How to reduce SAP costs using cloud and Managed Services

This article highlights the main cost elements associated with running your own SAP applications on premises and then the potential savings that user could realise by moving to cloud followed by the main reasons why service providers are able to offer even more cost reductions. 

Most organisations are running their SAP applications on infra-structure hosted on-premises and managed themselves. On-premises could refer to an organisation’s own physical site or office location, but will more likely refer to a colocation where the company rents Data Centre space to manage their own infrastructure. Most companies will also utilise a second physical location for their Backups and Disaster Recovery.

Current Costs for Running your SAP Applications

Data Centre/Hosting costs

There are costs associated with hosting IT both on-premises (in IT cabinets/ server rooms) or with a third-party colocation data centre provider:

·      Power - this is a significant cost and users should attempt to estimate the KWh consumption of their IT equipment. Colocation customers will either be metered or have an allocated power usage included (eg 2KW per cabinet) with their provider monitoring and applying overage fees for any excess usage.

·      Bandwidth - (not to be confused with connection speeds) bandwidth usage costs can also be significant. Users at the same physical location may enjoy lower cost LAN connectivity, however users at different physical locations will incur higher WAN costs. Colocation users will share bandwidth from their DC provider or pay for their own arrangements.

·      Cooling - costs on-premises can be difficult to estimate unless specific cooling equipment has been deployed to service the IT equipment. Colocation users will however have this element included in their normal Data Centre hosting fees.

Software licensing

Application license costs will vary when comparing different solutions. Software as a Service (SaaS) options will include the application licenses. Some MSPs will offer managed platform services as an alternative to using an on-premises estate and will permit customers to bring their own SAP Application licenses.

Operating System costs are not common costs across the different options as MSPs and/or cloud providers will often have alternative requirements for their service.

Database licenses like SQL or HANA should be a consideration when evaluating different environments as transferring existing perpetual licenses may not be permitted and may require the user to absorb new costs for other options.

Virtualisation cost and ongoing fees with vendors such as VmWare or Nutanix should be included. Some user agreements may have committed costs that cannot be reduced.

Business Continuity and Disaster Recovery costs

On-premises architectures often require additional equipment to be available if users evoke their business continuity plan. Designs attempt to avoid single points of failure and so inevitably require additional equipment to duplicate Production environments or will re-purpose IT equipment normally deployed in QA/Dev Test environments. The type of DR solution selected will likely be chosen to meet the cost and RPO/RTO targets acceptable to the business.

Backup/replication system. Systems with application inter-dependencies that involve multiple VMs with real time databases require careful consideration to ensure database integrity. SAP HANA databases for example require certified database systems and practices to ensure data is free from corruption in the event of needing to be deployed.

Management costs

Infrastructure (servers and networking) will all require configuration, management, patching and debugging. This requires time, staff and expertise which may have associated training or hiring costs.

Monitoring system capabilities will be dependent on the level of investment with email alerts. Observing notifications can be difficult and expensive.

Maintenance/Support costs

Infrastructure will be subject to software/firmware updates and hardware failures. Any changes or replacements will require managing to ensure they are planned, implemented and tested to have minimal risk of impact for the service.

24/7 on call with rapid responses to serious incidents will incur significant costs. Hiring/employing staff has associated costs, especially if paying for out of hours duties or overtime payments. Managing the appropriate staff levels and skills is difficult and expensive. Response times need to be acceptable to the business, with the cost impacts to the business from any severe loss of services calculated.

How cloud can reduce the running costs of SAP Applications

Insight’s recent survey estimated that 30% of cloud spend is wasted*. History has proven this from numerous ‘lift and shift’ projects being victims of spiralling cloud costs. Without care and attention to how things are moved to cloud will only create problems later. Replicating inefficient systems, architectures or non-essential data and repeating operational bad practices when moving to cloud can unfortunately increase the users costs in a cloud environment.

Security and compliance

Security and compliance are the top reasons organisations move to cloud, especially since the recent pandemic means remote working can no longer rely on any physical location-based security measures. Clients with sensitive data or specialised security needs will also look at private cloud to deliver their bespoke security solutions and achieve the best of both worlds. This is the prime reason for the resurgence in private cloud with growth now predicted to exceed public cloud growth over the next five years.**

Scalability

Scalability of cloud allows clients to rapidly spin up new servers & infrastructures which can reduce project delivery timescales and offer extra resources at peak/busy periods. This has a huge advantage compared to more fixed on-premises landscapes, however a business model based on paying for resources ‘as and when’ needed still requires the discipline to ‘turn off’ or decommission cloud infrastructure when not.

Business Continuity & Disaster Recovery

BC/DR is one of biggest potential savings to be realised when evaluating the benefits of cloud. Business Continuity plans involve switching production environment alternatives to continue IT operations in the event of a disaster. Cloud offers the ability to easily turn on extra infra-structure in the event of a disaster or when DR testing with more cost-effective options than any on-premises physical infra-structure solutions.

Cloud Recovery utilises replication technology to create near live copies of VMs in other DC in the same or different region. All public cloud providers offer multiple regions, Microsoft call these Availability Zones which provide increased availability with higher SLAs achieved at reasonable cost.

