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Introduction

A

s you might have noticed I have put some time in creating a banner for this blog. This is part of my new plan to deliver better quality blogs.

Finding the right information is often considered to be challenging. That’s why I have decided to add a small chapter “Information sources” at the end of each new blog where you can find relevant information on the topic which is discussed in the blog post.

Ramp-up

<update>It seems the blog title has been spreading a message that is not accurate so I updated the blog title. There is nothing wrong with the functionality of SAP LVM. I used it at SAP TechED during a hands-on session and was mostly positive about the functionality. Once I get my hands on the ramp-up version I will blog out pro’s/con’s of SAP LVM functionality. The pricing information that I received was not 100% accurate (which I already mentioned in the comments) and SAP is in touch with my customer to see how they can help bring my customer into the ramp-up process.</update>

The ramp-up of SAP Netweaver Landscape Virtualization Management (SAP LVM) is active. There has been some delay in the start of the ramp-up as it was originally scheduled to start in November 2011. The plan now is to ramp-up the product and finish the ramp-up within the first half of next year.

Virtualization & Cloud week

This year SAP hosted the Virtualization & Cloud event in April in Palo Alto and I assume SAP will host the same event again in 2012. If the event is hosted around the same period in time as this year you can expect to get feedback from customers who were active in the ramp-up of SAP LVM and of course news from the Virtualization & Cloud teams on different aspects such as upcoming features and new products.

Pricing

Although there was no direct comment on my last blog post SAP contacted me concerning my thoughts on the Enterprise Edition and the pricing of SAP LVM. As I already mentioned before the new SAP is present in the Virtualization & Cloud team and they want to collaborate. They promised to have a discussion about the editions and the pricing. The goal for them is to make sure the customer benefits from having SAP LVM in place which aligns with my goal of course. I simply don’t want to introduce a product that doesn’t deliver the necessary added value to my customer.

Shared concern

I’m not the only one who is worried about the pricing and editions of SAP LVM. There have been a lot of reactions of SAP community members and a recent blog post of SAP Mentor Chris Kernaghan expresses his concern as well.

The blog post of Chris originates from October and yet it seems there has been no discussion on the pricing so far. That makes me wonder to what extent they really intent to discuss the pricing. I haven’t seen any signs yet that they are actually doing that though. Perhaps it’s just an attempt to keep me and others from blogging out what is really going on.

What is reasonable?

The pricing is supposed to be reasonable but what do you call reasonable. What is reasonable for a big company isn’t reasonable for a small company and if the product price doesn’t scale according to the usage then you are automatically excluding the small and probably even medium-sized companies in this case. What I would like to see is SAP LVM running at most of our customers because I believe it can deliver at being a best practice to perform SAP system copies and refreshes amongst other things.

I’m not sharing the vision that SAP LVM does not belong to the core of SAP and in my opinion the product should be free of charge as part of the maintenance fee. It should even be part of SAP Solution Manager. I don’t know if it’s a deliberate strategy of SAP to put the product on a another Netweaver platform instead of SAP Solution Manager but the essence of its features and capabilities scream out “this belongs in Solution Manager”.

At the moment I wouldn’t call the pricing reasonable at all and this time I have insight and details. The way I see it I can only get a proper business case introduced at one of our customers to ramp-up SAP LVM if the following prerequisites are fulfilled:

  • The customer has a lot of SAP products in place and receives a significant discount on new SAP products
  • The customer has a lot of capital to invest into innovation
  • The customer performs system copies and refreshes frequently and in large numbers

If these prerequisites are not fulfilled I’m afraid the business case won’t allow the customer to lower their TCO. Most customers will be most interested in the system copy / refresh functionality of SAP LVM at this point in time.

This concerns me because when this is the case SAP LVM will become one of those rare products like TDMS that only runs at a limited amount of customers and never really delivers the added value it was promised to deliver.

What do you propose then?

Another valid question towards me is what do you propose then if you don’t like the current pricing model. It’s always easy to comment that something is not good but doing something about it or coming up with ideas proves to be more difficult at times.

I would propose SAP to use a pricing model that really scales. I’m not the first to say such things by the way because the suggestions have already been made towards other SAP products as well. For example mobile applications and their relation to SAP Netweaver Gateway and the Sybase Unwired Platform.

What will happen now is that only a relevant small number of large customers will go for the SAP LVM ramp-up. Because the base price is already significant and the price per source system makes it more expensive, even large customers will have to do an effort to create a proper business case. Let’s take some small numbers to build up an example.

Customer

Size

Number of source systems for copy/refresh

Base product price

Price per source system

Total

Maintenance fee (22% Enterprise Support)

Payed by customer after ten years

Alpha

Large

10

300

30

300

132

1920

Beta

Large

15

300

30

450

165

2400

Gamma

Large

20

300

30

600

198

2880

Delta

Large

30

300

30

900

264

3840

Epsilon

large

10

300

30

300

132

1920

TOTAL

12960

What happens if you drop the base product price and only go for a scalable price per source system? The product would be implemented much more and smaller customers would have the ability to put it in place as well. The larger customers will more likely pay for a larger number of source systems that can benefit from having the functionality in place because the total price of the product is much lower due to the fact that the base price has been dropped.

