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SAP cloud migration a long haul for implementation partners – TechTarget

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The CEO of an ERP consultancy and SAP partner explains the benefits, challenges and tradeoffs of moving to SaaS, and why the on-demand subscription model is a double-edged sword.
SAP cloud migration has challenged SAP and its tens of thousands of customers. The ERP market leader, like all vendors with long histories in on-premises ERP, has struggled to move its product line to the cloud and entice customers to move with it.
Today it has a large portfolio of cloud applications and deployment options that are both hugely attractive and scary to companies entrenched in old, familiar ways of doing business.
Make no mistake. SAP now gets a third of its revenue from the cloud, and growth is steady every quarter. The cloud is gradually replacing the on-premises model.
But undeniable progress at the macro level means little to companies that are unsure whether to move their complex business processes to unfamiliar territory. They typically need an SAP implementation partner to hold their hands through the entire journey.
Partners have always played an important role in getting SAP products sold and implemented, but this year they share center stage with SAP itself, thanks in large part to Rise with SAP. Introduced in January, it’s the latest SAP cloud migration service, one that explicitly relies on the SAP partner network to turn the cloud’s promise into reality.
In this podcast, Hanif Sarangi, president and CEO of Phoenix Business Consulting, an SAP partner, shares his experiences with SAP cloud migration. The company is based in Sarasota, Fla. and provides implementation, training, support and system review for SAP ERP products.
Despite years of glitzy marketing from SAP, it’s clear that S/4HANA Cloud, the multi-tenant SaaS version of S/4HANA, is not as full-featured as the on-premises version.
What do customers give up by moving from an older on-premises SAP ERP — typically, ECC — to S/4HANA Cloud?
“With on-premise versions of SAP software, they’re very customizable. I can do virtually anything with an on-premise system,” Sarangi said. “Now my cloud customers have to be willing to accept the best practice scenarios that are available in the system. If they’re going from an on-premise to a cloud system, they’re going to lose some functionality sometimes.”
SaaS ERP also comes with quarterly patches that can clash with tailored systems. “If your system is too customized, the testing involved in making that system work is going to be extensive,” he said.
SAP is fond of saying that the several flavors of S/4HANA have the same code base, which can make it sound like the differences are minimal. But it doesn’t mean they all work the same. It depends on which features have been activated, according to Sarangi. “On-premise versions of S/4HANA do have more capability,” he said.
He recounted one small business’s decision to forego S/4HANA Cloud because of the specialized needs of its niche, which it handled with a custom-developed ERP built up over 25 years.
“I tried to sell them the standard SaaS functionality, because they’re of the size where SaaS makes sense,” Sarangi said. But after he looked closely at the company’s business processes, it became clear that they couldn’t be fit into SaaS ERP.
“They ended up having to buy an on-premise system and have it customized,” he said — the on-premises S/4HANA hosted on Amazon Web Services.
In contrast, an insurance customer illustrates the time and cost savings of multi-tenant SaaS. Sarangi said that in the past, implementing on-premises ERP for an insurance company would have cost at least $10-15 million and taken a year or two. But this customer is willing to accept the standard business processes of SaaS ERP and is paying $1-2 million to implement it in six months.
“It’s mind-blowing for me, having worked in the business for 30 years and seeing the pricing of implementation,” Sarangi said. “They have millions of transactions flowing through the system, they have complicated business processes, lock boxes and integration — all of that — and I’m doing it for somewhere between a million and two million dollars, which is amazing.” 
Sarangi was forthcoming about the financial challenges of moving to the cloud with SAP and its customers.
The main issue is what’s sometimes called the SaaS revenue trough, in which revenue from the typically upfront licenses for on-premises products declines faster than SaaS subscription revenue can replace it. The financial strain on SAP and similarly positioned ERP vendors extends to their implementation partners.
Sarangi’s SaaS difficulties began when he continued responding to requests for proposals with on-premises ERP just as SaaS ERP was taking off.
“The SaaS companies were coming in and doing it at a fraction of my cost,” he said. “Even though I was demoing well, they loved the product and we were meeting all of the requirements, just on a purely cost factor, we were losing.”
Phoenix eventually made selling SaaS the priority, but the numbers remained challenging. Before, Sarangi might put 50 people on site for two years and bill for $20 million. “Now I’m selling a $200,000 project … but my sales costs haven’t come down,” he said. “What I have now is people working at home working on multiple SaaS projects at the same time.”
And now it’s become a price war.
Phoenix revenue was down in the past two years while costs have gone up because more staff is needed for each of SAP’s many cloud products, according to Sarangi. He is banking on rising SaaS subscription revenue eventually offsetting the loss.
Also discussed in the podcast:
 To hear it, click on the podcast link above.
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Google's SAP on GCP investments may pay off – TechTarget

