SAP’s announcement of the availability of SAP HANA as a database for its SAP Business Suite was not unexpected, and yet it is true that the vendor has introduced a major advance to the core system, opening up new possibilities for process innovation – what SAP refers to as ‘real-time business.’

Customers now have the option to use SAP HANA as the platform for both transactional ERP and analytics, as an alternative to the relational databases they have been using for decades.

This could particularly impact Oracle (as well as SAP), whose database underpins the majority of SAP installations.  It is important for IBM too, but the potential impact on DB2 revenues will be tempered, even outweighed by the fact that IBM hardware has become a favored platform to run HANA.

So from today the standard modules of the SAP suite can leverage SAP’s in-memory technology. As part of SAP’s roadmap, industry-specific solutions based on the suite will be adapted to SAP HANA, too. This incremental development approach is, in PAC’s opinion, in line with market adoption needs: we expect customers will move to SAP HANA step by step. (You can find more about SAP HANA in our post “Where Does SAP HANA Take Us And How To Benefit?” and a in a PAC paper funded by IBM)

ERP pricing model

One obstacle for customers regarding SAP HANA adoption was the volume-based pricing scheme. An ERP customer would have to pay more as the amount of data managed by SAP HANA increased. So a key part of the announcement is that there is a pricing schema that resembles that of relational databases: The customer pays a percentage (about 15%) of the software contract for the database.

In our view this removed a major barrier to broad adoption of SAP HANA by its ERP customers. We believe that many companies will now evaluate the value of SAP HANA for their ERP environment. However, we do not expect a large number of customers to switch to SAP HANA immediately nor to take a big bang approach.

In order to use SAP HANA, customers running the latest ERP version need to install an enhancement package from SAP. For customers, this is not a major technical upgrade. But it means changes in governance and operation of the SAP ERP systems. Customer-side issues which need to be addressed concern the available skills base, administration of data, compliance, mechanisms for backup/restore, failover, and many more.

PAC’s View

Quoting SAP’s Co-CEO Jim Hageman Snabe, “the suite on SAP HANA is not R/4, but a major innovation in the core ERP solution.”

This announcement was not a surprise. We had expected it during last year’s Sapphire. In fact, it is good news for ERP customers that SAP is bringing innovation to the core product at a time where SAP has diversified into various areas such as SaaS and mobility.

Interestingly, SAP is positioning HANA as a way to simplify existing SAP landscapes. From our perspective there are obviously features that allow such a simplification, but this is yet to be proven. We expect that companies will have a chance to eliminate additional systems and workarounds they had to install to overcome limitations of traditional database technology. But it is yet to be seen if SAP HANA can help to reduce the complexity of the SAP landscape.

We believe that this announcement is just the start of a longer journey. A big part of this journey will be to optimize processes of the SAP Business Suite for SAP HANA, to innovate business processes and even business models to what SAP calls “real-time business.”

For sure, to exploit the potential of real-time ERP, SAP users need to change their way of thinking and working towards a real-time culture.

– By Frank Niemann, with contributions from Tobias Ortwein and Philip Carnelley