This blog was co-written with Melchior du Boullay, General Manager, Americas, at oXya.
Today’s blog is the 3rd in the “Outsourcing SAP” series. In the first blog, Outsourcing SAP: Should We Outsource Our SAP Environment?, we covered various questions and concerns that customers have regarding SAP outsourcing. We discussed security, the responsibility aspect, various types of outsourcing partners, and briefly mentioned two additional considerations – infrastructure and HR/headcount.
In the second blog, “Outsourcing SAP: Choosing a Partner to Manage Our SAP Environment”, we suggested several criteria to help you choose your SAP outsourcing partner. These criteria include SAP-specific SLAs, the reports you’ll get, and the delivery model the partner will provide you. We also suggested tips for negotiating with partners and ensuring you’ll get the service promised, such as a contract that includes fiscal penalties to the partner, should they fail to meet the agreed-upon SLAs.
Today’s blog expands on two considerations that customers usually deal with, when looking to outsource their SAP landscape – infrastructure and HR/headcount.
You’ve decided to outsource your SAP management. Now, you have two alternatives:
- Continue to own the infrastructure, host it in-house, and be responsible for it
- Have your SAP outsourcing partner also take full control over the infrastructure (purchase a service package that includes both SAP hosting/infrastructure & SAP managed services)
In-house SAP infrastructure
Why do customers choose to keep their infrastructure in-house, rather than outsource it as well? There are several reasons:
- The customer just recently purchased the SAP hardware, they don’t have anything else to do with it, and they don’t want to lose their CAPEX investment. This is the most common reason.
- The customer prefers to keep their entire infrastructure in-house, including SAP and non-SAP infrastructure. In that respect, it’s important to note that while oXya is a specialized SAP partner, we have many customers which have chosen to outsource their entire IT infrastructure to us, not only their SAP infrastructure. We welcome that type of business.
- Related to the previous reason, when the customer has additional non-SAP systems they do not want to outsource; and they have a team of infrastructure and OS admins (but not SAP admins) that handle all of these servers; then removing a significant portion (SAP landscape) of the infrastructure may lead to layoffs which they prefer to avoid.
- The fourth reason has to do with security/control perception. Some customers feel comfortable outsourcing the managed services side of SAP, but not the infrastructure that comes with it. They have a perceived threat of security, that the more access you give to someone else, the bigger the threat is, hence they prefer to keep the infrastructure in-house, and presumably reduce the risk. This is similar to the discussion we had regarding Security in the first blog of this series; whether that threat is realistic or not is less relevant; the perceived threat has increased for some customers, hence why they would not outsource the management of their infrastructure, only the services side of SAP.
When a customer experiences a perceived threat regarding their infrastructure, what often happens is we begin to provide them with SAP managed services, while they keep their infrastructure in-house. Over time, as they get a great service from oXya and trust us, they will often ask us later to also take full responsibility over their infrastructure—typically at the renewal of our contract. We’ve seen that happen many times before.
When the customer chooses to maintain responsibility for the hardware and for hosting SAP—whether on-premises at the customer, or at a third-party datacenter—we’re OK with it and would take just the managed services business. All we need is a good, reliable connection to the servers, to provide SAP managed services. We’ll just mention, regarding using a third-party datacenter for hosting your SAP infrastructure, what we’ve already discussed on the first blog in this series – the more providers you have for the same system, the less efficient it’s going to be.
Outsourcing the SAP infrastructure
The most important thing to remember regarding outsourcing your infrastructure, and the main reason why customers choose to do so – it enables you to transform your capital expenses (CAPEX) into operational expenses (OPEX).
There are two typical scenarios when customers want to outsource their entire SAP landscape, both services and infrastructure:
- Common scenario: at the end of customer’s infrastructure lifecycle (typically once in every 3-4 years). This is a great timing, as you move your SAP landscape onto the latest, brand new hardware. Many of oXya’s customers are using this method; they get to upgrade their hardware without paying the huge associated CAPEX, and instead pay a monthly OPEX bill for combined managed services and hardware.
- Far less common scenario: the customer recently bought new hardware, and then decided to outsource their SAP. Obviously, the customer doesn’t want to lose their investment in hardware, so oXya works with them to solve that. Typically, we will transfer the customer’s hardware to one of our datacenters and use it for their SAP landscape, until the next refresh cycle when they will move to new hardware, owned by oXya.
Amongst oXya customers, there’s roughly a 50:50 split between customers for whom oXya also manages the hardware and hosting, and customers who own their hardware and host it somewhere else. When oXya owns the infrastructure, we are responsible for everything – hardware, hosting, and including OS administration, database administration, and SAP administration. When we do not host the hardware, oXya is typically responsible from the OS layer and up (OS, database, and SAP administration).
