SAP Sees ‘Broad-Based’ Midmarket Opportunity For SAP HPE GreenLake Cloud Service

SAP Senior VIce President Clay Caldwell expects the new customer edition of SAP HANA Enterprise Cloud on Hewlett Packard Enterprise’s GreenLake cloud service to appeal to the “majority” of the SAP installed base. ”There is still a large segment of our customer population that would prefer to be in their own data center,” he said.

When SAP conducted a survey to see just how strong the appetite was for an on-premises private cloud version of SAP Enterprise Cloud and related SAP S/4HANA licenses, it was surprised at the number of customers that wanted to run the complex application in their own data center.

“The feedback was far greater across all geographies and across multiple industries than what we expected,” said Clay Caldwell (pictured), senior vice president and global general manager, HANA Enterprise Cloud at SAP, in an interview with CRN. “It wasn’t simply around the opportunity to offer a data sovereignty or compliance offering. It was more broad-based. There is still a large segment of our customer population that would prefer to be in their own data center.”

That’s the reason SAP is teaming with Hewlett Packard Enterprise on the launch of the new customer edition of SAP HANA Enterprise Cloud on the HPE GreenLake on-premises cloud service.

[RELATED: HPE’s Keith White: SAP HPE GreenLake Deal Is A ‘Massive Opportunity’ For Partners]

SAP said the new offering is a direct response to customers who want the flexibility and service of a managed private cloud but want to keep their systems in their own data centers. Customers also have the option of using a colocation facility or running it at the edge.

Caldwell expects the new SAP HPE GreenLake service to appeal to the “majority” of the SAP customer population. “The interest has been fantastic,” he said.

HPE will supply, install and manage the infrastructure, while SAP will provide application management services and expertise on integration from the operating system to the database to the cloud.

One reason SAP teamed with HPE is to offer a broad-based midmarket T-shirt-size offering that goes well beyond the large, multimillion-dollar SAP engagements. In fact, there is no steep minimum contractual commitment for the SAP HPE GreenLake service.

“The great thing about the GreenLake offering is we have T-shirt sizes—small, medium and large,” said SAP Executive Vice President and Global Head of Enterprise Cloud Services Peter Pluim. “You can grow along with it. It will basically be around the same pricing that we have today for customers in our own data center or in a hyperscaler.”

HPE has created a “component-based pricing model” for the SAP HPE GreenLake cloud service so customers can pay as they grow in the SAP ERP application environment, said Sunil Patel, head of the global SAP and Deloitte GTM (Go To Market), Alliance and Ecosystem Sales for HPE.

The SAP HPE GreenLake offering comes just two months after HPE launched T-shirt size offerings of GreenLake as part of a move to a group of 17 “building block” offerings for small, medium and large businesses.

The SAP HPE GreenLake cloud service removes a “huge barrier” for customers contemplating modernizing their SAP environments, said Patel.

“We did an analysis of our HPE installed base running SAP on legacy systems, and I will tell you there are a very high percentage of those that are due to modernize,” he said.

The on-premises private cloud SAP sales offensive is the brainchild of Pluim, who joined the German software maker 15 months ago after heading up infrastructure and data management services for $13.6 billion systems integration behemoth Atos.

Under Pluim’s leadership, SAP has nearly doubled the amount of SAP cloud customers. “The demand for customers to move to an Opex model and also just get rid of the whole hassle so they can focus on becoming agile and resilient and not have to worry about the IT side of it is enormous,” he said.

SAP now has more than 1,200 customers operating its ERP application in an SAP managed private cloud model, said Pluim. Seventy percent of those customers run the ERP application in one of SAP’s 15 data centers around the world.

SAP expects to increase the number of customers running SAP in a private cloud by at least 10 percent over the next several years in the wake of the new HPE GreenLake service.

SAP will begin aggressively selling the HPE GreenLake cloud service in the fourth quarter with delivery expected in the first quarter next year.

“The unique value is we deliver an almost SaaS-like experience completely tailored to the customer’s need,” said Pluim. “We basically create our own little hyperscaler environment for the customers in this data center with all of the expertise of SAP on top. That is the unique value we are providing in an Opex model.”

The SAP HPE GreenLake offer ultimately lets customers focus on their business rather than the nuts and bolts of their IT operations, said Pluim.

“What is very important here is there are so many moving parts. This allows customers to focus on what they really need to focus on—which is what they actually do with all of this IT stuff instead of worrying about the IT stuff themselves,” said Pluim.

One of the biggest drivers for the on-premises deployment is the astronomical investment in applications that run in a complex enterprise environment. Most enterprise customers have anywhere from 3,000 to 10,000 enterprise applications.