Replication technology must be considered when complex architectures and application inter-dependencies are present. VM replication does not ensure database integrity so low cost replication cloud services like Azure Site Recover (ASR) for example may be fine for certain workloads but may be inadequate for real time databases that require higher cost vendor certified/recommended solutions be deployed.

License costs

Database/OS license costs for SQL or HANA should also be considered when evaluating cloud. Some cloud providers allow their users to bring their own perpetual licenses in certain cases, Microsoft for example, offer their ‘Azure Hybrid Benefit’ specifically to allow users with perpetual Windows Server licenses with Software Assurance to be brought over to their cloud environment to reduce their monthly Azure costs.

Staff costs

In-house IT costs are often mistakenly assumed to reduce when moving workloads to cloud. A cloud environment with virtual servers and virtual networking will still need to be configured, managed, patched and debugged by someone. Cloud environments do of course promote centralisation and the use of automation tools to assist their efficiency, however any lack of in-house cloud skills or use of inadequately trained staff will at best be time consuming and at worst be a very expensive way to run their non-optimised systems.

How MSPs further reduce the costs of running SAP applications

MSP have the expertise and knowledge to get the best out of cloud systems and have the scale, resources and processes in place to efficiently and effectually manage many environments for their clients. MSPs also have the advantage of scale, to spread the costs of their systems over many users so can benefit from expensive automation tools, centralised management software and comprehensive monitoring systems at very little extra cost to the users. More sophisticated solutions not only identify faults but also detect when resources are approaching thresholds and even employ AI/machine learning algorithms to provide predictive fault information.

Application MSP Services - MSPs that specialise in particular applications will be able to offer not just expertise but also often are able to provide specific services orientated around them. As an example, SAP HANA database Backup /Replication is a critical yet complex area that often requires expensive SAP certified systems and knowledge of them to utilise effectively. MSPs also have the advantage of implementing for multiple customers that allows them to deliver a proven and cost effective service compared to companies trying to do it themselves.

Resiliency costs more in a single on-premises environment where duplicated equipment is required to avoid single points of failure. This either requires spare kit on standby or having advanced hardware replacement service contracts in place with vendors to avoid lengthy down times. Both options are expensive and where the MSP managing multi-tenancy environments can offer savings through scale. In the case of private cloud environments the MSP will share spare equipment/replacement contracts across their landscape and in the case of managing public cloud environments will use replicated architectures to provide resiliency to deliver their agreed SLAs.

Security and compliance

Security and compliance are such an important factor many organisations are now choosing their MSP specifically on security expertise for their particular environment. Having an intimate knowledge of their application to fully take advantage of app specific measures is often a differentiator. For example, SAP systems have functional techniques recommended to ensure individuals have the correct data privileges to only access the appropriate functionality and data. MSPs will have systems, processes and security partnerships in place to offer their clients cost effective protection of their data. 

User Access & Security- with so many remote/home working users now accessing corporate systems, companies also have to consider not just securing the ‘back end’ cloud system but also carefully consider the front-end system of how users access their data. This could be employing application connectors or virtual desktop solutions which the MSPs will have experience with and be familiar with the latest challenges and resolutions needed for particular applications. MSPs can assist users to implement their business security policy needs with a working understanding of relevant security measures such as Single Sign on, Multi-Factor Authentication and data encryption.

License costs

Software license costs- MSPs will leverage their economies of scale for their customers, with many having CSP / SPLA agreements in place to offer reduced cost services to their clients. Customers will therefore not have to buy their own licenses as part of their new managed service. 

MSPs may also offer application specific services, such as SAP HANA instances where resources are shared between multiple users and users only pay for their instance. Software costs can be determined from other factors like CPU Cores which will vary costs immensely between options.

Most organisations use MSPs to manage their environments for the above reasons. A cloud-native MSP will operate more efficiently than an individual organisation and if they specialise in applications like SAP, this can also provide other know-how and user benefits. Being the MSP’s ‘business focus’ they will be continuously developing knowledge and sometimes even intellectual property aimed at offering lower cost (and lower risk) onboarding templates and tools so that their clients benefit from less painful onboarding with management services that deliver cost optimisation on an ongoing basis.

Learn more about Opal Wave’s SAP Platform here and Read more of my SAP/Cloud blogs here

 References

*https://cloudcomputing-news.net/news/2020/nov/03/from-capex-to-opex-ensuring-the-cloud-shift-optimises-costs/

** https://www.dhirubhai.net/pulse/analysts-say-private-cloud-quadruple-over-next-5-years-david-penny/

Recommended Further Reading

https://www.dhirubhai.net/pulse/running-old-sap-kit-like-putting-money-bin-david-penny

https://www.dhirubhai.net/pulse/mistakes-moving-cloud-stakes-get-higher-david-penny

https://www.dhirubhai.net/pulse/you-ready-move-your-critical-workloads-cloud-yet-david-penny

https://www.dhirubhai.net/pulse/sap-paas-role-when-moving-ecc-s4hana-cloud-david-penny

https://www.dhirubhai.net/pulse/your-planning-move-sap-cloud-which-david-penny