Click Link to Jump to Section.Executive Summary. Despite making the code of S/4HANA 93% identical to ECC, SAP attorneys have deemed S/4 the “logical successor” to ECC instead of the “legal successor.” This means SAP ECC customers paying for support contracts with free software updates are unable to upgrade from ECC to S/4 without purchasing the software. Find out about the issues with HANA and S/4HANA pricing before you negotiate with SAP.IntroductionIn this article, we will review the implications for HANA pricing and S/4HANA pricing.

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If you are negotiating with SAP, neither SAP nor the SAP consulting firms will want you to read this article. They will say the information is not approved by SAP, that Brightwork is not an approved SAP analyst, that information must come from an SAP partner, anything to get you to not use the information in this article. However, one of the worst thing any customer can do is only rely upon information from SAP and a consulting partner when making a decision.Even listening to Gartner does little to improve accuracy as SAP pays Gartner what we estimate as around $150 million per year as we cover in the article.This article was written originally in March of 2017, however it was updated and is current as of September 2019. What is SAP’s Integrated Strategy for HANA and S/4HANA and How it Purges Oracle?Because of SAP’s confusing naming, it is still necessary to differentiate between S/4HANA and HANA. HANA is SAP’s first serious foray into databases.

S/4HANA, on the other hand, is the ERP system. S/4HANA only works with HANA, breaking with the previous tradition of SAP applications being open to different database vendors. HANA is not obligatory of any other SAP application other than S/4HANA, although SAP strongly leans on its customers, mostly through providing inaccurate information, to move to HANA for many other SAP applications.SAP has had a few other databases that they owned through the years, like Max DB, but these were very lightly sold. SAP purchased Sybase several years ago.

However it has not been able to sell many Sybase databases, and the Sybase acquisition has been a washout, with the Sybase product seen as quite dated. SAP doing very little to keep the Sybase database line up to date, and by trying to force HANA into historically Sybase accounts they damaged their relationships in the core Sybase financial sector and may of that customer switched to Microsoft SQL Server, which is based on Sybase. It is a feature of the controlled IT media, that the horrible outcome the Sybase acquisition has not essentially uncovered. We covered this topic in the article. A Major Change in StrategyIt is difficult to overemphasize what a change in strategy HANA is for SAP.

SAP used to be based around a system that, as with most applications vendors is open to a variety of different commercial databases (although not open source databases).SAP has very strongly based its strategy around HANA. The pricing for HANA is quite unusual and is important to understanding how to best purchase HANA. The HANA Based Strategy to Remove Oracle from AccountsSAP has an integrated strategy regarding HANA and S/4 HANA which is related to removing the Oracle database from accounts.

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Brightwork Research & Analysis receives no income from any vendor outside of competitive intelligence work. And we have no conflicts regarding Oracle or SAP and do not care if either win or lose business (see the explanation at the end of the article). But on its merits, SAP has put forward no reasonable technology reason for any of the other major database vendors to be excluded from supporting S/4HANA. That is, it is not that they have not put forward reasons, but upon inspection, none of these reasons check out. SAP’s Refusal to Certify Any DB but HANASAP has simply refused to certify any other database for use with S/4.

SAP has made many statements regarding HANA’s “unique” performance characteristics, I have carefully evaluated each of these statements and found them to be without merit. And Brightwork’s research into HANA in depth goes back to 2016.Secondly, SAP refuses to release transaction processing benchmarks (that due to HANA’s 100% column-oriented design, likely are not very good) as we cover in the article and they needed to create an entirely new benchmark under the false premise that the old benchmark did not reflect how companies “use” S/4HANA as we cover in the article. Meanwhile, SAP is losing in benchmarking tests to other database vendors and in reports from many accounts globally. In fact, there is a question as to whether HANA can outperform the far less expensive SQL Server as we cover in the article.However, through both its own and its many partners, SAP has a very effective sales force and the willing army of compliant consulting partners. These partners effectively to prevent this information from being widely known or repeated.The first thing to know, before understanding the technical details of HANA or its pricing is that the information provided by SAP and consulting companies is unreliable.

The only thing the SAP sales rep and various consulting resources are measured on is sales of either software or consulting hours. Consulting companies are not independent checks on SAP, they repeat whatever SAP says.

