Executive Summary

SAP’s original plan for dominating the database market with HANA was overly optimistic. The software was given a massive marketing and PR push, and the company aimed for a penetrate and radiate approach, in which customers would adopt HANA and then purchase follow-on database products.

In May 2017, however, SAP agreed to continue supporting Oracle database products through 2025. This suggested SAP was quietly distancing itself from the aim of dominating the database market with HANA.

Introduction: Changes in Policy

SAP has been communicating that it will replace Oracle DB with HANA on a mass scale. You will learn about SAP’s original plan with HANA and then discuss the recent unpublished change in policy regarding SAP Oracle, which says a lot about what SAP has internally realized about HANA and its future.

SAP & Oracle Partnership Future

The relationship between SAP and Oracle had changed when SAP began competing aggressively with Oracle in databases (for SAP customers, no one appears interested in purchasing HANA for non-SAP applications). Recently, SAP and Oracle announced a continuation of their relationship.

In this article, we will review the old version of the agreement from the new version of the agreement.

The Old Version of the Agreement

“SAP also enjoyed the right to resell to customers a license to use an Oracle database in connection with SAP applications, as well as the right to support the combined SAP and Oracle offerings. SAP and Oracle would like to announce that they have recently agreed to an extension of their Reseller and Support Agreement. This extension continues the existing Oracle and SAP relationship. For the next three years (through December 31, 2017), SAP customers can continue to acquire Oracle licenses from SAP to support SAP business applications. For an additional period of two years, SAP will continue to provide integrated support for SAP/Oracle applications (through December 31, 2019) and has committed to support Business Suite 7 core application releases through 20125.”

Considering The Original Plan for HANA

SAP’s original plan for HANA was optimistic in the extreme. It was championed by Hasso Plattner, and the plan was so extensive that describing all of it would be its article. However, it included the following:

Books: Four books written by Hasso Plattner around in-memory computing.

Marketing and PR: A massive marketing and PR push for HANA, which must have been one of the greatest efforts and expenditures in the history of enterprise software.

Exaggerated Benefits: The proposal of enormous benefits to HANA, some of which are cataloged in the article When Articles Exaggerate HANA’s Benefits.

The Illusory Concept of Simplification: The proposal that because of HANA’s simplified model, that HANA would massively reduce the complexity of SAP as well as the business processes on projects.

Artificially Limit S/4HANA to HANA: Here, SAP took its best-selling ERP system and, in the new version, called S/4HANA, limited it only to HANA. This was always an anti-competitive move, as there was never any true technical reason to perform this limitation. But as usual, the Federal Trade Commission, as well as the European Trade Commission, were not paying attention and did not step in. The concept was that many customers would migrate to S/4HANA, and then they would be forced into purchasing HANA. But that approach has not yet worked out as S/4HANA adoptions have been incredibly low, which is covered in the article, How SAP Controls Perceptions with Customer Numbers .

. Penetrate and Radiate: SAP’s had a follow-on strategy after getting HANA into the data layer. SAP has all types of follow-on databases and products that intended to pitch to customers after they had purchased HANA. One of the issues with HANA is that SAP does not divulge all of the components that are necessary to run HANA when one buys a copy of HANA. The customer finds out about complementary products after they have made the purchase. But secondly, SAP had positioned lagging databases, such as SAP IQ, formally Sybase IQ to perform data archiving for HANA. The argument was going to be that SAP IQ communicated much better to HANA, and this would, the plan went, force out database companies that were much better at archival, in favor of SQP IQ.

SAP’s Plan to Grow Into the Database Layer

As Oracle had acquired its way into the application layer using its database market share, SAP intended to grow (rather than acquire) their way into the database layer. In this way, they planned to push Oracle out of “their” accounts. For all software vendors, you should be on notice. When you sell software into an SAP account, they believe they own that account.

SAP’s move into the database layer was based on inaccurate information. Oracle acquired its way into the application layer. This is something I am not a fan of for several reasons: as acquisitions lead to concentrations of markets, and concentrations of markets invariably lead to less competition and lock-in.

This lesson needs to be relearned by every generation. But Oracle did have real applications that had real value propositions. So while I disagree with whether Oracle’s massive acquisition spree should have been approved by the Federal Trade Commission (which seems to spend most of its time eating donuts and taking long naps), it was not in itself deceptive. Except that Oracle promised to add value to its acquisitions, when it didn’t.

The Long-Term Problems with Software Acquisition

Here is why software acquisitions are, in most cases, not a good idea for the government to approve. They relate to:

Market Inefficiency

Market Concentration

Market Inefficiency

Acquisitions are typically made by companies that are dominant in one space. Oracle in databases. SAP in large company ERP. Microsoft in operating systems and office suite. These “excess” profits are then used to purchase often companies in related areas. However, this results in lower profits. Over half of Oracle’s profits still come from databases. Three-quarters of Microsoft’s profits come from Windows and Office (not XBox, phones, etc.).

