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5/9/2013
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SAP Customers May Overspend By 25%

SAP costs average $1,518 per user, per year, but new research reveals that two routes to consolidation can bring big savings.

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SAP customers running multiple instances and versions of the vendor's software could save 25% by switching to a single-instance approach, according to HCL. That's a pitch worthy of a gecko with an English accent, but getting there takes a heck of a lot more than a 15-minute phone call.

HCL's findings, released Thursday, are based on a global survey of 225 SAP-customer CIOs that uncovered much more complexity than the systems integration firm anticipated. The survey revealed that the average SAP customer with $1 billion or more in annual revenue runs five different instances and six core modules of the vendor's ERP software.

In many cases separate instances are set up to run different regions, such as North America, Europe and Asia Pacific. But in all too many cases, mergers, acquisitions and business fiefdoms add to a jumble of instances and even multiple versions of software.

"The SAP installed based is more complex and more fragmented than we expected," said Steve Cardell, president of HCL's Enterprise Application Services practice, in an interview with InformationWeek. "In some cases customers are running four different instances on four different release versions with one having five modules and the other eight, but they're not the same modules."

[ Want more on SAP's latest Hana consolidation option? Read SAP Cloud Push Starts With Hana. ]

Running multiple instances and versions of software adds to complexity and cost, necessitating redundant hardware and extra people to upgrade, patch, develop and test applications. Only 6% of respondents are running on a single instance of SAP, but their costs are 25% lower than the average of $1,518 per user, per year.

Systems consolidation is a goal for many SAP customers, and HCL finds there are two predominant paths to that goal. In one approach, companies bite the bullet and force through a company-wide consolidation project that may take 18 months to two years and cost a large company as much as $20 million. These projects are typically sparked by a top-down edict from corporate, according to Cardell.

The second consolidation approach is a surround strategy whereby companies use the business intelligence layer or mobile applications to synchronize and serve up consistent reporting from divergent back-end systems. In this approach, companies essentially give up on the idea of quickly getting to a single instance, but with BI, mobile and, increasingly, cloud applications, they slowly whittle away at the core.

SAP itself promotes the surround strategy by touting the Hana in-memory database, mobile, cloud apps and BusinessObjects BI as consolidation agents. SAP also just announced Hana Enterprise Cloud, an option for large customers to quickly migrate applications onto the vendor's in-memory database running as a managed service. Upwards of 90% of respondents expressed interest in Hana as a possible route to consolidation, according to Cardell.

SAP touts the company's own growing portfolio of cloud-based "edge" applications, such as CRM, SuccessFactors human capital management and finance apps, as a way to effectively shrink the core. But Salesforce.com and Workday have made significant inroads in helping SAP customers to shrink the SAP core, according to Cardell -- and as witnessed by the fact that Salesforce.com recently surpassed SAP as the leading CRM vendor, according to industry statistics.

As a leading SAP integrator (along with IBM and Accenture), HCL clearly has a stake in helping customers to consolidate. To support big-bang consolidation projects, HCL is introducing a set of data-mapping and data-migration accelerators at next week's Sapphire conference. The integrator also helps SAP customers with surround strategies, whereby it helps shrink the SAP core with mobile, BI or cloud services offerings. HCL is an integrator for Salesforce.com, Workday and Oracle as well as SAP, so it's not limited to one approach.

Where new implementations of SAP software are concerned, customers are intent on avoiding customization at all cost, according to Cardell. "In all the SAP projects we get, the first bullet point from the steering groups always emphasizes 'vanilla' deployments, because there are so many horror stories about customization," he said.

Moving off of and consolidating heavily customized legacy deployments is by no means as easy as signing up for a new auto insurance policy by phone. But a key takeaway from HCL's study, which was conducted by independent research company Vanson Bourne, is that there are ways to consolidate and cut the high cost of SAP ERP deployments.

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