It is accepted that any lie that is necessary to gain that sales is appropriate. When we support companies in negotiations, we see the same lies told again and again. One of our previous clients even were lied to about why there was a price decrease. Understanding SAP’s Strategy with S/4HANA and HANA PricingUnderstanding SAP’s strategy with S/4 and HANA is critical to understanding how SAP prices these products.SAP’s strategy is to use its dominant ERP system to dictate the database that is used to run this ERP system. Customer Input Not RequiredSAP never asked its customers if they were interested in the very large trade-off of losing database portability by placing stored procedures. Furthermore, there is also nothing to stop SAP from removing those stored procedures and putting them back into the application layer, which is something we predict SAP will do in the future.

That is after all the development approach they followed to good effect since SAP began as a company.What SAP is doing, although it does not seem to realize it fully, is sacrificing S/4 adoption to build its database business. This strategy has been unsuccessful in moving many companies to S/4. Getting Real with the S/4HANA Implementation NumbersCurrently, we estimate far fewer than the claimed number of S/4 implementations live, and almost all of these are for a single module – S/4 Finance. We monitor and analyze the S/4HANA case studies as we cover in (This article is the introduction. The actual research is paywalled)SAP will not continue, as they have, to sacrifice S/4 adoption forever.

Something else SAP has been doing is sacrificing revenues on S/4 to sell HANA. This topic gets a bit convoluted because there is a strong argument that S/4 should be free to current customers who are current on their support. Many customers are paying 22% or more on support contracts and were supposed to receive free updates for all the applications they have purchased. This certainly includes ECC. How SAP Changed the Rules and Put Itself in the Position to Charge Existing Customers for an UpgradeSAP changed the game, and declared that S/4 was a “logical successor” to ECC, but not a “legal successor.”SAP’s attorneys had to twist themselves into a pretzel to come up with the phrase that S/4HANA is the “logical successor” but not the “legal successor” to ECC.

SAP covered up the deception by stating that S/4HANA was so different from ECC that it was a new product.But an analysis by Paul Coetser or through a related party found that S/4HANA was somewhere around 93% code identical to ECC. Why is S/4HANA (According to SAP) Not the Legal Successor to ECC?The real reason S/4HANA is not the legal successor to ECC?SAP wanted to charge for S/4HANA, hence giving them the ability to double-bill its customers. We covered this in the article.This is just another change in the rules which violated the support agreement that states if the customer keeps up with their maintenance, they are owed all upgrades for the products you purchased.This phrasing meant that ECC was from a support perspective sunsetted. With support extending to 2025 and S/4 was positioned as entirely new applications that existing customers would have to pay for.All of this translates into the price for SAP increasing for customers. However, will your friendly neighborhood SAP consulting company explain this to their clients?Of course not.

If you ask a nice SAP consulting firm about whether these are in fact price increases they will dance around the topic. Is S/4HANA a Good Value for Existing ECC Customers They Get it For Free?How many companies that purchased ECC five years ago thought that after five years of paying more than 22% in annual support that they would also have to repurchase their ERP license, or stay on the last version of ECC?. Given this background, the idea that SAP is offering, as it has, promotions on S/4 for “free” is misleading because it makes little sense for current support customers to pay anything for S/4. After all, customers did not ask SAP to introduce S/4. SAP made this decision based on their internal incentives which branch into an overall strategy to remove Oracle from their customers.Nevertheless, SAP has repeatedly offered S/4 for “free.” but has refused to discount HANA (except for the runtime license, which is not a real license).

Therefore, SAP can “recoup” the costs of “free” S/4, by getting customers to pay for and get onto HANA.Getting customers on HANA is a huge win for SAP because as will be described in this paper very few companies will be able to run for very long on the amount of HANA license that they initially purchase. And this leads directly into the question of database sizing and its importance in HANA pricing, which we will get into now. The Importance of Database Sizing in HANA PricingOf primary importance in HANA pricing is that before any pricing numbers begin to be applied, database sizing must be performed. This is because HANA is sold per GB. This is quite an unusual pricing for a database.What this means is the HANA pricing is based on the size or footprint of the SAP database. And SAP has released information that will cause customers to substantially undersize the footprint so that SAP can get their foot in the door with HANA. Customers routinely have to go back to SAP and request more GB, which blows their budget.Without an accurate footprint estimate, HANA cannot be priced correctly.

