Retreading On Premise Systems to Leverage Cloud Technology – Part II of Turning Cloudy Chaos into an IT Strategy

This blog continues the discussion we started with Turning Cloudy Chaos into an IT Strategy Part I.  Here we examine how existing on premise systems of record such as SAP Business Suite can be brought into a cloud-centered IT strategy.

The vast majority of people reading SCN work for companies that already have existing enterprise on-premise systems up and running.  These companies are enjoying the business efficiencies from having their end-to-end business processes supported with comprehensive solutions such as SAP Business Suite.

In fact, new licenses of SAP enterprise on premise applications still remain strong despite all the hype about moving to new models such as software as a service. Why? Simply put, the capabilities provided by available on premise enterprise applications today still exceeds functionality available as software as a service. The gap is still too large for many companies to completely run their business with SaaS solutions, especially those in industries with specific requirements such as Oil & Gas or Banking.  For many companies, software as a service makes more sense as an add-on strategy for new capabilities, not a rip and replace strategy that only marginally improving existing capabilities.

Customers appreciate the comprehensive functionality, and the flexibility to fit mature applications to unique needs. Of course, drawbacks of on premise solutions are speed of deployment, cost of specialized expertise to improve and maintain, and the time and complexity to make changes after go live.

This is where bringing in cloud computing technology can be very helpful. You can think of this as retrofitting any capital investment such as major equipment, as my colleague Sven Denecken describes so effectively in his recent blog on a similar subject.

For on premise systems, there are three different approaches that can be mixed and matched for retrofitting your on premise enterprise systems for cloud computing. Approaches to moving from on premise to the cloud include:

• Private cloud in your data center
• Outsourced private cloud
• Running enterprise systems in a public cloud
• Mix and match

Private Cloud in Your Data Center

Whether you are running an organized, automated private cloud in your data center, or simply moving your enterprise systems to virtualized servers, you can:

• Automate labor intensive administrative tasks
• Speed up cloning and copying of systems for training, modification, and testing
• Optimize consumption of hardware, electricity, cooling

Most companies already have many of their systems virtualized and maybe running in a private cloud. Their mission critical enterprise applications are the last to be moved to the cloud.  The technical complexities of administering mission critical systems such as those running on SAP NetWeaver  can be greatly aided with new offerings from SAP such as SAP NetWeaver Landscape Virtualization Management.

Running your own private cloud provides the most control and flexibility to design your companies’ service according to its requirements. It is also the most capital intensive, skewed towards realizing some benefits of cloud at the expense of others.

Here is a run down of cloud computing capabilities you can realize if you build your own private cloud:

	Business Efficiency
	Business Capability	Example Metrics for Comparison
X	Automation of technical tasks	Reduction of hours spent on previously manual processes
X	Less reliance on specialized technical skills	Number of systems supported per team member, % of cross training
	Elasticity – capacity when you need it	Performance vs. peak scale achieved
	Metered – you pay for what you use	Metered cost vs. estimated cost of hardware capacity and administration
X	Optimization (utilization) of resources	Percentage of idle capacity, licenses, users vs. total
	Economies of scale	Cost per unit per month: user, system, hardware capacity
	Certainty – service level agreement	Achievable qualities, cost per capacity per month to build capability in house vs. external services
X	Robustness & availability	Monthly amortized cost to achieve required uptime and performance guarantees
X	Greener – lower waste, energy, and carbon	Difference in estimated power consumption, carbon footprint
	Conversion of capital to operating costs	Calculated monthly costs + opportunity costs + value of flexibility

Note: on the topics of “elasticity” and “economies of scale”, its arguable whether a private cloud implementation gains these. Elasticity you have to design for, economies of scale, you achieve if your own applications are big enough. The distinction is that you don’t benefit from another provider giving you these.

	Business Agility
	Business Capability	Example Metrics for Comparison
X	Faster system availability	Elapsed time to service business request for additional system
X	Faster ability to change systems supporting business operations	Reduction in time waiting for completion of technical tasks in implementations. Qualitative description of beginning to end roll-out of business relevant changes.
	Flexible connection options	Range of options for meeting user access and system to system integration requirements
X	On demand service	Elapsed time for business to be able to access systems according to scale needed.
	Tailoring of service agreements	Range of options for meeting performance requirements
	Always up to date	Time lag between new version release and production system update. Number of additional updates handled per year, and comparative system downtime for managing updates.
X	Sharing & collaboration	Qualitative description of improved interworking relationships between teams and members.
	Quickly leverage new best practices	Time to deploy new systems and new business functionality.

