The REALTECH study provides TCO benchmarking data, partner managed cloud TCO impacts, and investment & implementation costs savings of partner hosted private cloud.

1. Value Driven with IT
SAP TCO Study:
SAP’s Partner Managed Cloud (PMC)
REALTECH Consulting GmbH
Matthias Schmitt
13.02.2015

2.  Executive Summary
 PMC Savings explained in detail
 Evaluation parameters, approach &
assumptions
Content
2

3. Overview: SAP’s Partner Managed Cloud
3
Subscription delivery of traditional SAP solutions
SAP’s Partner Managed Cloud (PMC) is a subscription delivery of traditional SAP solutions through a partner’s
private hosted cloud, in the form of packaged and managed services.
• Strategic: Increased flexibility and agility in
responsiveness to business changes and changing
requirements
• Financial: Faster time to value and an overall 30%
lower TCO over 5 years, plus conversion of CAPEX into
OPEX that delivers an optimized cash flow
• Operational: Better utilization of information systems
with increased focus on high value IT initiatives,
instead of lower value system maintenance
The customer enjoys a fully
outsourced solution with
the following key benefits:
SAP provides:
 Term license for SAP solutions to
provide a solution as a services
offering for customers
 SAP and partner align on
customer(s) solution and
territory
Partner provides:
 Packaged solution as a service with
migration, implementation and support
 T&Cs and pricing for the offering with a Sales
team to position
 Subscription licensing based on the term
license (OpEx)
 Developed IP and services that can be reused
or tailored for an industry or solution

4. Summary of TCO Savings & Impact Areas
4
Partner Managed Cloud enables savings of 30% over a 5-year TCO lifecycle
Primary drivers for the TCO reduction are the combined
result of key SAP’s Partner Managed Cloud (PMC)
components:
Economies of scale from Cloud-based infrastructure
• Scalability – increase/decrease system usage on demand
without wasted or underutilized systems for backup, dev, and QA
• Flexibility –business process changes can quickly be reflected in
IT infrastructure
• Speed – Fast deployment and provisioning speeds time to value
and lowers wait time, improving productivity
Lower costs from application management services
• Pooled Resources – Expertise is spread across multiple
customers, thereby making it cheaper on a per customer basis
than if customers staffed dedicated SAP resources
• Automation / Standardization – Combines automated
processes for provisioning, management and monitoring with
virtualization across customers, along with standardized
packages for implementation, upgrades, and patches
Hardware/Software
Investment
Implementation
Hardware/Software
Ongoing Cost
Operations
Continuous
Improvement Projects
Upgrade Projects
SAP TCO Stack elements from bottom to top
in chronological order of the TCO lifecycle
12%
10%
11%
32%
18%
17%
7%
20%
22%
11%
11%
30%
PMC
Savings
On-Premise PMC
Based on REALTECH’s TCO benchmarking data for over 4,200 SAP customer deployments,
see savings detail section and methodology appendix for additional details

5. Timing of PMC Financial Impacts
5
Cost Impact Timing & Cash Flow Optimization with Partner Managed Cloud
The 30% savings in TCO accumulates over the course of 5 years,
as shown in the chart on the right.
• Since PMC extends the benefit of infrastructure hosting to software
licenses as well, the upfront capital costs are nearly eliminated
• When compared to traditional on-premise deployment options, PMC
cost savings are mostly front-loaded, with 51% of the savings realized in
the first year, and the remaining savings realized over the remaining
years
On top of the overall 30% TCO reduction, more even distribution
of payments with PMC helps to optimize overall cash flow
• On-premise deployments require more up-front cash outlay (31% of
total) while PMC has a more evenly distributed cash flow impact of
(approximately 20% per year)
• The impact from PMC on cash flow optimization is therefore greater
than on-premise, since the large initial outlays associated with on-
premise deployments are less “discounted” from a time-value of money
perspective, and are therefore more expensive
Based on REALTECH’s TCO benchmarking data for over 4,200 SAP customer
deployments, see savings detail section and methodology appendix for additional
details
49%
60%
66% 68% 70%
0%
20%
40%
60%
80%
100%
Year 1 Year 2 Year 3 Year 4 Year 5
PMC Expenses as a % of OnPremise (cumulated)
Year 1 Year 2 Year 3 Year 4 Year 5
OnPremise PMC
Comparative Distribution of Cash Flows Over Time

