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Beware of the SAP Cloud

With talk of the fiscal cliff broadcasting on nearly every news channel these days, everyone seems to focus on the potential financial changes on their lives. For those of us in the information technology business, especially those who work with SAP on a regular basis, we have a cliff of another kind that is looming.

A Different Kind of Cliff

This cliff can be described as businesses finding new ways to cut costs and streamline IT operations. Consider the following analogy. If every manufacturing company in the world decided to build their own power generation plant to support each production facility instead of buying electricity off the grid from the local utility company, how many people would it take to support that business model? The answer is probably in the millions… and a large waste of resources that could be used for R&D and growth.

But beyond the financial costs, imagine how much more we’d have to pay for the products that are manufactured in those facilities. Not to mention the tons of pollutants that would be pumped into the atmosphere. This analogy extends to SAP management and hosting. If organizations host their environments independently versus outsourcing SAP to the cloud, they could be missing out on valuable efficiencies and economies of scale.

Evolution of Cloud Computing

In the past few years, cloud computing has evolved from just an interesting idea to a crucial reality with increasing demand for physical data center space in multi-tenant facilities. According to 451 Research (an emerging technology research firm) the amount of data center space is growing about 9% a year in the U.S. Given that the top twenty markets in the US had a total of 22.1 million square feet of revenue producing data center space in 2012, the 9% increase will add approximately 2,000,000 square feet in 2013. And, in most areas the demand is growing faster than supply.

One 451 Research piece reported, ‘there is an unstoppable move to the cloud to host production workloads as well as to outsource services.’

Building an SAP Army

The SAP cloud tipping-point is rapidly approaching as more organizations are starting to adopt cloud solutions of all kinds, which necessitates a reduction or repurposing of their existing IT workforce. Currently, an army of IT professionals work together to support and maintain each production instance of SAP. To give you an idea of the size of the SAP army, consider these numbers:

• SAP is the third largest software company in the world
• Employees over 60,000 people worldwide
• Over 5000 programmers
• Revenue in excess of $20 Billion dollars
• More than 125,000 SAP installations
• Estimated over 15,000,000 users of SAP
• More than 30,000 companies run SAP

Given these amazing statistics, we still don’t know how many people are directly and indirectly required to support the thousands of instances and millions of people using SAP. We do know the number of support staff is in the millions.

For the coming SAP Cloud tipping-point the reverse of the power plant analogy is true. We already have thousands of individual ‘SAP power plants’ in thousands of business locations worldwide with thousands of people and other resources in support of this business model. What happens when the SAP Cloud adoption increases and organizations scramble to ‘plug in’ to the cloud?

Better, Faster, Cheaper Business Model

Just like typewriter repairmen, television antenna installers, milkmen delivering dairy products door to door, or digital cameras replacing photographic film cameras; life changes as better business models come along. And so it will be with the SAP Cloud. In this case, as companies streamline their SAP instances to a cloud hosting model, greater resources will be put into other areas to be more competitive in a changing marketplace. Job markets will also evolve to fulfill increasing demand for new types of IT positions in strategic growth and management within organizations.

The SAP Cloud tipping-point can be quantified as the difference between the number of people currently supporting SAP and the number required to support it when SAP transforms into a primarily cloud based platform. This transformation is occurring within SAP, but has been a gradual change due to the variety of modules and key SAP divisions. However, it is important that CIOs and other IT professionals keep a close eye on SAP and begin to develop their own cloud strategy to gain competitiveness.

Economies of Scale With Cloud-Based Solutions

Consider the economies of scale that will be working in favor of those organizations that move to a cloud based business model for their mission critical systems. The cost advantages that cloud providers offer are driving much of the interest in SAP Cloud solutions. Cloud providers can spread out their fixed costs across all customers for things such as the datacenter building, HVAC, electric power consumption, the racks, the hardware and even the technical services. This allows an enterprise hosting provider to fractionalize their fixed costs and charge only a portion of the full costs to each of their customers. This approach typically yields a lower cost to each customer than if they were to bear the entire fixed costs of supporting their own data center.

To compare SAP to a very successful cloud-based software company, consider Salesforce.com:

• Employees over 7,500 people worldwide
• Revenue in excess of $2.5 Billion dollars
• More than 104,300 customers (as of 2011)

The telling statistic is that Salesforce.com is able to service three times as many customers as SAP with one-eight as many employees. Also, Salesforce.com has well over 300,000 independent consultants and developers that do much of the custom programming and support work; saving many Salesforce.com customers the expense of employing these resources themselves. The comparison is not exactly apples to apples because SAP performs so many more functions as an ERP application than does Salesforce.com which is a CRM application. However, the compelling message of cloud computing is emphasized in Salesforce.com’s company slogan – No hardware. No Software. No headaches.

Secure-24 is an SAP Partner and recognized leader in providing SAP Cloud hosting and other services. With a large percentage of our global clients running SAP – we have an extensive portfolio that offers guidance and expertise in managing SAP in a private cloud. We have highly experienced SAP staff to handle all the daily care-and-feeding needs of SAP, including Basis, operating system management, risk mitigation, system monitoring, disaster recovery, storage and backup systems, and a flexible and scalable infrastructure.