For some customers we provide Platform-as-a-Service (PaaS) and host their entire IT infrastructure, not just SAP. In such cases we are always responsible for the infrastructure and OS administration, and sometimes also database management for the rest, non-SAP applications (if these applications have databases). The customer is usually responsible for the non-SAP applications themselves.
One of the main infrastructure benefits that customers get from oXya, when we manage their SAP landscape, is a full disaster recovery (DR) solution (see our blog about disaster recovery for SAP).
When you host the SAP infrastructure in-house, it is quite challenging and expensive to have a DR solution: you need another, remote location; another set of servers installed in that location; have fast communications lines between the two sites; and have someone maintain that remote site—all that so the second site would serve as a DR site.
Once you choose an SAP outsourcing partner such as oXya, all of these are given. Any reputable and reliable provider will have a DR sites, and often multiple sites. Hence, the decision to outsource your SAP systems—on the infrastructure side—is not only about replacing the infrastructure, but it is often about the ability of adding onto the infrastructure you currently have, without incurring huge CAPEX costs. Just by moving your infrastructure to an external SAP provider such as oXya, you can make your SAP landscape far more secure and more reliable.
We even have a few SAP managed services customers who choose to keep their infrastructure in-house, but ask oXya to serve as the DR provider for them. In such a case we provide space in one of our datacenters, and can even provide the infrastructure on the DR side. The customer is responsible for the link between their datacenter and ours. Once the link is up, we can configure the system so that our site serves as the DR for their in-house datacenter. It’s not a very common option, but some customers do leverage it.
Who Chooses the Hardware?
Sometimes we’re asked whether—when oXya owns and operates the infrastructure—the customer is involved in choosing the infrastructure. Another question we’re often asked is what type of infrastructure we typically use, and what we recommend.
The answer to the first question is “yes”, of course oXya customers are involved in the decision making process about their infrastructure. Since oXya offers a private cloud solution, and the infrastructure will be solely dedicated to the specific customer, they obviously want to know all the details. Furthermore, when a customer has specific preferences or requirements, then we’ll do as they ask.
As for the second question – whenever there’s no specific preference from the customer, we will typically advise and use hardware from Hitachi Data Systems (HDS), which we have been using over the last few years. We have a very good experience with the HDS hardware, as it is extremely redundant and extremely reliable. (Disclaimer: oXya started using HDS equipment back in 2013, about two years before HDS acquired us in February 2015).
HR/Headcount is a very important criteria when companies consider whether to outsource their SAP infrastructure. From an HR/headcount point of view, we see two main challenges companies have when looking to outsource their IT in general, and specifically SAP.
The hiring challenge
Some industries choose to be located in very specific regions of the country, due to tax benefits. These tax breaks are usually given at relatively remote areas, where the specific state would like to create new jobs and attract employers. One industry for which this is typical is the automotive industry, but also for various other industries.
While these tax breaks make a valid reason for a company to relocate to that region, the downside is these areas can be very challenging for recruiting experienced IT personnel in general, and even more so for recruiting SAP experts. Some companies experience major challenges in hiring infrastructure admins, and even more so SAP professionals. Often, these companies will turn to SAP outsourcing, which solves all of their recruitment needs, as they no longer need to hire people to manage infrastructure, SAP, databases, and so on—all these roles are covered by the outsourcing provider.
The Headcount Challenge
From a headcount perspective, some companies are very sensitive to headcount, to the extent that they’re OK with sometimes paying more to external consultants and outsourcers, just to reduce their headcount and avoid hiring people. If that’s a driving factor in your company, then outsourcing is certainly the way to go. You can remove the entire IT team from your headcount, if this is important to you. This is something that we see, and one of the driving factors of companies who choose to outsource their SAP landscape to oXya.
What do you really get when outsourcing SAP?
One of the interesting things to check is what exactly you get when outsourcing SAP. Do you get the exact same thing, only done by an external team? Or is it something different, possibly more?
The answer is that when you outsource, and specifically to oXya, you get a lot more for the same amount of money, compared to when you do the same thing in-house. Let’s show that using a few examples:
- When you host your systems internally, you probably have at least one SAP Basis person (for smaller SAP installs), or a few SAP Basis experts (for medium-size installs). Not only is this small team always overloaded with work; what happens when the one person you have gets sick? When someone takes a vacation? When one of your SAP Basis experts leaves the company? Are you set to manage your SAP with fewer resources?
