SAP's S4/HANA master plan: The lingering questions

SAP's launch of S4/HANA previewed the company's master plan to not only keep customers in the fold but dazzle them with business transforming applications.

However, there are a few lingering questions that'll take months---if not years---to sort out. Here's a look at the issues surrounding S4/HANA, which will be pitched on the boardroom level. CIOs will have a say, but initially SAP is expecting CFOs to be the ones drooling over the first installment---Simple Finance.

Our database (if you want S4). Executives at SAP's S4/HANA launch repeatedly said that migrating databases wasn't a big deal. "Migrating databases is not that difficult. It's not that complicated," said Rob Enslin, SAP executive board member and sales chief. CTO Quentin Clark reiterated that theme. But the reality is that Business Suite 4 requires HANA. It's SAP's database. Business Suite customers who choose Oracle or databases will be supported through 2025. Previously: SAP revamps Business Suite with new UI, HANA analytics

SAP's argument is that the features of S4 on HANA are so compelling that customers aren't going to sweat a database swap. The catch is that some customers may prefer Oracle or at the very least can't get out of their contracts easily.

Bill McDermott, CEO of SAP, outlined how he thinks S4/HANA is a game changer.

We are running the entire Business Suite on HANA. The Business Suite has now been reinvented and natively built on HANA. The name of this product is S4 HANA. S stands for simple. 4 stands for fourth-generation. And HANA speaks for itself. It's the world's standard in-memory data platform for this generation, not the last one.

Why is it so substantial? Because, beyond TCO reduction, which is dramatic, it's also about creating business value for the customer. Imagine your forecast and the accuracy around that, essentially segmenting the markets, the deals, and the flow so you have a greater outcome with more precise planning. Imagine if you could close your books 72 hours earlier, just to pick a number -- it could be a lot better than that. And imagine the power to reinvent and simulate new business models completely on the fly and create the boardroom of the future, where the management team sit at a common area looking at all the operations of the company with real-time data, giving them feedback loops that they can make real decisions on -- game changer.

Now SAP by running S4 on HANA isn't doing something unheard of. Oracle's stack is optimized for its database. Microsoft's Dynamics runs on SQL. But a big chunk of SAP application customers happen to run on Oracle. You want the S4 innovation? The only way to get it is HANA. SAP argued it has to be that way.

SAP user group DSAG said it wants database freedom:

"We are very interested to see what further developments are in store for SAP S/4HANA. In terms of specific requirements, we want SAP to maintain a real freedom of choice for customers when it comes to databases, among other things. Alternatives to SAP's HANA database must remain possible with no restrictions on functionality or performance."

Two lines of code. SAP's S4/HANA launch has created two lines of code. SAP apps on HANA. And SAP apps on other platforms. How SAP manages innovation, rolling out new features and keeping all customers happy should be closely watched. It's not a huge leap to assume SAP will favor HANA-based apps. Another wrinkle: A two code line approach gives SAP customers even more of an excuse to look elsewhere as they ponder roadmaps. You'll have to change code lines anyway so look at every option.

What's the killer app for HANA? SAP argues that the killer app for the HANA platform is Business Suite, specifically Simple Finance, which will woo CFOs with the real-time visibility. Every revolution needs a spark and SAP execs were confident that in 2020 we'll look back to Feb. 3, 2015 as a key inflection point. It's all hockey stick from here, these execs say. The conundrum: You usually don't see killer apps coming. And vendors usually don't get to call their own killer apps.

Pricing. For early S4/HANA customers, the HANA portion of the equation is free for nine months. SAP's Enslin said the company will evaluate pricing after the initial promotion is over. In a nutshell, HANA is 15 percent of the software cost. If that cost is $100 under the promotion, the price would be $115 after Sept. 30. CIOs seem to understand that you'll pay for intellectual property. Expect IT buyers to analyze total cost of ownership of HANA vs. other databases and weigh the value of features. UPDATE: SAP clarified the HANA pricing with the following language:

Existing Business Suite customers that are current on their maintenance and additionally have SAP HANA Runtime Database for Business Suite licensed, can get S/4HANA with no additional fees as a part of a promotion ending Sep 30th, 2015. In essence, it's not HANA they are getting free, as the customers participating in the promotion would have already migrated to HANA. They would be able to add S/4HANA on top of their existing SAP HANA Runtime Database for Business Suite for no extra fee.

That lock-in feeling. Let's face it---any SAP customer considering HANA is already running the business on the software vendor's app. The move to HANA doesn't seem like much more lock-in---especially if SAP can undercut Oracle. What remains to be seen is whether SAP customers squirm at betting an entire stack on the company. At least with Oracle in the fold, there's always another app provider to pit against SAP. Rest assured that Oracle and SAP are both playing the same optimized stack and business transformation game. At SAP's launch at the New York Stock Exchange, Royal Dutch Shell CIO Alan Matula quipped: "Look at your current footprint. You're already locked in."

How long? S4/HANA is a look at SAP's future, but many customers won't be in a position to move quickly. SAP execs acknowledge that a move to HANA will take time. SAP will go over roadmaps with each customer plotting a move. Matula has more than 70 HANA projects running around Shell, but they are all smaller efforts for new applications and business cases. As for S4/HANA, Matula said he has to be comfortable that HANA has everything an enterprise-class database has and that the "price points make sense." Any move to S4/HANA would be a multi-year affair at Shell's scale. At SAP Sapphire in May, the company will roll out a managed cloud version of S4/HANA. That move will likely open up migration opportunities for customers.