However, all the sources of information on sizing the footprint either come from SAP or come from a SAP partner. Companies that are partners with SAP lose control over the information that they provide to customers. They must not provide information that contradicts the SAP information (read our ). This, of course, includes companies that are the largest advisors in the space (your Deloittes, Accenture, etc.) to the smallest.How do we know this?SAP partners contact me and tell me stories of how SAP threatens to take their partnership away if they don’t follow the SAP rules. No SAP partner can provide accurate information on SAP pricing, SAP HANA pricing or any other SAP pricing for that matter.Therefore, companies are boxed out of accessing accurate information on this topic. Brightwork Research and Analysis is one of the few entities which will publish or provide consulting on this topic. Unsurprisingly, we have no partnership with SAP, and unlike someone like Gartner or Forrester, we take no money from SAP (or any other vendor for anything else than competitive intelligence).Getting into the Customer’s Business Regarding ArchivingIn most cases when a database is sold, the database vendor sees the sizing as more of a customer determined item.

Yet this is not the case with HANA.Companies have database administration groups that have their own views as to how frequently and how extensively they want to perform archiving. How much they want to rely upon compression, etc. However, because of SAP’s pricing of HANA, SAP is now front and center on the topic of the database size, and has become quite prescriptive of how they think database administration departments should be managing their databases.After HANA is Sold: SAP’s Next Steps for Follow on SalesFurthermore, it is now clear that HANA is just a first step for SAP sales in penetrating the database layer. The first salvo was to lead with HANA. The argument being that no other database can keep up with the performance provided by HANA.

SAP not only intends to get the application database business from its customers which its applications reside upon but also is positioning other database products, such as those it acquired from Sybase in its accounts as well. Sybase has been unsuccessful against Oracle, but this time Sybase’s products are commingled with SAP’s sales force and positioning. All SAP Applications Work Better with HANA?SAP’s marketing positioning is that these databases work much better with HANA than with any other database. So it is a two-step process. The first step is convincing clients to use HANA. SAP is doing this with a combination of selling the purported performance benefits of HANA, along with blocking all other vendors from applications like S/4 so that they are the monopoly database provider for their ERP system. The second step is marketing the compatibility aspects of HANA with all other database products.

That is HANA is simply the nose of the camel into the tent. There is an ancient Arabic proverb about what happens after you let the nose of a camel into the tent. At first, it may seem innocuous, but bad things follow if you don’t put a stop to it. Bedouin know you do not allow the camel’s head into the tent. If you let it in, pretty soon your tent is lying on its side, and your belongings are strewn across the desert.SAP sales reps are excellent at getting the nose into the tent. The nose is brought in normally through false statements. Curiously, very few SAP customers hold SAP accountable for things they said that turned out to be false and that the contracts are based upon these false pretenses.

I am repeatedly told by procurement departments that they have no choice because SAP has them “over a barrel.”SAP consulting companies are also intent on telling the customer to never hold SAP accountable, and that lying is not lying. Of course, the SAP consulting companies have far more allegiance to SAP than to their “clients.” Archiving “Down” HANA’s Footprint?The chart that SAP likes to show is with almost all data archived on to a separate database. SAP is pushing customers to use Sybase IQ to archive old data from ERP. Financial Bias DisclosureNeither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed. Search Our HANA and S/4HANA Pricing and Costs Content ReferencesI cover how to interpret risk for IT projects in the following book.https://www.sap.com/products/hana.html.https://upperedge.com/sap/sap-announces-4q-revenue-shortfall-is-it-time-to-discount-hana/https://www.snowsoftware.com/int/blog/2016/09/20/use-s4hana-get-rid-sap-shelfware-pt-1#.WBzBfYXJ-Y.

Better Managing Software RiskThe software implementation is risky business and success is not a certainty. But you can reduce risk with the strategies in this book. Undertaking software selection and implementation without approximating the project’s risk is a poor way to make decisions about either projects or software. But that’s the way many companies do business, even though 50 percent of IT implementations are deemed failures.

Finding What Works and What Doesn’tIn this book, you will review the strategies commonly used by most companies for mitigating software project risk–and learn why these plans don’t work–and then acquire practical and realistic strategies that will help you to maximize success on your software implementation. ChaptersChapter 1: IntroductionChapter 2: Enterprise Software Risk ManagementChapter 3: The Basics of Enterprise Software Risk ManagementChapter 4: Understanding the Enterprise Software MarketChapter 5: Software Sell-ability versus ImplementabilityChapter 6: Selecting the Right IT ConsultantChapter 7: How to Use the Reports of Analysts Like GartnerChapter 8: How to Interpret Vendor-Provided Information to Reduce Project RiskChapter 9: Evaluating Implementation PreparednessChapter 10: Using TCO for Decision MakingChapter 11: The Software Decisions’ Risk Component Model.