successful companies transform with flexible sap solutions

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bilhão

Executive Briefing

All around the world, companies of all sizes and in all sectors are changing. Examples are plain for any-one to see in the retail and automobile industries. Market leaders in e-commerce are offering virtual supermarkets, for instance, and the whole future of trade is now being shaped by online, multichannel and mobile sales. In the automobile industry, so-phisticated configurators, mobile apps and online services are state of the art. Cars “speak” with each other (i.e., connected cars), with the dealer, with the manufacturer, and above all, with the driver. Machine-to-machine (M2M) technologies occupy a central position within automated processes. At the same time, OEM portals and communication plat-forms enable effective cooperation and the central-ization of information.

The main term used to describe this change is “transformation“, which signifies departure from the established. It represents radical alteration that leaves no stone left unturned and proceeds at an ever increasing pace. Here, time to market plays a decisive role. Companies must transform quickly so as to avoid falling behind and to remain competitive.

THE DRIVER OF TRANSFORMATION

The term “transformation” is usually associated with the transformation of IT (applications and infrastruc-ture). However, transformation from a market and business perspective constitutes a more radical change toward new business segments and greater customer proximity. In order to hold their ground in the face of fierce competition, companies have to get closer to customers, brands and markets. This means addressing customers in a more individual and direct manner, as well as using available infor-mation for better and faster decision making. For instance, the market prospects for new products may be determined using of predictive analytics, providing a basis on which the required resources may be planned more efficiently and used more effectively.

TRANSFORMATION VIA DIGITIZATION

Innovative technologies such as clouds, big data and analytics, mobility, in-memory technology and

Big data analyses, social media, mobile apps and worldwide networks are altering our society dramatically. Processes are running faster while technologies and trends are changing at breathtaking pace. Flexible and scalable SAP solutions from the cloud are an efficient and reliable way to overcome these challenges.

Digital megatrends driving IT

As communication and interactions between a company and its customers, suppliers, partners and competitors largely take place via IT resources, IT plays a decisive role in business transfor-mation. This is all the more true in today's “age of the customer,” which puts the customer at the center of all entrepreneurial thinking and action.

DEVICES ON THE INTERNET

BY 2016

BILLION10

MOBILE M2M CONNECTIONS

BY 2020

BILLION1

TRAFFIC BY 2017

ZETTABYTES44

SUCCESSFUL COMPANIES TRANSFORM WITH FLEXIBLE SAP SOLUTIONS

WHAT DOES TRANSFORMATION MEAN WITHIN THE COMPANY?

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social collaboration are leading to a paradigm shift in companies’ relationships with customers and staff, as well as to ward a stronger focus on the (end) customer and on projects geared toward in-creasing customer satisfaction. Companies are pre-sented with a whole range of new possibilities for various tasks and departments. In the SAP environ-ment, an abundance of new application scenarios is emerging for companies, including:

• Real-time sales-channel benchmarking in sales • Preparation of customer-specific offers in real

time for marketing • New service business models via machine-to-

machine data• Financial analyses based on real-time data in

accounting • Identification of fraudulent transactions by means

of real-time fraud detection• Modeling of end-to-end financial processes,

through to the mobile end device, with SAP Fiori and SAP Simple Finance

These are just a sample, as there seems to be no end to the possibilities offered by innovative tech-nologies and products. The SAP HANA Use Case Map provides a good overview and demonstrates numerous examples of the successful use of SAP HANA in practice.

However, there are a number of factors that put some companies off switching to SAP HANA. Fi-nancial considerations are foremost: 86 percent ex-pect the changeover to require additional invest-ment in hardware, and 74 percent find it difficult to estimate the cost-benefit ratio. This means that the investment also has to be seen alongside a tangible business advantage for the company, justifying the investment.

USE CASES SHOW ADDED VALUE

Nevertheless, there is already an abundance of real use cases that represent a broad spectrum of func-tions and sectors: A consumer goods corporation, for example, consolidates its international data pool for uniform reporting across national borders, harmonizing its processes. Retailers adopt ap-proaches based on innovative, future-oriented busi-ness models, such as real-time analysis of consum-ers' purchasing behavior. Production companies optimize their ability to react to dynamically changing circumstances, such as disruptions in the supply chain or the production flow. Real-time analytics solutions are particularly beneficial to those in charge of controlling and operational processes, or who perform managerial tasks, but there are also far-reaching prospects pertaining to marketing.