- At oXya, you get an entire team of SAP Basis administrators (8-12 people) that is dedicated to managing your account and that of a few additional customers. While this team is not dedicated only to your account, they know your systems inside-out (because they’re directly responsible for your systems), and when someone is sick or on vacation there are always several other team members to answer your calls and handle any issue.
- When hosting SAP internally, do you get 24x7 monitoring and support? Or is SAP support only provided during regular work hours? After all, to achieve 24x7 support you need to have 2-3 shifts, meaning you’ll need to at least double the number of SAP Basis personnel on your team.
- At oXya, you get 24x7 monitoring, which includes shifts around the clock. We look after your systems all the time, perform proactive maintenance work, and more.
- When you host SAP internally, how much ongoing training do your people get? Do they have time for special projects, outside of regular maintenance? Customers tell us that their people were often overworked, didn’t have enough time (or any time, quite often) for ongoing training that is critical in SAP. Also, since buried with ongoing support work, these internal teams don’t have time for various projects.
- At oXya, we have cross training inside each team and between teams. We can also “afford” to send people to external training, since we have enough backups to keep on supporting our customers (if you attended SAP TechEd in Vegas in October 2015, you probably saw lots and lots of green oXya shirts around; these were all our SAP experts, going to many training sessions. Later, they pass the training to their teams).
- As for project work, this is one place where oXya can help you, even without managing your SAP landscape. On top of our ~260 enterprise customers for which we provide SAP managed services, we have another ~1000 customers who manage SAP themselves, and use our services for various projects, such as installing new products (including HANA and S4/HANA), various upgrades, and more.
And above are just a few examples, there are more. The bottom line is that for a small to medium size SAP install (not that of a Fortune 100 company, but smaller), replicating in-house the kind of support experience and expertise that you get from oXya is extremely expensive. The result: the vast majority of companies have nothing even close to that level of support, or that number of dedicated SAP Basis experts.
Above is one of the main positive aspects of outsourcing, from an HR perspective. oXya already has all HR processes in place to guarantee 24x7 service and replacements when someone is sick, on vacation, or leaves us. That’s an added bonus to our customers.
So how do we do it at oXya? How do we make money? Well, that’s our business model. Since this setup is mutualized—one large team, dedicated to a number of customers—we can spread the costs and still provide it all to our customers, at a much lower rate, compared to the scenario where you do it all in-house. So, there’s a huge advantage, in terms of HR, to outsourcing your mission-critical applications such as SAP; you simply get much more manpower for a similar or smaller cost.
Something about costs
We can’t finish a discussion about HR and headcount considerations, without saying something about costs, can we? So, let’s clearly explain the statement we made in the previous paragraph:
- oXya’s managed services for SAP will always cost significantly less when the customer wants internal 24x7 support and a rotating SAP Basis team, and compares all these internal expenses to oXya’s price offer.
- When customers compare their existing headcount cost that does not provide 24x7 support, with the oXya’s price offer that does include 24x7 support, then our cost is very competitive and often lower, compared to cost of the customer’s internal SAP team. This is true even though oXya provides many more services, that the customer’s internal team doesn’t and cannot provide.
What has your experience been like, regarding the infrastructure and/or headcount considerations?
What is your view on these topics?
How are these dilemmas impacting your business?
Share with us your thoughts and experience below, in the Comments section.
Our next blog in the “Outsourcing SAP” series will describe in detail the process of moving your SAP landscape from your in-house datacenter (or from a different vendor) onto oXya, and the exact steps we take to minimize downtime and risks to your business.
Send us questions about any aspect of “Outsourcing SAP”, and we will answer them in the last blog of this series, in a few weeks. Please post your questions to the Comments below, or send them directly to us, Dominik Herzig <email@example.com> or Melchior du Boullay <firstname.lastname@example.org>.
Dominik Herzig is VP of Delivery for US & Canada at oXya. Dominik has 10 years of SAP experience, starting as a Basis Admin, and then moving to SAP project management and to account management. Dominik was one of the first few people to open oXya’s US offices back in 2007.
Melchior du Boullay is General Manager, Americas at oXya, responsible for all of oXya’s operations across North, Central and South America since 2007, when oXya started operating in the Americas. Melchior has nearly 15 years of experience as an SAP Basis admin and technical consultant, SAP project manager, SAP account management, and business development.
oXya, a Hitachi Data Systems company, is a technical SAP consulting company, established in 1998. oXya provides ongoing managed services (outsourcing) for enterprises around the world. In addition, oXya helps customers that run SAP with various projects, including upgrades and migrations, including to SAP HANA. oXya currently employs ~600 SAP experts, who service more than 260 enterprise customers with more than 250,000 SAP users around the world.