Customer

Size

Number of source systems for copy/refresh

Price per source system

Total

Maintenance fee (22% Enterprise Support)

Payed by customer after ten years

Alpha

Large

20

30

600

132

1920

Beta

Large

15

30

450

99

559

Gamma

Large

20

30

600

132

1920

Delta

Large

30

30

900

198

1108

Epsilon

large

20

30

600

132

1920

TOTAL

7427

Zeta

Small

1

30

30

6,6

96

Eta

Small

2

30

60

13,2

192

Theta

Small

3

30

90

19,8

288

Iota

Small

4

30

120

26,4

384

Kappa

Small

1

30

30

6,6

96

Lambda

Small

2

30

60

13,2

192

Mu

Medium

6

30

180

39,6

576

Nu

Medium

8

30

240

52,8

768

Xi

Medium

7

30

210

46,2

672

Omicron

Medium

10

30

300

66

960

Pi

Small

4

30

120

26,4

384

Rho

Small

3

30

90

19,8

288

Sigma

Medium

7

30

210

46,2

672

Tau

Small

1

30

30

6,6

96

Upsilon

Small

4

30

120

26,4

384

Phi

Medium

6

30

180

39,6

576

Chi

Small

4

30

120

26,4

384

Psi

Small

3

30

90

19,8

288

Omega

Small

4

30

120

26,4

384

TOTAL

7680

TOTAL

15107

Why wouldn’t such a model be possible or even profitable for SAP? At this moment the pricing says “We don’t want too many customers to have this product in place” instead of “Innovation and technology has been our main focus over the past two years and we want our customers to benefit from having SAP in place”.

I guess I’m a bit irritated by the promise of a nicely scalable price model for SAP LVM which I simply don’t see at the moment. I even hesitated yesterday to tweet out “Are you sure money isn’t the main focus of SAP? #sapsummit” but that would have been wrong because it was Vishal Sikka who was talking at #sapsummit and we all know he does have a passion for technology and innovation.

What about inclusion?

At SAP TechED Madrid I was able to participate in the late evening event on Inclusion & Design Thinking. While the focus there was more around the inclusion of persons, for example women in technology, the event had a significant impact on me. It inspired me to step up and change things in my own life. I got inspired by talking with others about the subject. I see now that SAP is excluding customers by using the price model that is currently in place for SAP LVM.

This means only the big boys can come out and play. The pricing model is supposed to scale to allow small customers to also be included. While the pricing model does scale it only starts scaling after you already are forced to pay a large sum of money for the basic product itself.

This is not the message SAP has been sending out in recent events like SAPPHIRENOW in Madrid and just yesterday at the SAP Influencer Summit in Boston. This isn’t right and as such I’m doing an effort in an attempt to change this.

The message that was send out in recent SAP events is that they care about small and midsize companies and that SAP is transforming itself or is already transformed into the new SAP where they pay attention to these kind of things.

I’m not seeing this when I look at the pricing model for a number of products and features SAP is introducing for SAP Business Suite or the SAP Netweaver Platform.

I hope SAP picks up the pace and does what is promises because at this moment it looks like SAP LVM might not make it and if it survives it looks like it will become a rare product that only large customers can put in place which would be a pitty.

Information sources

SAP Notes

SAP NetWeaver Landscape Virtualization Management software 1.0 Standard Edition

Release Restrictions for SAP LANDSCAPE VIRT MGMT STD 1.0

SAP NetWeaver Landscape Virtualization Management software 1.0 Enterprise Edition

Release Restrictions for SAP LANDSCAPE VIRT MGMT ENT 1.0

Documentation Updates for Landscape Virtualization Mgmt 1.0

Installation guides

http://service.sap.com/instlvm

Blogs on SCN

Managing SAP Systems in Virtual and Cloud Infrastructures

Blogs by @BoobBoo:

Landscape Virtualization Manager concerns

Blogs by @tomcenens:

Virtualization and Cloud – Landscape Virtualization Management
Questions regarding the maintenance fee and the relation to SAP LVM

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2 Comments

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  1. Patrick Brandicourt
    Tom,

    even I am not blogging I am reading a lot the SDN blogs (at least twice a week).
    Your blog format makes a difference (gives a professional flavor).

    I see some (a lot) of potential benefits with LVM. But I have some historical bad experience around the SAP pricing strategy (not flexible at all to take into consideration the company size, one size fits all).
    I have seen sometimes a lack of recognition of feedback given (including in SDN).

    As you have said it is all about TCO .. introduction of new technology must allow sometimes to reduce some cost on the customer side.

    So far I have not been focusing on the LVM cost and focusing on the capabilities.

    I have some evidence that for some related offering SAP solution has not been cost effective.
    In one of the SAP LVM Madrid teched slide they refer to 90 % Cost reduction in some cases. Maybe it is true for Internal SAP projects (as they do not pay SAP license) but I I have taken this 90 % cost reduction from a customer side and trusting SAP (including the SAP license).

     

      

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    1. Tom Cenens Post author
      Hello Patrick

      Thanks for your comment.

      I agree about the potential benefits of having SAP LVM in place. It’s up to SAP now to prove they can also implement SAP LVM at small / medium size customers.

      The pricing details I received where not 100% correct apparently as I received an update on it but my sentiment is still the same so far and the idea described in the blog also stays valid.

      I heard marketing talk in webinars of SAP LVM with which I don’t always agree.

      I still have a number of interested customers for SAP LVM. Some are interested in the ramp-up, others in the final product but by that time SAP will have to come with evidence that SAP LVM is in fact a product that can reduce TCO.

      Kind regards

      Tom

      (0) 

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