A Primer on Key Cost Considerations for Implementing SAP in Your Organization

In February 2019, SAP announced an extension for SAP Business Suite 7.  They extended the mainstream maintenance of core applications till 2027 end, post which enterprise customers can avail of an optional maintenance extension until 2030 end. Despite this extension, S/4HANA continues to be the natural choice for businesses that do not want to miss out on the multiple advantages of this next-gen ERP system. After all, who wouldn’t want revolutionary features such as state-of-the-art embedded analytics, smooth UI, or automation supported by artificial intelligence (AI), internet of things (IoT), and robotic process automation (RPA) that the successor of SAP R/3 and SAP ERP brings with it?

But harnessing the benefits of this high-speed, in-memory ERP system comes with a steep learning curve coupled with considerable cash outlays. For enterprises, the journey of SAP implementation is often overwhelming and marked by challenges owing to lack of skilled in-house resources, costs of several infrastructure components, etc.

Fortunately, there are several proven ways to bring down the financial challenges of SAP implementation and today we are going to discuss some of those key cost considerations in this blog. Let’s get started!

Calculate the ROI

Just like SAP Business Suite, SAP S/4HANA comes with an in-built ROI calculator. This means that prior to SAP implementation, businesses can estimate their savings through total cost of ownership (TCO) and optimization. Besides, S/4HANA also offers additional benefits such as new UI, increased flexibility, lower data volume, and higher throughput rate, all of which translate into significant cost savings.

Aim for efficient implementation

Migration is not an easy or quick task but a mammoth investment that can take anything from a couple of months to a couple of years, depending on the business environments, estimating a deadline and sticking to it can be a savior. And that is possible when you invest in efficient implementation – whether it’s a greenfield project or a brownfield project, a big bang scenario, or a phased rollout. Once you have decided the path, it’s wise to outsource the herculean task of ensuring effective implementation to a trusted vendor.

SAP implementation partners are equipped with certified consultants, centers of excellence (COEs), and tools to guide you through the implementation journey. For example—as a globally trusted name with long-standing experience in providing SAP implementation services—Cloud4C takes a strategic approach to ensure a smooth, effective, and quick transition without minimal business disruption. We begin by analyzing business processes and requirements followed by installing and configuring applications ensuring zero business disruption, finally resulting in a painless transition with robust support.

Make use of the cataloged feature

Enterprises often pay hefty prices for managing large databases (DBs) – prices that go beyond storage and factor in manpower, time, and downtime, too. SAP S/4HANA comes with its own accessible cataloged features which are not only highly effective in reducing the size of DBs as well as the associated risks and costs, but also improve performance, capabilities, and recovery.

Explore alternative modes of software licensing

A significant portion of SAP implementation cost goes into software licensing. But if you avail alternative models of purchasing HANA, you can unlock significant savings. Take for example the total memory allocation that gives you 64GB of RAM allocation along with three available additions – Standard, Enterprise and Express. Each comes with a price point and set of functionalities. This type of license is ideal for enterprises who prefer ‘full use’ license on their SAP HANA platform.

Another alternative is to get limited runtime licenses for your SAP application servers on SAP HANA DB. While these licenses come with certain restrictions, their pricing is competitive as compared to other SAP-supported DBs. Your SAP implementation partners can help you obtain these licenses.

Enterprises often forget the license fees for RedHat or SUSE that eventually shoots up the cost during their implementation journey. We recommend using SAP distribution as it helps in accessing SAP update repositories as well as the support team. In addition, you should also consider paying for virtualization licensing as well as OEM software.

Don’t forget about hardware costs

There are a few strategies to minimize or control hardware costs while migrating to SAP HANA. For example, instead of opting for the appliance model that often leads to a huge amount of capital spent on outdated or under-utilized components, enterprises can choose Tailored Datacenter Integration (TDI). TDI gives SAP implementation companies the much-needed flexibility to customize SAP HANA servers and reduce redundancy as well as maintenance costs.

Enterprises can also choose entry-level systems such as Intel® E5 CPUs over E7 CPUs. These are cheaper and get the job done with minimal hassle. SAP, too, offers a list of vendor platforms for SAP HANA workloads which may not be highly scalable but are certainly more cost-effective. Enterprises can also save significant costs by purchasing reconditioned hardware and running SAP HANA like IaaS, in the cloud.

Go the ‘Muda’ way

If you are wondering what ‘Muda’ means then let us introduce you to this Japanese concept that has long been followed by leading manufacturers to reduce costs. Muda is the opposite of adding values. It stands, instead, for wastefulness and futility. So, when you embrace this approach, you identify factors that are not adding value to your business, or here, in this context, to your SAP implementation journey. Toyota has successfully managed to reduce its SAP TCO by taking the Muda approach. In order to reduce wastage of budget on unproductive activities, Toyota Production System identified and eliminated eight unprofitable activities – defects, overproduction, extra processing, waiting, transportation, motion, inventory, and under-utilized resources.

If you are looking for ways to reduce your SAP implementation costs or pave the way for an effective transition, get in touch with our SAP experts today. You can also learn more about the benefits of partnering with Cloud4C, a leading global SAP strategic partner, here.

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