All these scenarios require IT services that follow the dynamics of business processes. This calls for a competent partner, that can map and support different business models and processes in an eco-nomical manner.

TRANSFORMATION IN THE IT DEPARTMENT

The IT department is becoming the “enabler” of revenue growth and competitive advantages. At the same time, ITs traditional responsibility remains guaranteeing the day-to-day operation of failsafe IT systems with high availability. This gives rise to a genuine dilemma. On the one hand, there are the operational departments demanding fast, cost- efficient processes. On the other, management is pressing ahead with company expansion goals and implementing new business models. But, both sides can agree on one thing: IT is expected to dra-matically decrease “time to value,“ i.e., the time between the decision in favor of a particular IT solu-tion and the moment when the staff create added value with that solution.

CLOUD AS CARRIER TECHNOLOGY FOR TRANSFORMATION

While cloud technology has so far served as an ef-fective means of cutting costs and making IT pro-duction more economical, the cloud is now becom-ing the carrier technology. In other words: No cloud, no transformation.

SAP HANA use cases show that investments pay off. Source: http://hana.sap.com/abouthana/why-hana.html

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As IDC describes it, “The cloud movement is about much more than the cloud. Cloud cannot be suffi-ciently understood as a stand-alone phenomenon in the IT market, but rather as a core ingredient of a larger transformation of the IT industry – and many other industries using IT to transform themselves.” Dynamic and flexible IT resources from the cloud pave the way for new business processes. Dynamic acquisition of IT resources for applications, data-bases and middleware from the cloud helps the IT department cope with its myriad challenges. The IT department also has to deal with the speed of innovation in cloud computing and rapidly provide platforms for high-speed, short-term computing requirements.

The corresponding solutions are available because providers like SAP are transforming their product range with the cloud in mind. In 2013, Jim Hage-mann Snabe, CEO of SAP at the time, declared, “The future of SAP is in the cloud.” Current CEO Bill McDermott is continuing on the course set by his predecessor. And users are open to SAP from the cloud – even in Germany, where decisionmakers are usually rather cautious with regard to new de-velopments. In a recent survey conducted by Pierre Audoin Consultants (PAC), almost two-thirds of respondents (62 percent) said that in the future, many SAP customers will also use SAP cloud services. However, in order to make SAP available from the cloud on short notice, and in a manner that is tailored to suit current require-ments, companies often have to adapt their SAP landscape. The standards are high: customers and staff expect trouble-free business and service processes in the form of standardized and industri-alized IT services, – with high availability, proven technologies, needs-oriented delivery and maximum security.

Nevertheless, the journey into the cloud is worth-while for the users: in the PAC study, the majority of respondents identified clear advantages, such as better support of mobile end devices, reduction of operating costs and an easing of the burden on the IT organization.

WHAT DOES TRANSFORMATION MEAN FOR THE IT DEPARTMENT?

A company's current transformation requirements give rise to a whole range of questions. Among oth-er things, the following must be clarified:

• How the complexity of heterogeneous systems may be reduced, particularly in the company’s SAP environment

• The possible ways of making the fixed costs of core business applications variable

• How the expenditure on IT operations may be decreased while ensuring high availability of SAP systems

• Which measures provide greater transparency regarding existing systems and their costs

• What should be done in order to support specialist departments more efficiently and effectively, and to remove shadow IT

• How cloud services will support the implementa-tion of the company strategy

• Which cloud options should be considered for SAP

WHAT BUSINESS TRANSFORMATION HAS TO DO WITH SAP

Internationally, with revenue of more than 16 billion euros and a presence in 180 countries, SAP has be-come the leading provider of enterprise resource planning software. Its worldwide market share, ac-

SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP SAP







SAP SAP

ADDED VALUE FROM SAP FROM THE CLOUD

67%

59%54%

54%

72%

60%

Rapid introduction of new software

functions

Efficient management of

SAP solutions Less burden on the IT/SAP organization

Reduced operating

costs

Cost structures with greater flexibility

Better support of mobile

end devices

Source: PAC

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THE SAP CLOUD IS GROWING

cording to Gartner's findings, is 24 percent. More-over, data from Gartner shows SAP is the world's largest provider of analytics software, as well as software for handling business processes, with rev-enue in this area amounting to more than three bil-lion US dollars. SAP HANA contributes to these fig-ures significantly. No product in the company's history has ever generated such demand so quickly, as this in-memory database is strategi-cally important in the area of big data/ analytics applications as well as in the role of a powerful integration platform for SAP's innovative cloud products.SAP has now set another milestone with S/4HANA, the successor to SAP ERP. As PAC analysts Tobias Ortwein and Frank Niemann have noted, “For SAP, the announcement of S/4HANA is an important, major step in the company's history.” They add that S/4HANA is not just about a new release of the SAP Business Suite running on SAP HANA because it changes the way the core system operates. For instance, the Financials, CRM, SRM and PLM mod-ules now share a common platform. This eliminates the previously necessary data transfer between components such as ERP and CRM.

In addition, SAP is continually integrating the database with its software products. Alongside the Business Suite, these include SuccessFactors and Ariba. In the coming years, SAP is following a clear road map that defines which SAP systems are to be transferred to the cloud within what time cycle, and which are to remain in place for some time.

SAP FROM THE CLOUD – BUT HOW?

For companies, the SAP transformation process means that new SAP HANA installations have to be set up in order to benefit from coming innovations. Sooner or later, there will also be a need for clarifi-cation with regard to the traditional components. Should they be transferred, or do they have to be integrated? Integration generates heterogeneous landscapes that require more time and effort for IT management. Whenever systems are transferred to the cloud, be they SAP or non-SAP solutions, a fea-sibility and cost analysis must be conducted in ad-vance, in the course of which the sourcing strategy should also be incorporated into strategy develop-ment as a decisive factor. Which SAP systems should be run in-house, as a managed service, via outsourcing or as a cloud service?

According to Gartner, more than two-thirds of German CIOs are planning to adapt their sourcing strategy with respect to cloud services by 2016.

STRATEGIC ACTION: THE BASIS FOR SUCCESS

Despite all the uncertainty surrounding business transformation, one thing is clear: the IT depart-ment is continuing to become more important within the company. Considering how fast the changes are happening, though, there is a risk that IT decisionmakers will now merely react to require-ments. To be successful in the long term, they must be able to anticipate developments and make navi-gational interventions. IT organizations that take an active role in business transformation should de-velop a sourcing strategy that defines the extent to which services are provided internally, or by one or more service providers. In this process, unlike in the past, decisions are not made purely on the basis of cost. It makes more sense to decide according to business advantages and company strategy, and to support business processes with adequate IT ser-vices. This gives rise to goals that are to be set indi-vidually, such as:

• Lower costs for standard and scalable services

• Short response times via services that are to be performed in a flexible and agile manner

• Customer-specific services• Establishment of new business processes

and models via technical innovations

In order to support the agility and flexibility that the marketing and the sales department demand, cloud applications should be an integral part of any sourcing strategy. This makes it possible to achieve goals such as cost reduction, flexibility and greater individuality, as well as appropriate data protection and security.

But when companies set out on their journey into the cloud, no matter where they start from, it is al-ways advisable to use the know-how of experi-enced and professional service providers who are already successfully active in the cloud. This is be-cause, particularly in the SAP environment, provid-ing and securing SAP system services, combined with the complexity of the processes, necessitates comprehensive practical knowledge and the vari-abilization availability of resources that an internal

German SAP users believe that more SAP solutions will be used from the cloud in the future.

SAP CLOUD: LOOKING AHEAD The issue of sys-tem and data in-tegration will be-come much more important in future.

Many SAP cus-tomers will also use SAP's SaaS solutions along-side SAP soft-ware.

Running SAP's on-premises solu-tions in the cloud will become a key component of companies' SAP strategy.

68 %

32 %

62 %

37 %

49 %

51 %

Source: PAC

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IT department usually cannot provide in a lasting and sustainable manner. NO TRANSFORMATION WITHOUT CLOUD SERVICES

As IT's importance to the company increases, so does the CIO's dilemma. The larger and more com-plex the systems, the higher the cost of day-to-day operations. Developing and supporting new business models requires staff and financial re-sources that are not available. The only way that CIOs can regain their capacity to act in the long term is by outsourcing all SAP operations to the

cloud. Easing the burden on day-to-day opera-tions enables CIOs to provide innovative solutions for the business proactively. In addition, running SAP in the cloud with an experienced provider of-fers an opportunity to use new applications based on SAP HANA, without a major initial investment. This includes, for example, mobile applications for more efficient sales and service processes, in-memory technology for real-time analyses and faster business decisions, as well as the incorpora-tion of special cloud solutions for e-commerce or human resources. Thus, IT supports the transfor-mation process in the specialist departments, at calculable costs.