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Google doesn’t want its cloud platform to be considered the third-best public cloud hyperscaler for SAP S/4HANA workloads.
The multinational tech company in Mountain View, Calif., is making a clear push to market its Google Cloud Platform (GCP), a suite of cloud computing services, as the preferred destination for SAP systems. One of Google’s most significant moves is its considerable investment in data centers that are dedicated to running SAP ERP systems and other SAP applications on GCP, said Snehanshu Shah, managing director of SAP partnerships at Google.
The data centers are located in Frankfurt, Germany, not far from SAP headquarters in Walldorf, and provide three specific functions for SAP on GCP, according to Shah. They are as follows:
“These data centers are all built by Google, they’re all exactly the same, the entire stack is completely vertically integrated,” Shah said. “There’s an enormous amount of security that goes into this and we want to protect customer data, so everything is encrypted in flight. The SAP workloads are in our data centers because we built our own virtual machines to control all of this infrastructure.”
SAP customers want two basic but essential characteristics in their public cloud environment, Shah explained: They need to make sure that their mission-critical systems don’t go down, and they need their systems to be highly scalable.
One thing that has changed dramatically in the past year due to the COVID-19 pandemic is the willingness of companies to put mission-critical systems in the public cloud, Shah said.
“For SAP customers, there’s a massive move to public cloud between all the hyperscalers, so you’re no longer the first, you’re the thousandth,” he said.
He believes interest is skyrocketing for a few reasons including resiliency and security.
“Cost and business continuity is one thing that we’re seeing with COVID, the other is security,” he said. “The amount of security resources that any public cloud has dwarfs anything that even a large Fortune 100 company can have, and that’s critical for a lot of SAP customers because at the end of the day its financial data and you do not want anybody tapping into that.”
Rodan + Fields, a skin care company in San Francisco, is one SAP customer that has taken advantage of GCP’s single instance public cloud capabilities.
Rodan + Fields sells its products directly to consumers via its website and through a network of 300,000 consultants. The company has an SAP-based environment that includes SAP ECC and SAP Hybris, according to Steve Dee, Global CIO and CTO at Rodan + Fields. The company initially hosted its SAP systems on a private cloud network but decided to move to GCP two years ago when the private cloud couldn’t handle increasing business demands.
The business has huge spikes at certain times of the year, such as at the end of each month when consultants tend to increase their sales activities, and Dee said they needed to have a public cloud environment that provided stability, security and scalability.
“We rarely go on sale, and when we do, it generates a huge amount of demand,” Dee said. “For example, on Memorial Day we did 10 to 15 times the amount that we’d do on a normal day. So, the ability for us to scale in those spikes is one of the top reasons for being on Google Cloud.”
Rodan + Fields is running its e-commerce sites on SAP Hybris and is using SAP ECC for its back-end business systems but is planning an S/4HANA migration in 2021, Dee said. It will also make the ERP migration easier, as it takes away the need to think about all the infrastructure and application management issues, he said.
“That’s one benefit of the cloud; it takes managing infrastructure from the buy, build out, wire, all your heating, cooling needs — you don’t have to worry about managing a data center, you just have to worry about the functionality,” he said. “As we think about next-generation technologies like S/4HANA, the faster you can get there the better, and it gives you options around machine learning and more automation.”
SAP on GCP may get a leg up on the other cloud hyperscalers because several ex-SAP executives work at Google, said Jon Reed, analyst and co-founder of Diginomica Ltd., an enterprise computing news and analysis site. That roster includes Shah, who spent 11 years at SAP, as well as Rob Enslin, president of Google Cloud sales, who was formerly the president of SAP cloud business group.
“Google Cloud is something of a dark horse [as a public cloud hyperscaler] because of all the SAP cross-pollination within Google Cloud,” Reed said. “There are pros and cons to each different cloud environment, and that’s part of what customers will look at going forward, so Google having so many SAP engineers under the hood, in theory, would provide them with some valuable capabilities.”
Google’s ex-SAP contingent can be a critical difference as SAP wants its customers to see the public cloud as a place to get the most out of S/4HANA’s modern ERP capabilities, he said.
“One thing that SAP has been hammering away about lately is this idea that the hyperscalers can provide the same level of experience and access to innovation, rather than just throwing up your ERP system into the cloud and just letting it sit there,” Reed said.
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Cyclone Computer wins $73.3M of deals as education ministry project costs grow – Reseller News

