Lessons Learnt: Bottom up TCO Analysis for HANA Platform

This document is a summary of lessons learnt from real customer experience in HANA sales cycles during Q2 and Q3 of 2015. Determining value of any investment is of paramount importance to any IT and business team and there are several applicable ways of getting to the dollar impact. Two such methods are briefly described initially with the value points from a HANA platform based analysis shared in detail for the bottom up TCO analysis.

Two ways to analyze value and benefits of an IT investment

1. Top down cost avoidance calculation – This is one of the most popular ways of assessing the business value leveraged by SAP’s IVE team regularly. As part of their survey with the customer, we determine their short and long-term initiatives for introducing new technical solutions (especially non-SAP solutions) to the business including the estimated costs and time associated with them. Due to the simplification and platform capabilities made possible with HANA platform, we are able to either eliminate or simplify these implementations compared to the customer’s current approach. As an example, one of the customers I worked with in Southern California was planning to implement 22 new dashboards for Supply Chain performance monitoring using non-SAP technology. Their SI had provided an estimate of USD 500,000 per dashboard for a total of USD 11 million cost + 3 million for analytics software purchase that was positioned to be specialized for supply chain performance monitoring. With S/4HANA based Supply Chain control tower and Integrated Business Planning for Supply Chain and other standard Supply Chain related Fiori applications, we were able to reduce the cost of this business use case substantially and absorb the general cost of commissioning S/4HANA in their environment as part of a larger project. Working through the list of priorities and projects planned for the next several years and mapping them to available SAP S/4HANA or HANA platform capabilities can result in multi-million dollar cost avoidance in addition to simplification and access to the latest innovation from SAP. Between the two methods discussed here, the top down method typically uncovers bigger stones where hidden dollar savings might be found when positioning HANA but these are estimates that may vary.
2. Bottom up TCO calculation – The second and the other preferred method for our customer’s IT organizations is the bottom up TCO calculation where we prepare a summary of their current spend on IT infrastructure, resources, maintenance, support, change management and other operational aspects and compare those with equivalent in a post HANA world. The savings derived by this method are very close to the real ones as they are based on formulas or proposals, however these numbers may not be as large as those derived from the top down calculation. Both top down and bottom up approaches should be considered for a holistic analysis. Bottom up TCO analysis also required knowledge of the customer’s architecture and it has been observed that Pre-Sales working in conjunction with IVE is the best combination to perform this analysis.

  Typical considerations in a bottom up analysis

Following is a framework to collect inputs from the customer about their current spend on their environment. Detailed excel template available on demand.

1. Hardware Maintenance & Storage Costs    

1. Infrastructure Hardware - SAP applications
2. Infrastructure Hardware – Others
3. SAP Infrastructure Storage Management
4. Current Data Warehouse Environment

1. Hardware Acquisition costs

1. Infrastructure Hardware

1. Software Related Costs

1. Infrastructure Software

1. Resource Costs      

1. Cost of creating and maintaining customizations related to SAP Data

1. Migration Conversion Costs

1. Total Migration/ Conversion Costs        

Observed Challenges and pain points in a typical OLTP and OLAP landscape

To baseline the customer’s current environment, architecture and the challenges posed by them, the following suggested points can be leveraged from the framework we developed for the customer engagements where such analyses were performed. This is an indicative list and there could be additional or different challenges that your customer might be facing which could form part of your analysis. A visual summary of these challenges is presented below and described subsequently:

1. Limited Operational Reporting with ECC on traditional DB due to resource, performance and tuning considerations for an OLTP environment on a traditional DB
2. High Data redundancy with multiple copies of SAP data in the landscape like data marts, data warehouses and copies of data within these due to their architecture of persistence, aggregation, indexing etc. Adding DEV, QAS and PROD environments for each of these parallel environments quickly creates an unmanageable challenge
3. Data Governance, Quality and security challenges within data marts / copies of SAP data
4. High TCO with shadow IT costs to maintain numerous data silos
5. Bloated Data Warehouse footprint with multiple implicit copies of data due to internal staging, indexing, aggregates, data stores etc. that a traditional DW architecture would force them into
6. Unsustainable performance workarounds like aggregates and indices in a traditional DW that not only add to the data footprint but do not provide a cost effective scalable model
7. High data latency with 24 – 48 hrs. delay in data availability for reporting within the traditional DW
   1. No real time business analytics as a result and delayed data results in loss of business context under which the queries were raised in the first place
8. Reporting tool proliferation within Business users for self-service analytics
   1. Inconsistent User Experience across multiple reporting tools from different vendors
   2. Implicit need for IT to support such business acquired tools outside their regular support plans and skills
   3. Variety of security models and further data silos created by each such tool
9. Costly and time consuming end to end change management processes due to the multi-layered architecture
10. Limited Change Agility due to complexity of the architecture which prevents IT from delivering changes and new content to the business in a timely manner

How does HANA platform provide value?

HANA not only provides a remedy for the above-mentioned challenges but also tremendous value to the business and IT organizations within any enterprise. These benefits are visualized in contrast to the previous illustration as follows:

Future State Architecture Benefits – Immediate Business and IT value

1. Massive reduction of the current data footprint through
   1. Single copy of SAP ECC data across business processes and teams
   2. Data provisioning for business functions through pre-built virtualized data models (non-materialized)
2. Simplification of the landscape by
   1. Data marts elimination and replacement with Virtual data models and views on a single copy of persisted data
   2. Large reduction of DW data volume or eventual elimination of the traditional DW based on the customer’s roadmap
3. Easier access to SAP data for reporting with
   1. Business user friendly semantics of the model
   2. Direct operational reporting from SAP ECC Vs BW or DW
4. Real time / Near Real time analytics on all data with
   1. Combined transactions (OLTP) and Analytics (OLAP) in a single platform on a single copy of data
   2. Analytics Simulation (What if analysis) in real time for better decision making
   3. Supply Chain visibility analytics in real time on SAP ECC with HANA enterprise as an example
   4. Category spend optimization from Ariba (Supplier spend), Concur (Travel Expense), Fieldglass (Contract labor) and ECC (Direct and Indirect procurement) with HANA enterprise depending on the customer’s preferred solutions for these scenarios
5. Access to granular data with
   1. Line item level detailed analysis is enabled in real time
   2. Elimination of aggregates and pre-calculated totals as in a DW
6. Improved change agility with
   1. Easier end to end change management process, fewer layers to change
7. Compelling and consistent User Experience
   1. Any user device enabled, browser based access with beautiful and intuitive UI
   2. Elimination of the need to deploy new reporting and transactional tools
8. Lower TCO with
   1. Simplified landscape and data footprint which results in smaller backups, faster recoveries and lower investment in infrastructure redundancy related to them
   2. Better utilization of current H/W resources especially storage
   3. Better utilization of IT and Business human resources through elimination of Shadow IT organizations
9. Robust Data Governance, Quality and Security with enterprise grade best practices within the platform

End State Architecture Benefits – Full Business and IT value of SAP HANA

1. All of the previously mentioned SAP HANA platform benefits plus
2. Further simplification of the customer’s landscape through SAP S/4HANA
   1. Elimination of SAP BW with BCS capabilities in Integrated Planning with S/4HANA capabilities and Integrated Business Planning for Finance and Supply chain (some of it is planned functionality as of Q3 2015)
   2. Increased utilization of HANA enterprise for non-SAP data (for e.g. in DW currently) for a single source of the truth across SAP and non-SAP data sources
3. New Business Processes introduction by leveraging HANA for IoT edition on the same platform
4. Advanced predictive analytics processing of Clinical trial data in real / near real time in conjunction with ERP inventory data

The above are a few indicative examples to help with moving in the right direction with the analysis and the lists are a mix of known and not so well known points that can be leveraged as part of the framework.

Thanks for reading!

Sudhendu