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bilhão

Executive Briefing

HOW DYNAMIC SAP SERVICES FROM THE CLOUD SUPPORT THE TRANSFORMATION OF THE BUSINESS AND THE IT DEPARTMENT

GREATER FLEXIBILITY AND SCALABILITY FOR PROCESSES

One of the IT department's main challenges is greater flexibility. In the financial sector, for in-stance, if product lifecycles (from the concept through to termination of the product) last only a few weeks, the demand for SAP services through-out the year can only be roughly estimated. The IT department runs the risk of either holding up too many costly resources, so as to be able to cover peaks in demand, or failing to meet customers' ex-pectations when performance requirements are high. In view of the increased hardware require-ments of future SAP products based on SAP HANA, decisionmakers are under more pressure to consistently provide (as precisely as possible) only the amount of IT capacity that is actually used, and which translates into revenue. This is where SAP solutions from the cloud come in –, often in addition to an already existing on-premise SAP infrastructure.

TURNING CAPEX INTO OPEX

The greater flexibility of costs is a key advantage to cloud-based IT services. This also applies to SAP operations in particular, which represent a large part of the IT expenditure in many compa-nies. Budgetable monthly operating expenses, in-stead of non-transparent cost blocks, give not only the CIO but also the entire company as a whole, the financial scope necessary for business transformation.

REDUCING COSTS

Asked why companies do not change over to new technologies, business leaders often cite cost. With SAP solutions from the cloud, this argument can be turned around: experts' experience shows that in a flexible, cloud-based operating model, costs can decrease by as much as 30 percent compared to those of a company independently operating an on-premises solution.

EASING THE BURDEN ON THE IT DEPARTMENT

During business transformation, the IT department needs additional resources in order to provide bet-ter support for valueadding tasks, such as process innovation and product development. However, as complexity and scale increase, the day-to-day oper-ation of companies' existing SAP systems ties up more and more staff and financial resources. Out-sourcing the operation of SAP applications to an experienced provider frees up more resources, again, for helping the specialist departments reach their commercial goals and for facilitating new de-velopments.

IMPROVED PERFORMANCE, AVAILABILITY AND SECURITY

As with any other business application, the benefits of an SAP installation depend on its availability and performance. Cutting-edge software is of no use if the servers are overloaded and the users stare at an

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hourglass instead of doing their work. However, as performance and availability are always a cost is-sue as well, many companies curb their expendi-tures on high-performance infrastructure when purchasing on-premise solutions. This reduces not only the solution's return on investment but also the productivity of staff and processes. Here, too, outsourcing SAP-based operations is a viable alter-native, because performance, security and avail-ability can be provided more economically in the provider's external data center than within the company. This eases the burden on the CIO while simultaneously ensuring that all applications re-main state of the art.

SAFEGUARDING AGAINST FAILURE

Any time service or production processes are brought to a standstill for an entire day, the impli-cations are clear, and the losses in such a situation are perilous. Moreover, while IT's expansion and networking within the company increase, so does the risk. For this reason, more and more companies consider taking measures to ensure trouble-free operation from the simple snapshot, through to di-saster recovery and business continuity strategies. For cost reasons, though, the mirroring of complete data centers at geographically scattered locations and network infrastructures designed with end-to-end redundancy cannot be realized by most user companies. Cloud service providers, on the other hand, provide this as a standard part of SAP ser-vices.

SAP HANA INSIDE

Introducing future-oriented technology like SAP HANA requires considerable expenditure. As SAP develops all new products solely on the basis of SAP HANA Enterprise Cloud (HEC), the integration of the complete SAP Business Suite also entails high costs. This drives the initial investment upward and means that some innovative business cases based on the new applications do not pay off. However, running SAP from the cloud enables companies to try out new possibilities first, without generating high fixed costs – the provider runs the platform and the costs can be budgeted as part of the monthly usage fee. This also applies to updates and release upgrades. Here, cloud users also benefit from the fact that all the organizational outlay, including run-ning the test environment, is covered by the provid-er. For the user, operations simply carry on.