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Project costs are rising on major ICT initiatives at the Ministry of Education.
The Ministry of Education, in Wellington.
Cyclone Computer led the contracts list at the Ministry of Education in 2021, sealing a renewed $49.8 million device and services deal.
In addition, the reseller scored a $23.5 million finance deal through subsidiary Cyclone Finance.
The device and services deal on its own eclipsed contracts awarded to large construction companies building schools and other facilities nationwide. Extending the decades-long relationship will see Cyclone to continue to supply customised devices to the education sector and a host of associated services.
Cyclone is known to resell HP, Lenovo, Google and Microsoft devices and software among others as well as Aruba wi-fi systems.
The ministry told Reseller News the company was the service provider of the TELA (digital devices for principals and teachers) scheme and also provided end-to-end services including supplier and stock management, service desk, warranty, indemnity repairs and financing. 
During the last twelve months Cyclone has changed the financing arrangement for the TELA scheme from TRL Leasing to Cyclone Finance reducing costs, the ministry said. 
Cyclone also provided a large number of education-ready devices under the all of government IT hardware agreement to support learning from home as part of the ministry’s COVID-19 response.
Also at the ministry, the bills for a couple of large ICT projects have grown significantly.
One project, called the education resourcing system (ERS), began life with a budget of $17.4 million but has now cost or is estimated to cost $63.9 million. 
The ERS will manage approximately $8.4 billion of funding for schools and early learning services each year, replacing a complex thirty-year-old system and around 50 associated systems and data sources.
The ministry said the original estimates for the cost of delivery in 2015 underestimated the scale and complexity of changes to associated systems.
“After establishing the core platform and taking into account policy changes since that estimate was prepared, the remainder of the work was re-estimated,” Scott Evans, Hautū (leader) infrastructure and digital said.
“Subsequently, additional funding was sought. The programme has now been allocated funding sufficient to complete the delivery of a fit-for-purpose solution.
“This programme has not overrun and is forecast to remain within budget.”
The ERS was being implemented through multiple releases aligned to ministry funding cycles and enabling new government policy initiatives.
“Initial elements have been operating successfully since October 2018, with the new system enabling rapid COVID-19 related funding to the sector in 2020 and 2021,” Evans said.
Adoption of the system is above 96 per cent for playgroups while the initial functionality for schools has an adoption rate of more than 99 per cent.
The ERS programme was on schedule for the next three major releases from June 2022 to support the 2023 school year, Evans said. The next release date, for early learning services, is October 2023.

The ministry itself is the systems integrator on the ERS project, which is is primarily based on Microsoft .NET and Azure as well as Oracle Intelligent Adviser. The work is being performed by a mix of permanent and contracted staff, plus a small selection of specialist vendors.
The ministry is also replacing its legacy payroll system, which was introduced in the early 1990s. Expected to go live in the third quarter of 2022, this was budgeted at $5.8 million but will now cost, or is estimated to cost, $7.4 million.
“The expected cost is higher than originally budgeted due to an increase in scope and slightly longer duration to ensure appropriate change readiness and an increase in post go live support,” Evans said.
The replacement payroll system is a module of the SAP Success Factors suite of people products used by the ministry. SAP is the primary vendor and is also providing implementation services supplemented with external contractors.
Another programme will implement Te Rito, a web-based national information repository which connects ākonga and learner information across kura, schools, ngā kohanga reo and early learning services. According to a Parliamentary disclosure, Te Rito was budgeted at $4.5 million but would now cost or was estimated to cost $18.5 million.
However, Evans told Reseller News the project was not over budget and the information filed to Parliament was being updated.
“We have been working closely with kura, schools and early learning services across Aotearoa to prepare them to connect to Te Rito,” he said. “Some have started getting ready, and some are now connected and using Te Rito.”
Te Rito is an online, cloud-based system supplied by Canada-based CoreFour and uses a platform from Massachusetts based education application specialist Edsby.
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SuccessFactors Employee Central extensibility allows 'customization' – TechTarget

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