Acquisitions (and even growth into non-core areas) means a decreasing efficiency of the enterprise as bureaucracy increases and the additions are less effective than the core. About the only company that seems to counter this rule is Amazon. Amazon appears to be able to move into anything they do and be highly effective at doing so. They even migrate into areas like AWS that have a higher profit margin than the area they started in (online retailing).

Market Concentration

Acquisitions lead to concentrations of markets, and concentrations of markets invariably lead to less competition and lock-in. This lesson needs to be relearned by every generation. But Oracle did have real applications that had real value propositions.

So while I disagree with whether Oracle’s massive acquisition spree should have been approved by the Federal Trade Commission (which seems to spend most of its time eating donuts and taking long naps), it was not in itself deceptive.

However, SAP’s statements about HANA were always inaccurate.

The Recent Change in Policy on Oracle

SAP’s plans for HANA were so extravagant that they fell into the category of fantasy. I was working through a consulting company several years ago and attended a meeting where several men from SAP came over to educated us on HANA and S/4HANA. What was pitched as an educational presentation became one of the most aggressive sales pitches for HANA and S/4HANA or any other product for that matter that I have ever witnessed.

Taking a Deep Drink of SAP HANA Kool-Aid from SAP Marketing

At one point, one of these highly confident men stated that “there was going to be no innovation in SAP outside of HANA and S/4HANA.”

“there was going to be no innovation in SAP outside of HANA and S/4HANA.”

This is a ridiculous statement, as it implies that no other SAP products would receive any development (at SAP, “innovation” is a euphemism for “development.” And of course, ceasing all development on all SAP products aside from HANA and S/4HANA would be a terrible and very illogical move. It is difficult to overestimate the hyperbole that surrounded HANA, and to some extent, still encompasses HANA. HANA took over SAP conferences, it took over the marketing messaging of the SAP consulting companies, with each attempting to out-HANA one another.

At one consulting company that I was contracted to, a salesperson with a fantastic pipeline of HANA deals was brought into the company without checking anything about him, the desire for some HANA expertise was so high that one. But probably other consulting companies would grab any person with HANA on their resume, and at very favorable terms to the resource. On LinkedIn, virtually overnight, people added HANA not only to their experience to their job titles. There were HANA Solution Architects and HANA Marketing Specialists.

The SAP ecosystem could simply not get enough of HANA!

The Problem with Not Making Sense

There was just one little problem, and it took me a few years to figure it out. But HANA simply did not make any sense. I began investigating HANA from multiple dimensions several years ago, first because the hype around HANA smelled strange. I reminded me too much of the Netweaver marketing program that preceded it. I compared HANA to Netweaver in the article Has SAP’s Relentless HANA Push Paid Off?

“Information about the database reseller contract between SAP and Oracle (May 30 2017) The following text has been agreed upon by SAP and Oracle: SAP and Oracle have agreed to a long term extension of SAP’s global reseller and support relationship. For more than twenty years, SAP and Oracle have worked together to provide customers with a supported SAP/Oracle environment, running SAP applications and an Oracle database. During this extension SAP customers can continue to acquire Oracle licenses from SAP and Oracle to support their SAP business applications, and SAP and Oracle will continue to offer support for the combined Oracle/SAP Offering.”

This is one of the longest partnership announcements SAP has ever signed. SAP salespeople were until recently telling customers that support for Oracle would stop in 2017. This contract between SAP and Oracle changes that.

How SAP is Underemphasizing This Change

Here is the entire text of the SAUG, the SAP Australian User Group article on the contract.

“”SAP and Oracle would like to announce that they have agreed to a long-term extension of SAP’s global reseller and technical support relationship. For more than twenty years, SAP and Oracle have worked together to provide customers with a supported SAP/Oracle environment, running SAP applications and an Oracle database. During this extension new and existing SAP customers can continue to acquire Oracle licenses from SAP or Oracle to support their SAP business applications, and SAP and Oracle will continue to offer Technical Support for the combined Oracle/SAP offering.” SAP and Oracle have agreed to a long-term extension of SAP’s global reseller and support relationship. For more than twenty years, SAP and Oracle have worked together to provide customers with a supported SAP/Oracle environment, running SAP applications and an Oracle database. During this extension SAP customers can continue to acquire Oracle licenses from SAP or Oracle to support their SAP business applications, and SAP and Oracle will continue to offer support for the combined Oracle/SAP offering. Between now and 2025, SAP will continue to offer integrated support for all Oracle/SAP environments (full time and runtime). SAP will continue its current resale practices Oracle runtime licenses for the first part of the extension period, through December 31, 2023. For the final two years of the extension, between January 1, 2024 and December 31, 2025, SAP will sell Oracle runtime licenses only to existing Oracle runtime customers.”

