFM can prove difficult for some teams to manage, which has given rise to a ‘professional’ option in which the contractual relationship exists between the hyperscaler and third-party provider where the terms pass through to you, the customer.

What is The Best Option for Me?

The amount of choice that exists in the market today is a great thing for customers, but the countless options can easily overwhelm a procurement team.  How are you supposed to determine which is the best possible match for your needs?

Over the past year, we have observed a general shift towards those middle alternatives of DIFM and PRO.  There are a few questions you can ask yourself to narrow down your ‘glass slipper’ solution:

  • What is our degree of internal maturity and could we comfortably negotiate and/or manage our own support services?
  • Can our team handle multiple vendor relationships or would we be best-suited with the simpler HEC or PRO options?
  • Private or Public? Private cloud providers offer attractive customizable services, but you will be unable to individually manage your support pillars.
  • What is our business/IT roadmap? Will we be an SAP-only shop for the foreseeable future or will we leverage multiple platforms?
  • What level of flexibility do we require? Hyperscalers now offer solutions that allow you to increase or reduce your processing volume while maintaining cost predictability which is invaluable for seasonal industries.
  • Finally, what is the status of our existing vendor relationships and how can we leverage them to negotiate the best possible deal for us?

Negotiating a highly competitive software deal with SAP can set your enterprise up for years of success but mismanaging the pillars that support it can leave you hamstrung. Take an honest assessment of your team’s capabilities and use it to build a foolproof roadmap to success.

Comment below, follow me on Linkedin and follow UpperEdge on Twitter and LinkedIn.  Learn more about our SAP Commercial Advisory Services.

What to Read Next