The Secret to Not Talking About The Cost of SAP HANA

What This Article Covers

• A Consistent Theme to Treat SAP HANA Costs as a Verboten Topic
• SAP HANA Costs
• SAP HANA’s Misleading Pricing
• Why SAP HANA’s Pricing is So Misleading

Introduction

I was recently interacting with a person on LinkedIn, and I brought up the topic of SAP HANA’s costs. This person responded that they did not know why I was bringing up costs! Wow what a comment.

A Consistent Theme to Treat SAP HANA Costs as a Verboten Topic

This has been a consistent theme that I have noticed with regards to HANA, where lots of ink is given to discussing the benefits of HANA but so little time is spent discussing its costs. It is almost as if it is a taboo subject. On the other hand, HANA is often presented as reducing TCO. So if that is true, then obviously the first place to start is to figure out what it costs to buy and operate.

SAP HANA Costs

Here is the truth.

HANA is quite expensive. It is expensive in hardware, software as well as resources which bill at the top of the market and which are difficult to find. I have heard of big consulting companies charging roughly $350 per hour for them, and that adds up fast.

HANA hardware alone is typically going to come to $1 million.

SAP has provided some insight into these costs which are not part of the SAP price list (that is not kept private). They have provided total cost of ownership numbers, or TCOs for SaaS. However, these come to:

• $2.7 million for 1TB for HANA Cloud Platform
• $5.9 million for HANA Enterprise four years (these are 2014 numbers).

Now Amazon Web Services (AWS) which provides transparency regarding costs. They offer up to 2 TB of RAM per instance. This means that HANA on AWS can be priced, although the data volumes are necessary to have (AWS has Business All in One, Business One, Business Objects, among others).

SAP HANA’s Misleading Pricing

Now if we move to the applications that use HANA, a Finance purchase and implementation is going to be much more than an FI/CO implementation. I have found this myself, but this is the story I have repeatedly heard from sales reps that sell HANA.

Why SAP HANA’s Pricing is So Misleading

HANA’s price is at first blush straightforward. It is priced per GB and quite expensive. But the problem is SAP proposes ridiculous reductions in the database footprint that will not turn out to be correct (around a 98.5% reduction). Thus almost every HANA purchase is based upon false assumptions. Second, the associated costs make it tough to price entirely. This is particularly the case because it is so difficult for find use cases that can cover HANA’s high costs.

The expense of HANA is a primary reason why HANA has been so limited in its market acceptance.

Conclusion

There is no point in putting off cost considerations and not discussing HANA costs. Yet, so many authors do this. They list the benefits of HANA without listing the costs.

References

Costs are of course quite important to IT decision making. I cover TCO in depth in the following book.

Enterprise Software TCO: Calculating and Using Total Cost of Ownership for Decision Making at Amazon or Direct

Getting to the Detail of TCO

One aspect of making a software purchasing decision is to compare the Total Cost of Ownership, or TCO, of the applications under consideration: what will the software cost you over its lifespan? But most companies don’t understand what dollar amounts to include in the TCO analysis or where to source these figures, or, if using TCO studies produced by consulting and IT analyst firms, how the TCO amounts were calculated and how to compare TCO across applications.

The Mechanics of TCO

Not only will this book help you appreciate the mechanics of TCO, but you will also gain insight as to the importance of TCO and understand how to strip away the biases and outside influences to make a real TCO comparison between applications.

By reading this book you will:

• Understand why you need to look at TCO and not just ROI when making your purchasing decision.
• Discover how an application, which at first glance may seem inexpensive when compared to its competition, could end up being more costly in the long run.
• Gain an in-depth understanding of the cost, categories to include in an accurate and complete TCO analysis.
• Learn why ERP systems are not a significant investment, based on their TCO.
• Find out how to recognize and avoid superficial, incomplete or incorrect TCO analyses that could negatively impact your software purchase decision.
• Appreciate the importance and cost-effectiveness of a TCO audit.
• Learn how SCM Focus can provide you with unbiased and well-researched TCO analyses to assist you in your software selection.

Chapters

• Chapter 1: Introduction
• Chapter 2: The Basics of TCO
• Chapter 3: The State of Enterprise TCO
• Chapter 4: ERP: The Multi-Billion Dollar TCO Analysis Failure
• Chapter 5: The TCO Method Used by Software Decisions
• Chapter 6: Using TCO for Better Decision Making

TCO Calculator

Brightwork Research & Analysis offers the following free TCO calculators. See by clicking the image below: