SAP Sees COVID-19, Hard-To-Control Public Cloud Costs Driving More On-Premises Engagements

“The costs are so much harder to control [in public cloud],” said SAP Executive Vice President and Global Head of Enterprise Cloud Services Peter Pluim. “You blink, and you pay something to a hyperscaler. You move data for two seconds or you turn a bit on a hard disk with a hyperscaler, and you pay for it. If you have a very steady, even usage, [on-premises is a good option].”

The COVID-19 pandemic—which is driving more focus on data sovereignty—along with hard-to-control public cloud costs are driving an increase in on-premises SAP ERP rollouts, said SAP Executive Vice President and Global Head of Enterprise Cloud Services Peter Pluim.

“Data sovereignty and regulatory requirements are becoming ever more stringent,” said Pluim of the increased appetite for SAP on-premises deployments. “I think COVID-19 will accelerate that.”

Pluim also sees increasing nationalistic trends and trade tensions driving more on-premises engagements given that the dominant hyperscaler public cloud providers are all U.S.-based.

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The other trend that is driving more customers to move to an on-premises SAP private cloud deployment is unpredictable cloud costs in a hyperscaler public cloud model, said Pluim.

“The costs are so much harder to control [in public cloud],” he said. “You blink, and you pay something to a hyperscaler. You move data for two seconds or you turn a bit on a hard disk with a hyperscaler, and you pay for it. If you have a very steady, even usage, [on-premises is a good option].”

Pluim, who took helm of the cloud business at SAP 15 months ago, said he saw the public cloud conundrum first-hand when he was heading up infrastructure and data management services for $13.6 billion systems integration behemoth Atos. In one case, a customer moving to the public cloud received a 6,500-page bill. “They had no idea what was in there,” he said.

The beauty of the on-premises model—like the new SAP HANA Enterprise Cloud, customer edition on Hewlett Packard Enterprise’s GreenLake platform—is customers get the cloud subscription model with data sovereignty and cost controls in their own data center without the exorbitant cost that comes with the traditional capital-expenditure-based IT application deployment, said Pluim.

In fact, the reason SAP teamed with HPE on the launch of the new customer edition of SAP HANA Enterprise Cloud on HPE GreenLake is a direct response to customers that want a fully managed SAP private cloud in their own data centers.

HPE partners, for their part, said they see the difficult-to-control public cloud costs along with data sovereignty issues driving more customers to the HPE GreenLake cloud service.

“A lot of customers have seen ridiculous public cloud bills that they can’t make heads or tails of, and they are looking for a model where the costs are more predictable,” said Erik Krucker, CTO of Comport Consulting, an HPE Platinum partner that is No. 314 on the 2020 CRN Solution Provider 500. “Some of the fees for customers to get their data to egress out of a public cloud are two to three times the cost of the operation of the gear. That is not palatable for any organization.”

HPE GreenLake is thriving because of its billing predictability and its ability to scale quickly, said Krucker. He said that is especially appealing with a broad-based, complex enterprisewide application like SAP.

“With a big complex application stack, customers want to get away from managing every piece of that stack, dealing with everything from security to compliance to cost and the complexity of just running the application,” he said. “Customers are looking to simplify that. For HPE to put together an offering like this that offloads all those pain points is huge.”

Comport, for its part, is seeing increased momentum for its own Comport Secure fully managed cloud service offerings in the wake of the COVID-19 pandemic.

“Customers don’t have the up-front cash or capital to spend on infrastructure and are looking for everything as a service,” said Krucker. “Customers want to focus on how they can solve business problems and become more agile. They want a fully managed service from us with an SLA. With Comport Secure, it just works. They don’t have to worry about the nuts and bolts of IT.”

The customer move to a fully managed SAP Opex cloud model has also become even more attractive in wake of the COVID-19 pandemic, said Pluim.

“Before [COVID-19], we said cash was king. Cash has become God and if you can move away from a Capex model where you need to pay HPE $4 million for your Superdomes but you can now just pay it on a monthly basis over five years as your business goes up and down, that is the key thing,” he said.

Given the number of customers running SAP that need to refresh their HPE hardware over the next three years, there is an “enormous” opportunity for the SAP HANA Enterprise Cloud customer edition on HPE GreenLake, said Pluim.

“Customers have enormous amounts of HPE iron with more than 20,000 SAP customers running on HPE,” he said. “They are up for refresh. They have to move to S/4 within a certain amount of time. They are currently in a Capex-driven model. They might have huge data center investments that they can’t get out of. They have application entitlements that require the SAP landscape to be closed to the rest of the applications. There is no hyperscaler there. They have regulatory requirements—data sovereignty requirements. For any of those reasons, they want to move to an Opex model. They want to move to best-in-class and they want a SaaS-like private managed cloud.”

Key to the HPE GreenLake offering is the ability for the SAP-HPE duo to provide “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,” he said. “That is the unique value we are providing in an Opex model.”

That Opex model provides customers with a predictable monthly price backed up by SAP and HPE, said Pluim. “We guarantee the price,” he said. “We also have leverage. We have a lot of customers so we can get one even price. But if you try to manage this yourself, even the bill you get from a hyperscaler is incomprehensible.”