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ENT202 69% and Falling: Lowering the TCO of Enterprise Apps - AWS re: Invent 2012


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In this presentation, Ralph Treitz from enterprise consulting legend, VMS AG, dives deep into a detailed cost analysis of running SAP on AWS using best practices from more than 2600 environments. If you want to know more about understanding the components of TCO models for enterprise software (including SAP), this is the session for you.

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ENT202 69% and Falling: Lowering the TCO of Enterprise Apps - AWS re: Invent 2012

  1. 1. Recent FindingsSAP Business Suite and Netweaver on Amazon AWS.• The AWS platform is certified for running SAP solutions.• AWS recently extended the capabilities to accommodate large ERP systems on AWS e.g. 6,000 users, 90,000 SAPS.• Up to 94% savings on storage and server operations.• 80% savings on servers for large ERP systems.• No upfront investment.• The overall 5-year TCO savings when running SAP on AWS ranges between 16% and 22%.• The savings in the areas, where AWS has an impact on, Content and Design © 2012 ff. by VMS AG range between 59% and 71%.• Amazon AWS achieved again a CWI (AWS) of 59, the leading position in VMS’s list of platforms.
  2. 2. Agenda • How the cloud computing platform impacts SAP • What is the cost savings potential of Amazon AWS • How to apply that to my own environment Content and Design © 2012 ff. by VMS AG • TakeawaysP. 3
  3. 3. NIST Cloud Definitions -1- (May 2012) Cloud computing allows computer users to conveniently rent access to fully featured applications, to software development and deployment environments, and to computing infrastructure assets such as network-accessible data storage and processing. Content and Design © 2012 ff. by VMS AGP. 4
  4. 4. NIST Cloud Definitions -2- (May 2012) Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider Content and Design © 2012 ff. by VMS AG interaction.P. 5
  5. 5. The task list when moving an app to the cloud NIST May 2012. Depending on an organizations requirements, different technologies and configurations are appropriate. To understand which part of the spectrum of cloud systems is most appropriate for a given need, an organization should consider how clouds can be deployed (deployment models), what kinds of services can be provided to customers (service models), the economic opportunities and risks of using cloud services (economic considerations), the technical characteristics of cloud services such as performance and Content and Design © 2012 ff. by VMS AG reliability (operational characteristics), typical terms of service (service level agreements), and the security opportunities and risks (security).P. 6
  6. 6. The Evolution of Providing IT Services (based on the NIST definitions) • Outtasking • Purchasing very specific repetitive services from external service providers or individuals. • Outsourcing • Transferring the responsibility for an explicitly defined customer-specific application infrastructure to a service provider. • Your environment – running and serviced in another data center. • Going Cloud • Self Service: on demand. • Resource Pooling (no permanently dedicated hardware for a customer, an application, a system). • Elasticity (growing and shrinking). Content and Design © 2012 ff. by VMS AG • Pay what you use in measured consumption units not in long term provisioned units. • Virtual Appliances • Pre-configured SAP systems (either customer-specific, customizable or provider-specific) with or without customer data, … • … which can be installed, restored, cloned within minutes or at least hours.P. 7
  7. 7. SAP’s Experience With Virtual Appliances SAP Virtual Appliance Factory – Provisioning SAP installations. • Base Single System, e.g. ERP • Before 5 MD • After 0,5 MD • Single System with Content, e.g. IDES, IS • Before 7 MD • After 0,5 MD • Business Scenarios, e.g. ERP with IS, CRM, BOE, SCM, EP • Before 20 MD • After 0,5 MD Content and Design © 2012 ff. by VMS AG • The appliance concept is desperately needed, as we learn from a quote in a German computer weekly newspaper: „We had typical lead times of 13 weeks until we could provide a new SAP installation, now we are down to 4 weeks and can respond to customer requirements more quickly“P. 8
  8. 8. Cookbook for SAP Related Cloud Economics How can we quantify the benefits? • There is broad acceptance that the technical features of cloud computing are beneficial for running SAP. • But a positive opinion and a business case a two different things. So VMS provides: 1. A systematic approach to understand the TCO of SAP in the cloud. 2. Calculations for 4 different prototypes of SAP installations. 3. A methodology to apply that to the individual situation of a company using SAP applications: Low 7 High Cloud Worthiness Assessment potential CWI potential Content and Design © 2012 ff. by VMS AG 4. A ranking for Amazon AWS cloud offering in the market: Cloud Worthiness Index (AWS) CWIAWS = 59P. 9
  9. 9. P. 10 Extended by VMS. The SAP TCO ModelContent and Design © 2012 ff. by VMS AG
  10. 10. P. 11 The SAP TCO Model cont.Content and Design © 2012 ff. by VMS AG
  11. 11. Where Do Benefits Materialize? Excerpts from the recent VMS white paper on SAP on AWS 2012. AWS SAP TCO model triggered Weight (Level 1) savings Hardware/Software 22-29% 11% 26% Investment Impact Implementation 26-39% 9% No impact 74% Hardware/Software 17-19% 12% Ongoing Cost Application Operations 2% 33% Continuous Content and Design © 2012 ff. by VMS AG 22-45% 20% Impact: hardware investment; planning and building of the Improvement Projects infrastructure; running cost for hosting, operation of infrastructure, Upgrade Projects 23-45% 15% storage, setting up development, test and quality assurance systems. No impact: licenses and maintenance of application software; all Savings where AWS matters: 59-71% business process related work during implementation, changes and upgrades, incident and problem management; process design. Savings overall: 16-22%P. 12
