With HANA for ERP, SAP Promises Performance Power and Brings New ROI Calculations to the Enterprise

by   |   January 17, 2013 7:22 pm   |   0 Comments

Raising the stakes of its in-memory database and analytics technology, SAP said it would make available its in-memory HANA technology alongside—and incorporated within—the Business Suite ERP system for which the company is famous.

“Now the software at the heart of thousands of the world’s best‑run companies can work and think as fast as our imagination,” said Dr. Vishal Sikka, member of the SAP Executive Board, Technology and Innovation of the Jan. 10 announcement. “We can now eliminate the traditional trade‑offs between cost and performance, and reinvent real‑time business while dramatically simplifying our customers’ landscapes, together with a strong open ecosystem of partners.”

While the idea has appeal, the answer of whether this package wins over customers is likely to come down to the cost-benefit calculations for those enterprises with large enough ERP systems to warrant the evaluation, industry analysts said.

Notably, SAP describes its pricing model for the new software suite as “based on the percentage of application value, and extremely competitive to market alternatives”—in other words, based on license fees, not data stored.

“The extent to which up-to-the-second reporting actually matters will vary from business to business—as will the ROI,” said Dan Roberts, a senior consultant at Framingham, Mass.-based Cambashi. “It’s all about price points, and what use HANA will actually be.”

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Lora Cecere, founder and CEO of Baltimore-based Supply Chain Insights, said that SAP has a good idea going, but faces challenges with customers on pricing. “I would really welcome easier analytics on top of ERP: I really like the concept,” she said. “But, it’s expensive, and many manufacturers will struggle to see the value.”

Technologically, the pluses to HANA-enabled ERP are clear. No more batch runs to extract and copy production data to a data warehouse. No data warehouse either, for that matter. No more batch runs to run analytics on that data. And no more analyses that are out of date by the time they are run—because, in the meantime, the live database has changed.

In short, it’s that fabled “one version of the truth,” with planning, execution, reporting and analytics all using the same live data as a reference point. And, what’s more, doing so at unprecedented speed, thanks to HANA’s in-memory architecture and adroit leveraging of technologies such as solid-state drives and multi-core processors.

“With computing ‘on the fly’, running against the real database, you can personalize on the fly,” said Amit Sinha, head of marketing, database and technology innovation at SAP. “You can deliver customized offerings on the fly: it’s one-on-one marketing, and one-on-one service delivery.”

So who will benefit from this? The vast majority of businesses running ERP suites and enterprise software solutions such as Supplier Relationship Management, Supply Chain Management, and Product Lifecycle Management—particularly SAP’s powerful high-end solutions—are large manufacturing companies. (While other firms in retail, construction and other industries use ERP, they have fewer reasons than manufacturers to use all of its elements, including product lifecycle management.)

These companies will need to calculate how valuable it is to them to engage with their customers at a level where HANA’s promise makes economic sense. Is the ability to run a report based on up-to-the-second data, as opposed to four-hour old data from their existing batch process, compelling enough to overhaul an enterprise’s existing approach to data management, including data warehouses and existing analytics and BI tools?

SAP’s Sinha says he has an answer for this question. The definition of ‘analytics’, he points out, might be broadened to include the Materials Requirements Planning (MRP) software at the heart of an ERP system—the algorithms that take forecast demand, ‘net off’ inventory on-hand and on-order, and then calculate the balance that must be bought or manufactured.

“A manufacturer can now run multiple MRPs—different demand scenarios, different price points, different inventory management assumptions,” Sinha argues. And all incredibly quickly, rather than the lengthy batch runs that characterize MRP normally.

Such simulations of changing scenarios should appeal most to those companies which have the human resources in place to deal with master scheduling—as this activity is called—where management reviews the numbers and make value-enhancing decisions on them.

Freelance writer Malcolm Wheatley is old enough to remember analyzing punched card datasets in batch mode, using SPSS on mainframes. He lives in Devon, England, and can be reached at editor@malcolmwheatley.co.uk.

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