Outsourced private cloud

Basically, this is a modernized version of the traditional hosting industry, with a lot more flexibility of services. Depending on the service agreements you select, you can directly or indirectly realize nearly from nearly all the efficiency and agility benefits of cloud computing.

As of the writing of this blog, SAP lists 63 regional and global cloud services providers in its catalog.

Cloud services providers manage your applications in their private cloud infrastructure. You leverage their expertise in running mission critical enterprise applications in the cloud, and avoid having to spend the capital to build out your own private cloud. Their menu of services provided range from full outsourcing of IT management of enterprise applications to hosting individual servers for test or demo purposes where your IT department remains responsible for administration. Your specific service menu and service level agreements can be designed to meet your company’s unique needs. Access to hosted systems can range from VPN access to leased lines, depending on your security requirements.

The diagram above shows the evolving industry best practices of cloud services providers. The rarest and most advanced capabilities are at the top.

To learn more about how SAP certifies cloud services partners, check out this presentation from SAP Cloud & Virtualization Week 2012. Since this is a quickly evolving market niche, the certification and rating continues to evolve every year. For example, SAP recently started auditing green IT implementation of providers, but is not currently ranking partners in this category.

There are a lot of capabilities you can realize as a result of leveraging a cloud service provider, but the exact mix depends on the agreement you make:

	Business Efficiency
	Business Capability	Example Metrics for Comparison
X	Automation of technical tasks	Reduction of hours spent on previously manual processes
X	Less reliance on specialized technical skills	Number of systems supported per team member, % of cross training
X	Elasticity – capacity when you need it	Performance vs. peak scale achieved
*	Metered – you pay for what you use	Metered cost vs. estimated cost of hardware capacity and administration
X	Optimization (utilization) of resources	Percentage of idle capacity, licenses, users vs. total
X	Economies of scale	Cost per unit per month: user, system, hardware capacity
X	Certainty – service level agreement	Achievable qualities, cost per capacity per month to build capability in house vs. external services
X	Robustness & availability	Monthly amortized cost to achieve required uptime and performance guarantees
X	Greener – lower waste, energy, and carbon	Difference in estimated power consumption, carbon footprint
*	Conversion of capital to operating costs	Calculated monthly costs + opportunity costs + value of flexibility

*Note: metering and conversion of capital to operating costs depends on the agreement with the provider. For conversation of capital to operating costs, are you paying for hardware, are they financing it for you, or are you legitimately renting hardware and software.

	Business Agility
	Business Capability	Example Metrics for Comparison
X	Faster system availability	Elapsed time to service business request for additional system
X	Faster ability to change systems supporting business operations	Reduction in time waiting for completion of technical tasks in implementations. Qualitative description of beginning to end roll-out of business relevant changes.
X	Flexible connection options	Range of options for meeting user access and system to system integration requirements
X	On demand service	Elapsed time for business to be able to access systems according to scale needed.
X	Tailoring of service agreements	Range of options for meeting performance requirements
	Always up to date	Time lag between new version release and production system update. Number of additional updates handled per year, and comparative system downtime for managing updates.
X	Sharing & collaboration	Qualitative description of improved interworking relationships between teams and members.
X	Quickly leverage new best practices	Time to deploy new systems and new business functionality.

Running enterprise systems in a public cloud

The big difference between an outsourced private cloud and a public cloud is how you work with the provider. In a public cloud, your IT department essentially micromanages the allocation, and usage of systems and services, and remains responsible for administering the applications that run within them. You are billed strictly for usage. You work with standardized units, and a certain degree of elasticity is built into units in terms of memory, communication bandwidth, and storage. You also have the ability to architect your public cloud systems into load balanced pools and high performance clusters. Essentially you have a robotic data center at your disposal on a metered basis, subject to the constraints of the service. Connectivity to these systems is over VPN, through your on premise firewall if you have any integrated on premise systems.

