Technology Trends Drive SAP Software Consolidation

SAP applications are often the most mission-critical and, simultaneously, the most vexing to manage in the enterprise.

In fact, a global survey of 225 CIOs released this week by the consulting firm HCL Enterprise Application Services (EAS) finds that IT organizations have, on average, five separate instances of SAP operating across their business. And 39 percent say they are running in excess of six instances. The findings also show that the average annual cost per user of running SAP is $1,518.

By moving to a single instance of SAP, large enterprises could potentially earn savings of up to 25 percent, which HCL EAS contends could save large enterprises nearly $30 billion.

HCL EAS president Steve Cardell says that so many instances of SAP exist in organizations because most of them have found it more expedient to integrate them than to try consolidating them. Over the long term, however, the lack of consolidation ends up being a much more expensive proposition due to the cost of the SAP licensing fees.

“A lot of organizations think it’s cheaper to integrate using a lot of surrounding technology than it is to go to a single instance of SAP,” says Cardell.

As a result, there are not only many instances of SAP software in a single organization, but a lot of organizations are still running older versions of SAP software. The HCL EAS research found that the latest version of SAP, ECC 6, is being used by just 37 percent of organizations, while 54 percent are using ECC 5 and 44 percent are using SAP 4.7.

Josh Greenbaum, principal of Enterprise Applications Consulting, adds that more often than not the decision has less to do with actual economics and a lot more to do with fiefdoms within an organization. “There’s a lot of politics involved,” he says.

However, there are three trends simultaneously coming together that will make a strong case for consolidating instances of SAP applications.

The first is the rise of the SAP HANA in-memory computing platform, which makes it more cost effective to support a much larger pool of users per instance of SAP. In fact, the HCL EAS survey found that more than three-quarters of CIOs say they plan to or have already deployed in-memory computing technology.

The second trend is cloud computing, which allows organizations to shift the focal point of their SAP application deployments to a single instance that can run on a virtual private cloud or a public cloud. The HCL EAS survey found that 73 percent of CIOs say that they have implemented cloud services in some manner, and 74 percent say that SAP technology would play a significant role.

The third trend is the rise of mobile computing, which is a lot easier to support via a single instance of the cloud. For example, prior to rolling out its mobile computing strategy, Vodafone consolidated all its instances of SAP application software.

“As an organization, we grew very fast,” says Niall O’Sullivan, group operating finance director for Vodafone. “But, without one version of SAP, rolling out mobile computing applications to 85,000 internal users would have been much more difficult.”

The HCL EAS survey found that 93 percent of CIOs are planning to or already have a mobility strategy. Of those surveyed, more than half say SAP technology would be the cornerstone of their mobility strategy.

A fourth way to reduce instances of SAP applications, of course, is to transform the entire IT organization.

“We’re going to go through a major transformation of how we use SAP core applications over the next 18 months to two years,” says Phil Greenwood, CIO of Nestle Nespresso SA.

While it is clear there has been a fair amount of stagnation across SAP environments in recent years, it’s now also clear that a combination of economic and technology trends are converging in a way that will ultimately force the issue of SAP application consolidation.

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