That is 144 words. One hundred and forty-four words on a significant change in contractual terms that all but spells out a massive change in SAP’s HANA policy. There is no introduction to the article, and it is the identical language as in the contract announcement. It as if ASUG is ashamed to write it.

What ASUG Wrote Could Happen With the Agreement

In the article About Those Oracle Runtime Licenses That You Own, Geoff Scott proposes that it is time to migrate to HANA from Oracle. “Another important thing to note is that the SAP-Oracle database licensing agreement is again up for renewal in 2017. What happens next can be anything from additional price increases to an end to the agreement, to something in between. In other words, uncertainty—which is a hard thing to plan for.” So ASUG proposes here that the SAP-Oracle licensing agreement could be terminated? Did ASUG think this was within the realm of possibility when they wrote this, or was this just FUD? Because it seems to be the very definition of FUD. If that did happen, what a massive change of the rules that would have been. Geoff Scott then finishes with: “It’s hard not to conclude that if SAP is your long-term enterprise software partner, you need to make a move to SAP HANA, Suite on HANA or SAP S/4HANA. All of the other options are intermediate stop-gaps, which require time and money. Better to do this once and right than have to do it multiple times.” Thus, the answer is to remove all other databases and replace them all with HANA! Any database that is not HANA is a stopgap. ASUG’s articles must never be differentiated from SAP. SAP controls SAP, and this article should be seen as mostly ghostwritten by SAP. Geoff Scott is a puppet, and he would never actually write anything that was not first approved by SAP. Are Vendors Also Partners? Did it occur to ASUG that these other vendors are also “partners” with these customers in the same way that SAP is a “partner”? The term partner is just misleading. SAP, as with Oracle, expects to get paid by their customers. Therefore, these are customers and SAP, and Oracle is vendors. This reframing of customer/vendor relationships as partnering is a highly inaccurate way to describe entities that pay and that are paid. Partners frequently team up to service another customer together. Partners often don’t transfer funds for goods and services. The words in the English language have already been created to explain these relationships. Furthermore, many customers have had SAP as a vendor and have also had Oracle, IBM, or Microsoft as vendors. Why is this logic to move more business over to one vendor versus the other? What is the TCO of HANA? Something that ASUG may be interested in knowing is that they think a 7% increase over two years is high. They should read the Brightwork HANA TCO Study, which estimates that HANA is more than 2x the TCO of “AnyDB.”

Adjustments

The question is how much is SAP backing off of its approach of trying to replace Oracle with HANA. SAP is continuing to provide false information to customers regarding compatibility to push out database vendors from SAP customers, as alleged in the Teradata complaint.

“On information and belief, SAP has also more recently begun significantly

restricting Teradata’s ability to access customers’ SAP ERP data stored in HANA for use in Teradata’s EDAW products, thereby ensuring that SAP’s Top-Tier ERP Applications customers utilize HANA (and only HANA) for all of their database needs.”

The Future of HANA?

Here is another problem SAP has. Without a large installed base of HANA, they are at a disadvantage regarding much more popular databases regarding the number of people reporting things, the “community.” My view is that SAP exaggerated HANA hoping to “fake it until you make it.”

But without that growth, the marketing push is fading, and it will become more evident that HANA is not a fast growing product, and so its inertia becomes stalled.

Does this look like a growing database? According to DB-Engines, which ranks database popularity, HANA has been declining for eight months. It should be recognized that SAP pumped a considerable amount of marketing dollars and company energy into pushing HANA, actually to the detriment of other of SAP’s offerings. This is why HANA’s future does not look good. HANA is out of runway on applications where it adds some reasonable value and is now receiving blowback from SAP’s exaggerations versus real-world performance. IBM and Oracle are now increasingly pushing back on SAP — even though both companies have relationships with and depend upon SAP for revenues.

Taking the Creme off the Top of the Coffee with BW Conversion to HANA

As you may have read in my recent article, SAP already took the creme off the top of the coffee when it sold into BW. After the BW, the value proposition becomes considerably weaker as HANA is just an analytics database masquerading as something more.

Now SAP is locked into this strategy, but it does not make any sense.

I have focused on proposing that SAP is a legacy. Its new products have turned out to be poor values had had a weak implementation history on accounts, as is covered in the article, How SAP is Now Strip Mining its Customers. It’s time to keep the ERP system, but stop buying so much from SAP. Our view on this is so emphatic that it is a primary theme on the Brightwork home page.