“I worked with a customer who has invested and calculated over 30 years nearly $1 billion in software development for those applications,” said Pluim. Those applications have latency requirements, firewall connectivity, use protocols that are half-dead. All in all, there is no business case for those customers to say, ‘I am going to kill all that software development and I am going to go micro-services and create everything from scratch.’ There is no case. That is billions in software costs.”

In some cases, enterprise customers running applications on a mainframe are dealing with latency requirements as they grapple with the move to the cloud.

“If you have a mainframe system and you have invested hundreds of millions in those environments and systems and 60 percent of your transactions run through that mainframe—which has a latency requirement of up to 10 milliseconds, maybe 12 milliseconds if you pushed it—if you then put your SAP system in the cloud 500 miles away and it needs to talk to the mainframe system it will break,” said Pluim. “So what do you do? You can’t move the mountain to Mohammed, so you move Mohammed to the mountain.”

The HPE GreenLake deal will open up opportunities for both SAP and HPE partners, said Pluim.

“What this provides for customers is peace of mind that their SAP system will run so they can then engage with partners and the larger ecosystem to start focusing on the S/4 migration, on the intelligent enterprise, on linking all of their applications out there into an opex model—and modernize ultimately not for the sake of driving IT applications and modernizing but to actually become agile and resilient,” said Pluim.

The SAP HPE GreenLake combination provides a powerful new on-premises data center option for customers looking to migrate to the SAP S/4 cloud platform, said Martin Stenzig, chief technology officer of Rizing, one of the top SAP partners in the country.

“What you have here is the top-tier hardware maker combined with the people who are developing the software,” said Stenzig. “There is nobody better at this than SAP. This takes all the worries away for CIOs who now don’t have to maintain the on- premises system themselves. This gives customers the benefit of running the SAP cloud in their own data center.”

Rizing—which provides a high-level consulting playbook for SAP customers looking to make the move to the SAP S/4HANA cloud platform—expects to grow at a double-digit clip in the next several years as it assists customers to ensure successful S/4 migrations within budget and project management timelines.

“What we are seeing is a wave of [SAP] customers migrating to S/4,” he said. “So far only 15 [percent] to 20 percent of the installed base has moved to S/4. That leaves an untapped market of 80 [percent] to 85 percent of the SAP customer base around the globe that in the next seven to 10 years has to move to S/4. All of these customers will look at replatforming SAP to something new. A good chunk of that replatforming can and will go to companies like HPE.”

One reason customers are looking closely at making the move to S/4 is the additional maintenance fees they will face starting in 2028, said Stenzig. That is sparking a “dramatic increase” in customer discussions around infrastructure choices for SAP, he said.

“Twenty years ago when you put in your SAP system, you had to buy a big server and database,” he said. “Now companies have the opportunity to look at the infrastructure side of the business and decide whether they want to reduce their IT footprint and outsource the responsibility for the application. This is an opportunity for customers to de-risk their installation because there are other companies much better at maintaining infrastructure and security than they could on their own.”

Stenzig praised SAP as a strong partner-centric organization. “We are a 100 percent SAP partner,” he said. “We love them. We believe in their technology, their long-term strategy and their growth.”

The SAP and HPE GreenLake combination sets a new standard for delivering the complex ERP application in an on-premises pay- as-you-go model, said Nalit Patel, CEO of All Solutions, a Livingston, N.J-based solution provider.

“What SAP and HPE are doing is taking charge and delivering an end-to-end solution,” he said. “SAP HANA is not something any Tom, Dick or Harry can configure. This isn’t Microsoft SQL Server. It’s a very robust complex system. This partnership is allowing customers to obtain SAP as a cloud service smoothly, efficiently and cost-effectively.”

SAP’s decision to team with HPE GreenLake on the on-premises cloud offer is a testament to HPE’s hardware infrastructure superiority, said Patel.

“There’s a reason SAP chose HPE GreenLake,” he said. “They see the value in the service that HPE is providing from an overall infrastructure perspective. This is a big win for HPE with the potential for HPE to capture hundreds of millions of dollars in enterprise engagements. This solidifies HPE’s position within enterprises as the backbone for SAP.”

The HPE GreenLake on-premises offer is not an exclusive deal, said Pluim.

SAP decided to start with HPE because of the large SAP HPE data center footprint it has itself, said Pluim. “It was never intended and never will be an exclusive partnership because at SAP we offer choice,” he said.

Pluim even hinted that there may be more deals coming down the road. “Right now we just want to get this to market and the quickest way for us to do it is with HPE GreenLake,” he said.