Very likely your company is already running some systems in a public cloud provider such as Amazon.  Supporting uses of public cloud for SAP systems with Amazon Web Services include:

• Running SAP Business Objects business intelligence solutions
• Running SAP Business All-in-One and other RDS solutions.
• Test drives and development environments for SAP Sybase Unwired Platform, Developer sandbox for SAP HANA, and SAP Afaria
• Non production use for SAP Business Suite

Check out this presentation by Amazon about their public cloud offering from SAP Cloud & Virtualization Week 2012. Also check out this presentation from SAP customer Lionsgate and their experience migrating SAP ERP to AWS.

Coming soon will also the debut of project “Titanium”, a tool that allows customers to spawn preconfigured demo and test instances of many SAP products.

Here are a list of capabilities you can expect to realize:

	Business Efficiency
	Business Capability	Example Metrics for Comparison
X	Automation of technical tasks	Reduction of hours spent on previously manual processes
	Less reliance on specialized technical skills	Number of systems supported per team member, % of cross training
X	Elasticity – capacity when you need it	Performance vs. peak scale achieved
X	Metered – you pay for what you use	Metered cost vs. estimated cost of hardware capacity and administration
X	Optimization (utilization) of resources	Percentage of idle capacity, licenses, users vs. total
X	Economies of scale	Cost per unit per month: user, system, hardware capacity
X	Certainty – service level agreement	Achievable qualities, cost per capacity per month to build capability in house vs. external services
X	Robustness & availability	Monthly amortized cost to achieve required uptime and performance guarantees
X	Greener – lower waste, energy, and carbon	Difference in estimated power consumption, carbon footprint
X	Conversion of capital to operating costs	Calculated monthly costs + opportunity costs + value of flexibility

	Business Agility
	Business Capability	Example Metrics for Comparison
X	Faster system availability	Elapsed time to service business request for additional system
X	Faster ability to change systems supporting business operations	Reduction in time waiting for completion of technical tasks in implementations. Qualitative description of beginning to end roll-out of business relevant changes.
	Flexible connection options	Range of options for meeting user access and system to system integration requirements
X	On demand service	Elapsed time for business to be able to access systems according to scale needed.
	Tailoring of service agreements	Range of options for meeting performance requirements
	Always up to date	Time lag between new version release and production system update. Number of additional updates handled per year, and comparative system downtime for managing updates.
X	Sharing & collaboration	Qualitative description of improved interworking relationships between teams and members.
	Quickly leverage new best practices	Time to deploy new systems and new business functionality.

Mix and Match

There’s nothing about the above approaches that makes them mutually exclusive. For instance, you might choose to leverage the public cloud for quick cloning of light duty testing and training sandboxes while your production system runs in your own private cloud or an outsourced private cloud.  Below is a list of typical use cases and most common cloud tactics employed by customers.

Productive ERP                        

• Run on virtualized systems
• Run in own data center managed as Private Cloud
• Outsourced Private Cloud w/ leased lines or VPN connectivity

Demo & training sandbox systems 

• Public Cloud

Test systems

• All tactics commonly employed

Development systems

• Private cloud and private outsourced cloud more common

We find that many customers take the opportunity to retrofit their IT stack to be cloud-centered as part of more comprehensive initiatives such as hardware upgrade cycles, or consolidation of multiple ERP systems.

Assessing which tactics are right for your company

It should be clear now that there are lots of choices for how to make your on premise enterprise systems more efficient and agile with cloud computing. Retreading your systems to run in a cloud infrastructure takes some engineering. The benefits can be significant as you can increase IT operating efficiency and potentially improve business agility by supporting new initiatives faster.  At the same time, getting another 5 or 10 years out of your on premise systems with improved operations will bring a significant additional return on your company’s prior investments.

If you are looking for an assessment on which ways are best for your company to take its on premise operations into the cloud, there are a few options.  Many of the SAP Partners offer consulting services. IBM and HP both provide comprehensive advice, but are also cloud services providers. Deloitte does offer hosting services, but also offers a very comprehensive cloud IT service. SAP Consulting offers Cloud and Virtualization consulting services that can help you assess your needs, and determine which vendors’ services and products are likely to meet your needs.

Finally, if you are reading this blog before SAP TechEd Las Vegas, 2012, I recommend checking out a really great preconference session that will get into the details of modernizing your current SAP landscape to take advantage of cloud computing.