Of course, that is radical to SAP customers. But really, none of what they said would happen with regards to the benefits of these new non-ERP systems worked out. It was, in total, a massive misallocation of resources into a failed strategy. But the customers that did this can’t admit the error. Interestingly, decision makers are very rarely held accountable for bad decisions, and how bad so many of these decisions are when analyzed in detail.

As I mentioned in my article last year, the other teams within SAP will not like to be discounted heavily and then charge full price for HANA. It gives the HANA guys an unfair share of recognition within the company.

Who Was Wrong and Who Was Right?

Well, SAP was one. SAP claimed they would be the #2 database vendor in the world back in 2017. According to DB-Engines,

They have the 13th most popular database in the SAP Adaptive Server.

They have the 19th most popular database in HANA.

They have the 49th most popular database in SAP IQ (formerly Sybase IQ) and the 52nd most popular database in SAP SQL Anywhere.

Does that add up to the #2 spot? I need someone good at math to help me out with this one. Does anyone have Bill McDermott’s number? His data is always so reliable.

It seems reasonable for customers to ask SAP salespeople to apologize to them for telling them that SAP would not support Oracle after 2017. That looks quite dishonest, especially after that date has now passed.

Hyping HANA

In the many articles that followed on HANA, I was repeatedly told by people that worked for SAP or for large SAP consulting companies that I did not get it. That HANA was going to be a huge success, and I simply lacked the vision. I was exposed to many discussions by people that knew little about databases or comparative database designs that HANA was the future. This is what it is like working in SAP. When you work in SAP, you are expected to mindlessly and loyally support the notion that SAP is the best at everything. And that the mere existence of an SAP product, means that this product should be used — because it is SAP. The lunacy of people talking about things they did not understand reached a fever pitch when I was condescended by a recruiter about how HANA would be so great and that I was not getting it. That is right people, a recruiter — that is a person who never touches much less sees any of the systems that they place people for, who worked for Dickenson and Associates, explained to me that I needed to get on the “HANA train.” He told that his only reason for supporting HANA was not to staff HANA resources, but was related to making the world a better place. (I can’t make this stuff up)

How To Deflect That You Were Wrong About HANA

A little while ago, I began to notice a pattern in the rhetoric with people I would debate, which is the topic of the article How to Deflect That You Were Wrong About HANA. This described an argumentative style that moved away from the main proposals of HANA when challenged on them, to stating that HANA was “so much more” than a database. Then the topic was changed to the HANA Cloud Platform or HANA Studio, etc.. SAP had simply come up with several products and had slapped the name HANA on them. This created a lot of confusion but allowed HANA proponents to substantially move the topic in other areas, and to declare that HANA was a “platform.” We covered the accuracy of the information providers around HANA in the article Who Got it Wrong and Who Got it Right on HANA?

Advice on Enjoying the Quiz

To see the full screen, just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

Conclusion

A vast number of people have been proven wrong about HANA. HANA fatigue has hit not only customers but SAP as well. Other groups inside of SAP are tired of playing second fiddle to the HANA teams.

The word from inside of SAP under brackets of “you did not hear this from me, but ..” SAP now realizes that it cannot come anywhere near approaching the uptake of HANA that they had hoped.

This is the reason for extending its relationship with Oracle .

This is why SAP does not want to talk about it and why they want it kept as quiet as possible.

HANA will become just another of SAP’s offerings now. It will not become, as Bill McDermott once said, the “basis for everything that SAP does.” More information is getting out that HANA is just not as advertised, and I predict from here on out, SAP is going to lose far more arguments on HANA than it will win.

As HANA’s time in the sun has come to an end, in a future article, I will cover how SAP will have to reverse itself on HANA. It will be tricky, as it must be done in a way that will not offend Hasso Plattner. Hasso must be handled very delicately. He must be told that his vision was an absolute genius, but SAP customers could not simply see his fantastic long-term vision.

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References

https://www.g3g.com/hubfs/White_Papers/Projected_Cost_Analysis_of_the_SAP_HANA_platform.pdf?t=1455200742977

https://www.saug.com.au/news/saps-global-reseller-and-support-relationship-with-oracle-extended

https://www.oracle.com/us/solutions/sap/introduction/overview/index.html

https://www.businessinsider.com/sources-why-vishal-sikka-left-sap-2014-5

https://www.forbes.com/sites/oracle/2015/10/29/larry-ellisons-world-view-7-observations-straight-from-the-hip/

https://www.asug.com/news/about-those-oracle-runtime-licenses-that-you-own

https://www.computerworlduk.com/it-vendors/will-oracles-customer-base-migrate-sap-business-suite-on-hana-3420138/

https://blogs.gartner.com/donald-feinberg/2014/09/28/in-memory-dbms-vs-in-memory-marketing/

*https://www.simba.com/blog/donald-feinberg-and-vishal-sikka-explain-about-in-memory-and-sap-hana/