Do You Suffer from a SAP S/4 Cloud Complex?

When it comes to cloud adoption, there is something of a prevailing wind blowing towards the hyperscalers. As one public cloud forecast illustrates, by 2026, 75% of organizations will adopt a digital transformation model predicated on cloud as the fundamental underlying platform, with much of this currently dominated by the big public cloud providers. The question is, will this last? While the COVID-19 pandemic had a lot to do with the acceleration in public cloud adoption, today there are new pressures on enterprises that are re-shaping cloud strategy in favor of the hybrid approach.

According to Olivier Frank, General Manager Data Solutions EMEA at HPE, the picture is becoming more complex. Many of those businesses that rushed to adopt public cloud from hyperscalers are now having to face up to the fact that mission critical apps, such as ERP, are better served through on-prem or co-location providers operating as-a-service platform models. Times have changed and this is being reflected in how organizations are now reevaluating IT infrastructure.

Data sovereignty, security, compliance, visibility and cost control are some of the key reasons why maturing cloud users are repatriating mission critical workloads to on-prem or colocation data centers, for example. As one survey in January found, nearly half of IT decision makers are looking at repatriating applications to on-prem. It’s a strategy shift, recognizing that public cloud is just one cloud option, not the definitive cloud option.

This becomes more pronounced when looking at SAP’s S/4HANA ERP application.  As customers look to migrate to SAP S/4HANA (with the 2027 deadline looming) there is a lot of complexity around how best to structure change. On the one hand customers like the scalability and ease of use of hyperscalers, but they also want the benefits of on-prem, such as greater control over data compliance and data privacy, as well as having predictability of costs. As such, many customers encounter complex billing and unplanned connectivity charges with hyperscalers.

According to one study last year, these are also important factors for the 95% of SAP customers that are planning to migrate to SAP S/4HANA. However, only 50% of these are planning to do so in the next three years, which begs the question, why? The reality, according to Frank, is that a vast majority of enterprises have not migrated to SAP S/4HANA, primarily because of the heavy lifting involved.

Finding ROI

Frank says that he is seeing customers move to the cloud “in a lift and shift way”, but he is also seeing some repatriation, with customers moving workloads away from hyperscalers to on-prem data centers. There is, he adds, a growing realization among the larger enterprises that while cloud may be the key underlying transformation technology (as Gartner’s numbers suggest), a hybrid multi-cloud approach in place of a hyperscaler one is a sounder tactic, at least when it comes to applications that are critical to the enterprise.

“If you move something as critical as SAP to the cloud, you still need to think about high availability, about the right design and about optimizing the infrastructure,” says Frank. “The hyperscaler is only providing you virtual machines that it is managing on your behalf, but the heavy lifting is still on you as a business.”

So, what about SAP S/4HANA? Does its compute and storage needs mean that using hyperscalers would be too expensive?

HPE is coming from a place of experience. According to Rupert Holzbauer, Director SAP Competence Center at HPE, through its own transformation to SAP S/4HANA it consolidated its 11 SAP ERP’s to one single SAP S/4HANA instance and eight master data sources to three, with a total of around eight petabytes data volume. “Out of these petabytes, about 18 terabytes is for S/4,” says Holzbauer. “The rest being for Hadoop clusters and other data sources. Just imagine therefore if we moved these about eight petabytes to a hyperscaler; we would be bankrupt.”

HPE believes its approach, focusing on functionality and enabling customers to have more control of data and costs, is therefore key. What this means is that HPE sees SAP S/4HANA’s best placed future as being in the customer’s own datacenter or in a colocation site. HPE has just announced an expanded partnership with Equinix, a move to offer customers “more choice” when it comes to hybrid cloud.

The strategy is also focused on improved cost and data sovereignty control but with all the functionality and agility of the cloud enabled through its private cloud on-premise solution, HPE GreenLake. The challenge HPE (and SAP) has is showing customers a quick ROI. That, says Frank, is why so many businesses to date have been slow to move towards SAP S/4.

“The ROI is not always that clear, at least on the surface,” says Frank, adding that however, there are some major gains to be had from improved processes and data management, as well as cost savings. This comes as part of a transformation towards a more dynamic, data-centric organization where legacy systems and data silos have been replaced.

Taking back control

“Around 50% of customer migrations come with consolidation from many older ERP systems into one,” says Holzbauer. “Most organizations start with the easiest part in the financials, and then it’s working out how to be better aligned to the SAP S/4 standard application stack through improved processes.”

The idea is that customers have to see the bigger picture, beyond SAP S/4HANA, and recognize this is about digital transformation. Holzbauer points to work that HPE has been doing with a large European retailer as a good example of this, moving the business from an IBM-based on-prem “static environment” to a private cloud HPE GreenLake model with HPE’s Superdome Flex servers.

The company in question is now working on the final phase of its SAP S/4HANA migration but is already seeing benefits. According to the business, the system is delivering real-time insights so it can optimize product sales, while enabling a flexible and scalable infrastructure with predictable costs.

Frank says HPE is also seeing this through colocation centers, and points out that it really is about working at the customer’s speed, especially as some firms don’t want to be in the datacenter business. It’s about choice, integrating an organization’s way of working into a fresh, more agile, cost-effective and controlled system. This becomes especially key when you consider the role of other applications in the stack. There is no one-size-fits-all here.

“Whether the customer is still on Oracle or Db2, that’s not an issue,” says Frank. “We can start there and migrate directly from those applications, customizing processes to work more effectively within S/4HANA.”

It is this flexibility and personalization towards transformation and SAP S/4 integrations that Frank says is a competitive advantage for HPE. He talks about the power of choice for customers as being key, and also HPE’s big differentiator offering on-prem option, as part of SAP RISE, or a private cloud deployment powered by HPE GreenLake for SAP.

“The large enterprise landscape is really a lot of best of breed, so having this ability to design your landscape the way you want it, means a consolidated and optimized approach is surely best,” says Frank.

For any business looking at sovereignty, costs and increased data control, that has to be attractive. Organizations will be constantly examining ways to optimize and reshape infrastructure investment over the next 12 months. Given the challenges around data management as well as cost control, the notion of adopting cloud principles on-premise will become increasingly attractive. A focus on cloud-native infrastructure and applications, migrating workloads into hybrid environments and embracing as-a-service models will start to dominate strategic thinking.

Sustainability is a key consideration integrated into the foundation of GreenLake for SAP S/4HANA, reflecting a commitment to environmental stewardship and sustainable business practices. By adopting this solution, organizations can drive sustainability while achieving their digital transformation goals. GreenLake for SAP S/4HANA optimizes resource utilization, minimizing energy consumption and reducing carbon emissions. Additionally, the flexible and scalable nature of GreenLake enables organizations to align resources Precisely with their needs, avoiding overprovisioning and optimizing efficiency. Through these sustainable measures, GreenLake for SAP S/4HANA empowers organizations to not only streamline their operations but also contribute to a greener future, fostering a harmonious balance between technological advancement and environmental preservation.

While these sorts of transformations can be messy, they don’t have to be. The key is understanding the benefits – in this case of SAP S/4HANA – but also knowing how to reduce the pain of change. Thinking along hyperscaler lines is just muddying the waters as it’s not necessary. The message is clear – transformation is an opportunity now and the clock is ticking.