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Welcome to the 7th in a series of blogs to dispel myths about SAP and the Cloud. Today we will debunk the myth that Cloud is all about Total Cost of Ownership (TCO).

What is the origin of this myth?

Cloud computing have primarily been seen as an IT topic. The CIOs are under pressure to run the company at best efficiency and lowest possible TCO.

They’re always asked to do more with less. Reduce operating costs, innovate & deliver business solutions to increase productivity and improve competitiveness where possible. From an IT technology perspective Cloud is all about TCO.

With the arrival of IT investment decisions moving to the LOB´s (Lines of businesses directly involved by 80% in 2016 according to IDC) and the availability of SaaS in a scaling market the role of cloud has significantly been changed.

No doubt, infrastructure decisions pro cloud are and will be mainly driven by scale and reduction of costs. We have to look behind the curtain of cloud to sort it out.

Cloud comes in three main stacks:

  • Software as a Service (SaaS)
  • Platform as a Service (PaaS)
  • and Infrastructure as a Service (IaaS)

It’s simple. The more of those stacks customers run themselves, the more they have to manage themselves. Ok, understandable that it will cause costs for Hardware, Energy, Software, Architecture, Maintenance, Support, Staff, and so on, but why is it cheaper to run software from an external vendor via the cloud than running it in-house/on premise?

The answer is Economy of Scale!

Vendors of cloud solutions achieve it with a huge tenant base which runs on their servers. Once a server is built up and running its marginal costs are going towards zero. Also vendors like SAP use synergies for companies of different size and of different industries. In contrast, classical on premise can only be used solely for one company. Also, from an investment point of view, the risk profile is much lower compared to an on premise investment. There are no upfront investments (CAPEX), but ratable payments over time (OPEX).

Beyond TCO, today´s business is driven by Speed and Agility. Success is measured by delivered Innovation. 52% of the Fortune 500 firms since 2000 are gone!

They have simply been out innovated by their market peers and were not able to react fast enough to change. The cloud deployment model is perfectly designed for today´s challenges. The beauty of cloud solutions lies in its easy consumption model.

To increase market share these days (and in the future), companies need to SCALE their business and reduce market uncertainties. Adapting the business model to the needs of their customers requires FLEXIBILITY in the structure of their organization, processes and IT. You need to make more, better and faster decisions. And information has to be available where it helps drive business directly, e.g. at POS (Point of Sales) and not solely in back office.

Cloud is about driving business INNOVATION and AGILITY. SAP has over 30 apps and suites in the cloud which are designed to optimize enterprise’s most critical assets –PEOPLE, CUSTOMER, SUPPLIERS and MONEY.

Because these applications are in the cloud, they are FAST-TO-DEPLOY. Our customers get service right away. We are able to onboard our customers to the cloud within weeks or months rather than years. This drives a significant improvement on TIME-TO-VALUE. Once on boarded, SAP’s cloud based deployment models offer an agile route to continuous innovation consumptions (FAST-TIME-TO-INNOVATE) due to its inherent constant delivery of functional improvements in swift cycles without the need for lengthy and cost intensive customer-individual upgrades.

They’re also EASY-TO-USE because they are delivered with an overwhelming UX (User Experience) and are accessible from any device, anywhere at any time.

Our Cloud solutions allow adoption of business models and capabilities at own pace and following own business priorities. A real “Land and Expand”, while competition in the market force customers to a “rip and replace”.  We are ready to help you transform your businesses and stay ahead of the change.

Next time we will talk about Myth #8: Cloud is primarily an IT discussion.

We are looking forward having you onboard again soon.

Bert Schulze (@BeSchulze), Sven Denecken (@SDenecken) and Nikolai Vetter (@NikolaiVetter)


Cloud Myth Busting: facts and figures of SAP ́s cloud business


Read other relevant blogs:

SAP Cloud - Quarterly update Q1 2014 by @SDenecken

10 #Cloud Computing Trends for 2014

Clearing the Clouds around the Cloud

Cloud Business Case #3: Collaboration in focus

Cloud Myth Busting: Myth #6: Cloud is for small companies

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