6.  Executive Summary
 PMC Savings explained in detail
 Evaluation parameters, approach &
assumptions
Content
6

7. High Level Overview of Key Benefit Areas
7
30% Cost Reduction along with optimization of Cash Flow
SAP TCO model
PMC triggered
savings
Level 1 Weight*
Hardware/Software Investment 12% 100%
Implementation 10% 32%
Hardware/Software Ongoing Cost 11% -79%
Operations 32% 31%
Continuous Improvement Projects 18% 37%
Upgrade Projects 17% 39%
Consolidated (Overall savings) 30%
* Weight = Share of cost for operation On-Premise
The PMC TCO impacts are greatest in the following areas:
• Upfront hardware & software investment is almost completely eliminated, going
from 12% of TCO down to 0%. PMC extends OpEx subscription for hardware –
inherent in outsourced infrastructure hosting – by adding in OpEx subscription
pricing for SAP software as well.
• In contrast, ongoing cost for hardware and software (where the license payments
have been moved to as operation cost) increases from an 11% to a 20% share.
This is below 100% increase (79% cost increase) due to better allocation and
provisioning of hardware and licenses.
• Implementation as well as later continuous improvement projects and upgrades
benefit from the cloud operation model with savings in the range of 37-39%.
• In both private and public, the cloud operation model provides flexibility and speed
in resource provisioning which is needed to enable application implementation or
change processes.
Whether it’s the initial technical implementation, a test system needed to check out
an application change, fast replication of test data, or additional machines needed
during an upgrade process, in all these cases, the rapid deployment of resources
speeds up project execution, enables early testing, and saves costs in FTE time
waiting for machinery to be available.
• Savings in Operations (especially application management and support) are cut by
31%. Not only does the cloud computing model provide resources faster, it makes
provisioning easier via automation of IT processes. Virtualization is a large part of
this saving effect as well as centralized management resources and talent pooling.
The key to success are automation and software defined landscape management.

8. Detailed Savings in SAP PMC Deployments
8
Initial investments & implementation cost savings
SAP TCO model Level 1 SAP TCO Model Level 2 PMC savings PMC Effects Explained
Hardware/Software
Investment
Technical Infrastructure 100%
No upfront investment needed for applications.
System Software 100%
Application Software 100%
Implementation
Technical Setup & Process
Design
90%
Technical implementation of hardware and software is virtually eliminated as cloud deployment
uses pre-defined infrastructure and pre-installed software.
Organizational Change 0% No effect, organizational change management is still needed.
Business Setup 0% No effect, business process design is also still needed.
Project Management 20%
More flexibility when additional resources are needed, and lower project overhead (technical
implementation, etc.), can help projects stay on-time and on-budget and reduce effort needed.
Also having one provider knowing the business of the customer and offering long term consulting
rates which are better than the market.
Testing 35%
Provisioning of test systems and test data is easier to accomplish with additional resources and on-
demand infrastructure that scales up and down as needed.
Training 35%
Training systems are cheaper to provide. Refreshes can be done easier, faster, more often in the
cloud operating model.

9. Detailed Savings in SAP PMC Deployments
9
Ongoing investments, operations, and upgrade projects costs savings
SAP TCO model Level 1 SAP TCO Model Level 2 PMC savings PMC Effects Explained
Hardware/Software
Ongoing Cost
Technical Infrastructure 2%
Changes in the infrastructure are much easier to provide. Increases and decreases in infrastructure needs
can be managed more effectively; over-provisioning of resources to meet max capacity vs. low utilization
of overall capacity during times of normal demand is no longer an issue.
Also IT providers have better purchase conditions than SME companies.
System Software -106% System software (database) and application software ongoing costs increase since there are continuous
payments made in a subscription model. These increases in ongoing costs can largely offset the upfront
investment savings but the positive cash flow implications are an added benefit.Application Software -95%
Operations
System Operations 55% The huge impact on operations is caused by the efficiency of the cloud computing operations model.
Virtualized environments, automated processes, and centralized resources enable high level of costs
savings. Talent pooling and SAP expertise availability enable more customers to be supported by less FTEs,
resulting in a net savings across customer implementations.
Application Operations 24%
Continuous
Improvement Projects
Continuous Business
Improvement
34%
When PMC is used, you just add another resource that you need. The simple expansion and scaling of SAP
instances, in the case of higher demand due to an increasing number of users or new functions, is based
on the ability to expand the capacity of cloud infrastructures.
The provisioning and management of SAP training and test systems can be simplified and accelerated using
cloning and recovery functions. Also the lead time for setting up new SAP systems decreases. According to
the fact that the service are coming from one service provider there are lower consulting rates and the
service provider knows the SAP landscape.
Continuous Technical
Improvement
90%
Rollouts 40%
Upgrade Projects
Application Upgrade 36%
System Upgrade 55%

10.  Executive Summary
 PMC Savings explained in detail
 Evaluation parameters, approach &
assumptions
Content
10

11. Customer Profile For The TCO Comparison
11
Key facts about the TCO comparison:
• Basis for the comparison is the a manufacturing company with
about $1.5B in revenue, based in the United States with a
production plant in Asia and sales offices round the world.
• The SAP software to be licensed includes core ERP, BW and CRM.
• The user community is about 1,500 named users, split into the
different license categories as shown in the chart to the right.
• All systems are run in the usual 3-stage-model with development,
quality assurance and production for each application (ERP, BW,
CRM).
• The comparison focuses on the TCO for a traditional in-house
operations model (on-premise) vs. the PMC approach:
• On-premise: Data center (Wintel or Unix, DB Oracle) on
premise, IT and application management in-house
• PMC: Data center, IT and applications operations out of a
managed private cloud, technology and application all SAP
(including HANA)
• SLAs as described on the right apply for both scenarios, on-
premise or PMC, in the same way
SLA for Production Systems
Incident & Problem Management
Application Support Office times USA
System Support 7*24h
Availability 99,70%
RTO (recovery time objective) 8h
RPO (recovery point objective) 1h
Dialog response time ERP 90% < 1 second
SAP Landscape
Named users (total) 1,500
SAP Licenses:
Professional / limited prof. / ESS
800 / 200 / 500
Storage used 18 TB
SAPS 80,000
System Landscape
SAP Systems (all in 3 stage mode, DEV – QA – PROD)
ERP fully used (not HR), 1,000 users, 600 active users per day
BW Reporting via Bex and HTTP, 500 users, 100 active per day
CRM Globally used, 300 users, 200 active per day
A Manufacturing Company Choosing Between On-Premise and PMC with HANA

12. SAP TCO Model Overview
The SAP TCO model covers the whole SAP lifecycle
12
Important components of the SAP TCO model:
The basis of this study is the SAP TCO model. This model covers the total cost of the entire
lifecycle of SAP software. The study covers CAPEX (investment cost) as well as OPEX
(operational cost) elements.
 Hardware/Software investment covers all costs to set up a technical environment to
run SAP on.
 Implementation covers the initial application customization and setup.
 Hardware/Software ongoing cost covers all HW/SW related cost, which occur
continuously over time. In the PMC model this is the continuous payments for licenses
In the case of on-premise, the maintenance payments for HW and SW.
 Operations covers the usual day-to-day work to keep things running. It includes job
management, system surveillance, etc.
 Continuous Improvement Projects cover all kind of changes, triggered by changing
needs of users or the business.
 Upgrade Projects cover all SAP triggered changes by new software releases but also
similar activities by database vendors, OS vendors, etc.
This study does not include end user operations, WAN or workplace-PC related cost.
The study is based on an installation lifecycle calculation of 5 years.
The model is detailed hierarchically by a total of 3 levels (on the right only levels 1 and 2 are
shown), each enabling a more detailed view on the subject.

13. Methodology & Assumptions
Scope and benchmark base
13
WHAT’S IN – WHAT’S OUT
• The SAP TCO model includes all elements necessary to run SAP in the
enterprise but excludes end user equipment and WAN network elements
to reach them.
• The study also excludes initial business process (re)design efforts when
implementing SAP for the first time. Those efforts are largely driven by the
status and demand of an enterprise but not by the hardware, software or
infrastructure used. However the cost for actually making the setup of
system and applications is covered.
• Using cloud or outsourcing will effect the management structure. New
roles for governance and a demand management are needed. On the
other hand the need for management of internal employees and all the
HR administration will decrease. So REALTECH considers this as cost
neutral.
• There is an additional saving’s potential triggered by HANA when
migrating the BW functionality back into ERP. In order to provide a fair
comparison, the study considers BW to be implemented and used for both
scenarios.
• SAP maintenance is assumed as the standard 22% for SAP Enterprise
Support.
• The comparison works for SAP landscapes which are around the size of
the profile on slide 11 (up to 2 times more users or one third of the users),
but not for SAP landscapes which are much bigger. SAPS or storage can
grow or shrink by even a factor of 3.5.
SAVINGS AS PERCENTAGES
• REALTECH shows savings as precise percentages (e.g. 22% savings on
implementing SAP) rather than as a range (15%-30%).
• The REALTECH TCO model enables calculation of the typical savings for the
specific defined profile, which is diluted by showing ranges. Of course, a
new SAP customer might end up with slightly different percentages, since
the real world implementation will not exactly match the prototyped
profile.
THE COMPARISON BASE
• PMC is compared against the typical scenario of systems in use today:
various Linux, Windows-based and Unix implementations. Most of them are
already using virtualization like AIX or VMware.
• Data for the comparison base comes from the REALTECH Benchmarkbase.
The Benchmarkbase holds real life usage, quality and cost data of more
than 4,200 SAP environments. It includes a broad variety of industries and
geographies. It generally reflects the current dissemination of SAP’s
products in use.
• The comparison group does not include any on-premise mainframe-based
installations. From a CAPEX point of view this would lead to tremendous
savings when switching from mainframe to cloud. This is a reasonable step
but rather rare. Therefore, the focus of this study is on mainstream effects,
not on special or uncommon scenarios.

14. Overview about Customers in the REALTECH Benchmark Base
Nearly all SAP Products, Industries and Sizes
59%
17%
6%
5%
3%
3% 3%
3% 1% 1%
SAP Products - Share
ERP
BI
HR (alone)
IS
PI (XI)
CRM
Portal
SCM / APO
SRM
Others
48%
18%
15%
9%
4%
6%
Industries - Share
Manufacturing
Services / IT
Finance
Utilities
Retail
Others
0%
5%
10%
15%
20%
25%
< 0.5 < 1 < 2 < 5 < 10 < 25 < 50 > 50
Revenue by Reference Companies
Revenue in billion €
14
REALTECH‘s database has got more than 4,200 systems. Here is a breakdown:

15. SAP HANACloud
SAP Mobile
SAP Solution Manager
Technologie
Driving Value With IT