  12. 12. The Individual Cloud Worthiness Index How to define your individual business case. K$/month • True indicator of the economic value of a cloud platform. 100 • Easily understandable and comparable simple number between 1 (low savings potential) and 10 (high savings potential). ∆W ∆T • Expressing the customer-specific cost savings potential. ∆WO • Leveraging best practices of more than 2,700 SAP environments. 50 100 • Applicable to all leading cloud platforms. 92 • Applicable to Private AND Public Cloud platforms. 63 • Applicable to SAP HANA. 54 Content and Design © 2012 ff. by VMS AG • Independent from VMS. 0 TCWO BPWO TCW BPW Low 7 High potential CWI potential TCWO – TCO as is BPWO – Best Practice without Cloud TCW – Total cost with CloudP. 13 BPW – Best-Practice with Cloud
  13. 13. Takeaways For IT professionals and IT service providers. • In order to enable self service features in an SAP environment, you have to define and to implement the appropriate procedures. • Only 1/3 of the cloud triggered savings are in the field of cheaper hardware and infrastructure. • 2/3 of the savings come from the cloud enabling faster, more reliable, easier to use , less laborious self service procedures. • SLAs are going to change and will per defined “per service” not “per piece of hardware”. • Decision makers and users are more and more conditioned by their private life cloud usage experience. Content and Design © 2012 ff. by VMS AG • There will be satisfaction for such expectations, whether from home-grown IT, the service provider or any kind of new service supplier. • If you leave it to the users to make up their cloud decisions, then there will be a lot of mess to be cleaned up afterwards. • Mastering cloud technologies increases your value to the market.P. 14
  14. 14. Takeaways For users. • Promote and demand IT agility, since there is no excuse in saying – I couldnt do it because IT was not capable to deliver resources. • The gain in time by a faster IT must result in faster decision making and faster adaptation of business processes. • Buying cloud services bypassing your IT may make you feel autonomous, but who will later on integrate your mess of processes and data islands? • In Europe more than in other parts of the world, data privacy, data security is used as the reason why “the cloud will not work for us”. It is time to find solutions which cover both sides , the benefit of cloud computing and the need of data privacy and data security. Content and Design © 2012 ff. by VMS AG • Otherwise, the economic gap between cloud computing and traditional homegrown IT will widen and later enforce unfavorable quick and dirty solutions.P. 15
  15. 15. Takeaways For purchasing departments. • Stop prolonging existing service contracts. It is time to rethink. • Check whether an offering has really “cloud inside”. • The cloud economy releases you from the typical burden of old style outsourcing contracts like selecting a computer type for years, minimum volumes, expensive add-on clauses, etc. • Check your application vendor strategy together with your IT. This is today’s lock-in level. It will take years to replace a core application architecture. So you better craft your purchasing plans carefully. • Check your companies needs regarding CAPEX and OPEX. Content and Design © 2012 ff. by VMS AG • This does not only apply for hardware and system software. The next frontier will be the debate around more flexible application software pricing.P. 16
  16. 16. “What Is Your CWI Today?” Content and Design © 2012 ff. by VMS AG Low 7 High potential CWI potentialP. 17
  17. 17. P. 18 Appendix • • About VMS VMS CustomersContent and Design © 2012 ff. by VMS AG
  18. 18. About VMS Who we are. 2002 • VM Solutions GmbH, Heidelberg • VMS = Value Management Solutions = IT creates value • Creation of a new methodology: DNA-level benchmark 2005 to measure and compare complex systems • Finalist CyberOne 2005 2006 • Germany’s most active benchmarking company • > 50 international customers 2007 • Advisory Service: SAP know how - best practice processes • > 1,600 years of SAP data collected 2008 • VMS Benchmarkbase is the largest repository of SAP usage worldwide • > 100 international customers Content and Design © 2012 ff. by VMS AG 2009 • Conversion to VMS AG 2010 • Launch of VMS Process Dashboard • “Top Innovator 2010” 2012 • Launch of Cloud Worthiness Index (CWI), Core Performance Index (CPI) and High Performance Analytics Index (HPAI) • > 2,700 measured SAP systems, 650 measured SAP BW systemsP. 19
  19. 19. VMS Customers Coverage of various industries and business models. Consumer Goods Retail Process / Pharma Bayer Discrete Manufacturing Automotive / Aerospace Energy / Infrastructur Daimler Financial Banking Services Content and Design © 2012 ff. by VMS AG Insurance Services Bayer IT Services Business Services IT ManufacturesP. 20
  20. 20. VMS AG Burgstrasse 61 69121 Heidelberg Office Berlin: Prenzlauer Allee 173 10409 Berlin GermanyCopyright © 2002-2012 ff VMS AG www.vms.netAll rights reserved, including those regarding reproduction, copying or other use or communication of thecontents of this document or parts thereof. This publication may only be reproduced, processed using electronicretrieval systems, or copied in its entirety. We reserve the right to update or modify the contents. Tel: +49 6221 4 38 52 - 0VMS references and indicates its own trademarks as is practical and appropriate to do so. Other trademarks usedin this document are trademarks of their respective owners and will be respected by VMS. Fax: +49 6221 4 38 52 - 22VMS registered trademarks are: VMS, the VMS logo, DNA-level benchmark, VMS Report, VMS Monitor, VMSProcess Dashboard, VMS IT Dashboard, VM Solutions, Cloud Worthiness Index, CWI. E-mail: info@vms.netPhoto Credits: Birkenzweig, eliteglobalbusiness, harry_nl, Nick Saltmarsh, pcshow98, twentyeight – Download April 2009 – florianmarquart on – Download Sept. 2011 – Royalty-free images of iStockphoto®.