APPLICATION MANAGEMENT (AMM/APM)

Every SAP installation evolves along with the com-pany that uses it. In order for the solution to bring maximum financial benefits at all times, this devel-opment must be monitored and controlled. Here, providers help with services like application man-agement modernization (AMM) and application performance management (APM). This means that companies using SAP as a service from the cloud benefit from know-how that a user company can-not maintain.

USE THE ADVANTAGES OF SAP FROM THE CLOUD IN PRACTICE NOW

There are many reasons to outsource operation of your SAP environment now. Here are some of the most impressive advantages of the cloud innova-tions that arise from the close partnership between SAP and IT providers:

• Flexible provision of and payment for IT services • Secure and efficient operation • Less investment

This is why numerous companies in various sectors and of various sizes, with several million users in to-tal, already use SAP services from the cloud today. They use globally available virtualized solutions that offer SAP-based operating services from the cloud in a standardized and industrialized manner. In this way, SAP operating costs can be reduced by as much as 30 percent. In order to fully exploit the potential benefits of the cloud, the following points should always be con-sidered when choosing your cloud partner:

• Demonstrable experience with successful cloud services in the SAP environment

• A solid basis of cloud customers of all sizes in all sectors

• SAP certification, confirming that the provider meets all of SAP's quality criteria pertaining to a secure professional cloud environment

• Platforms that are open to all common operating systems and possible to access quickly and securely via MPLS or Internet VPN

• Availability of added-value services such as busi-ness process monitoring or root-cause analysis

• Global data center networks

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• Highest security standards that meet the require-ments of locations scattered around the world

When establishing cloud services, network perfor-mance is of particular importance. Here, intelligent networks (MPLS) that “think” about the loads and also make dynamic bandwidths available are a key prerequisite for the business of the future. Further-more, the network enables control of components that play a part in a business process and makes weak points transparent. This is a prerequisite for IT-based support of critical business processes and for combining end-to-end service levels as com-plete services.

In general, companies should seek a technology partner that offers them end-to-end support in the

©IDG Business Media GmbH, Germany 2015

Sources:

http://hana.sap.com/abouthana/why-hana.html

2014 DSAG member survey, quoted from www.it-business.de/dienstleister/marketing-vertrieb/messen-events/arti-cles/463495/?cmp=nl-43

IDC, Four Pillars “Cloud,” 2013

IDG study, “Cloud Computing,” 2014

PAC, “SAP goes Cloud,” 2014

Gartner Market Share Analysis: ERP Software, Worldwide, 2013, quoted from www.forbes.com/sites/louiscolum-bus/2014/05/12/gartners-erp-market-share-update-shows-the-future-of-cloud-erp-is-now/

Gartner CIO Monitor 2015, quoted from www.computerwoche.de/a/deutsche-cios-sind-aufgeschlossen-gegenueber-cloud--computing,3061114

implementation of their business strategy and sourcing strategy, with the necessary flexibility. This partner should also have considerable experi-ence in operating the solution, as well as in system implementation and application management. Moreover, the chosen service provider should be an expert on SAP system transitions and migrations – including the incorporation of heterogeneous infra-structures with applications from various manufac-turers and the handling of interfaces that this necessitates. If these criteria are met, the IT depart-ment can confidently hand over its SAP systems and concentrate on its goals in the context of busi-ness transformation.

THE SIGNIFICANCE OF SAP SOLUTIONS FROM THE CLOUD IS GROWING

IDC-Commentary

“Only companies that evaluate and use cloud tech-nologies as a model for flexible acquisition of IT resources can prevail in today‘s tough competitive environment. In the future, SAP solutions from the cloud will also take on considerable significance with respect to business transformation, whereby companies do not have to commit themselves to any specific cloud subscription model, as they have various options to choose from.

Here, SAP S/4HANA offers additional potential re-garding flexibility and performance in business. To make full use of this potential, companies should seek partners that have long-standing experience, both in the SAP environment and with cloud com-puting. For the transformation and transitioning of businesses and information technology, it is impor-tant to focus on such partners that give companies as much freedom as the solutions themselves.”

Matthias Zacher, Senior Consultant, IDC Central Europe GmbH

www.computerwoche.de/a/deutsche-cios-sind-aufgeschlossen-gegenueber-cloud-computing,3061114

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successful companies transform with flexible sap solutions