Maximizing Value in SAP’s Industry Cloud: A Review of Program Costs for Channel Partners
Within SAP I am responsible for the topic of SAP’s industry cloud for channel partners. This blog post is mainly targeted at SAP’s channel partners and PE sell partners, but the blog post might be interesting for any partner considering building an Industry Cloud solution on SAP BTP.
In this blog post I try to answer one of the most asked questions I get from channel partners: “What do I have to pay SAP when developing an industry cloud solution on SAP BTP?”
The good news is that SAP has done a lot in the last year to make it easier for channel partners to build intellectual property (IP) on SAP BTP. SAP considers a “next gen partner” to be a partner who develops and sells IP. Living off services only is not the future. I recommend reading this interview with SAP’s Chief Partner Officer Karl Fahrbach.
The above diagram shows the topics a channel partner needs to get under control and execute when building their first industry cloud solution. Obviously, some partners might already have taken some steps and thus have less work to do.
Related to this journey, in this blog post, I reflect only of the “cost” element. Please see the end of this blog post for a link to more details of each aspect of the journey.
Plan and Design
Decide what to build: as a partner, you decide what to build – so there is no cost here. Partners typically start with “uplifting” one of their existing solutions to the cloud or productizing their existing service offerings.
Study PE build contract: First of all: to build (any) IP on top of SAP technology and commercialize it, a partner must have an appropriate contract with SAP. The PE sell contract covers reselling of SAP IP, but building and commercializing partner IP is something else. PE build contract is the answer. Thus, PE sell partner needs to add a PE build track to their contractual framework with SAP. Adding PE build track used to have an extra cost for a PE sell partner, but for more than a year SAP has removed this fee. Thus, no cost here! The same is true for PE service partners.
Understand cloud mindset: no cost to SAP here. Check out the “journey” link below for further guidance and enablement.
Learn SAP BTP: SAP provides a lot of eLearning and “boot camps” free of charge. Certification of developers on SAP BTP is recommended and has a cost, but certification of resources is not a hard requirement to get a solution approved as an SAP industry cloud solution.
Study ARC and ICRC guidelines: no cost. Access to these guidelines is free of charge, no surprise here.
Build and Innovate
Obtain development system: SAP recently launched new “free tier services” in which you as partner can get going with exploring and learning with free access to some SAP BTP web services. However, when you get seriously into developing a solution you should expect to need more SAP BTP web services resources, and this will have some costs associated. SAP tries to keep these costs as low as possible. Best practice is to consider these cost as part of “productive system cost”. Thus, you can consider distributing test and development system cost to the cost of the live environments of your customers.
Understand revenue share, royalty and run costs: When customers start to run your solution on SAP BTP and pay you for this, you will need to pay revenue share / royalty fees to SAP. This revenue share payment to SAP is to cover the infrastructure costs that SAP has (virtual servers, electricity, dev ops, etc.). Thus, these “costs” are not “program costs”. They are more part of “cost of goods sold”. There are some minimum costs, and it is important that you understand these so that you price your solution properly. You can tell your prospects that SAP runs/operates your solution together with you!
Leverage technical extensibility advisors, and participate in Hack2build: These high-touch services are free of charge via the partner benefit catalog and are great ways for you as a partner organization to get more 1:1 discussion about architecture questions, best practices etc. with an expert at SAP. Note: for some of these free services, SAP requires partners to have a minimum level of knowledge on SAP BTP to avoid 1:1 training on the basics of SAP BTP. Thus, there might be some requirements for a partner to have certified SAP BTP experts to leverage these free services. And certification has a cost as we talked about earlier.
Leveraging development community: Free of charge. Check out the “journey” presentation for three ways to leverage communities during building a solution.
Engineering support from SAP: If all the above is not sufficient for you as a partner to feel confident on how to develop you can request 1:1 expert engineering service from SAP to discuss any development related questions and advise you would like to get in your specific situation. You can request as much as you want, but it comes at a nominal cost.
We can keep this short: no costs here! SAP will execute the ARC and ICRC checks on your industry cloud solution without any additional cost, and there are no additional costs involved in the effort SAP will do to check and advise you on publishing your solution on the SAP store. These three activities are included in the PE build track, which I stated earlier was free-of-charge for PE sell partners.
An additional comment I want to make to address a question often asked: Are there any yearly fee for having an approved industry cloud solution? The answer is: no.
It is Not All About Cost…
In conclusion, SAP has done a lot in the last year making it less expensive for partners to join the program to develop industry cloud solutions on SAP BTP. The main “cost” a channel partner will have is obviously the manpower needed to transition their IP into real cloud solutions. Some channel partners look at this as a classical investment case: what are the costs and what is the extra revenue we can make? Just a straightforward business case, right? However, it is dangerous to boil this down to a simple question about “extra revenue”. Cloud is coming big time in our industry and if a channel partner is not positioned correctly, it is not about “extra revenue” but it is about “losing existing revenue streams”.
SAP itself has already taken drastic measures in this direction, driving revenue proactively from own on-premises IP & services to cloud solutions revenue. It might “hurt in the short term, but this is a strategic topic. I recommend channel & service partners look at it in the same way.
It’s All About the Journey
To learn more about all the aspects in the “Journey to develop your first SAP’s industry cloud solution,” read this recent blog on SAP’s industry cloud for mid-market partners.
To read more on SAP’s industry cloud, please follow my profile or the “industry cloud” tag. I post a blog post on the topic of SAP’s industry cloud and channel partners every second week. You can find Q&A and post questions in SAP’s industry cloud community.
In my next blog post I discuss the three ways to improve your channel business with SAP’s industry cloud.
1. Does the PE Build Program support the purchase of BTP licenses before any customer sales have been made?
It makes sense that Industry Cloud solutions are developed as multitenant SaaS applications on BTP. Under this architecture, the application itself must be deployed to a productive BTP environment so that customers can subscribe to it. In other words, the application must be deployed to production before any customers sign up. To support this, is it therefore possible to purchase a minimum BOM of the needed BTP services before any customer deals have been registered?
2. What flexibility is there for custom commercialisation agreements as an alternative to the revenue share approach?
The Customise your agreement section of The SAP Partner Edge Build web page states that:
Does this mean that the following licensing options could be considered to commercialise partner applications built on BTP?
3. How does the OEM licensing model work for partners building applications on SAP BTP?
OEM licensing agreement allows to buy upfront cloud credits and also provide Provider account for enabling subscriptions of various customers on SaaS model. Customer need not have to buy SAP BTP from SAP . It is partner responsibility to bundle in Apps
Hope this answer your questions