Outsourcing AMS – Catching on with SAP Customers of All Sizes
By Sam Sliman, President, Optimal Solutions Integration
It is well known that SAP is a very popular platform among large, global companies. 74% of Fortune 500 companies run their business on SAP. What is perhaps lesser known is that the majority of SAP’s 109,000 customers (86,000 according to SAP’s latest tally) are small to midsize enterprises (SMEs). SMEs also represent SAP’s fastest-growing customer segment, notching a 300% increase over the past three years alone.
When it comes to investing in IT, the preferences of SMEs are markedly different from those of large enterprises (LEs), but that’s not to say that SME IT practices are not influenced by what larger companies are doing. In the case of SAP applications, there are many areas where SMEs benefit directly from lessons learned by large enterprises -- with the growing trend among LEs to outsource their SAP application management work topping the list.
For large enterprises (> 2,500 employees), staffing shortages and economic factors are the primary drivers for outsourcing their SAP application management work. The need for cost reductions, particularly during an economic downturn, compels business leaders to evaluate their IT operations and identify underperforming and/or high-cost areas.
With increasing frequency, large enterprises are reaching the conclusion that they are spending too much time and money on the day-to-day management and support of their SAP systems. Moreover, in growing numbers LEs are coming to the realization that they simply are not very good at application management -- either because of insufficient skills and/or insufficient manpower.
Whatever the reason, the plain truth is that LE SAP customers with complex, geographically dispersed deployments have a hard time keeping pace with the business demands of their global users, and consumed by ongoing application management activity, they are less able to focus on innovation or business process improvements.
Outsourcing their SAP application management work to an experienced AMS provider affords the best (and perhaps fastest) way for LEs to reduce TCO, optimize application performance, and free up resources for more strategic initiatives.
Small and midsize businesses (< 2500 employees) and rapid-growth companies deploying SAP Business All-in-One solutions benefit greatly from the experience of SAP LE customers. Based on the SAP Business Suite, SAP Business All-in-One applications are preconfigured, industry-specific solutions developed by SAP partners to provide rapid implementation and rich, out-of-the-box functionality.
It is important to note that SAP All-in-One solutions are not a ‘light’ version of SAP Business Suite applications. They are full-fledged Business Suite applications that leverage a templated deployment methodology for fast, fixed-scope, fixed-cost implementation.
SAP Business All-in-One solutions feature built-in industry best practices learned over many years of LE deployment, making them ideal for rapidly growing SMEs that require the performance, functionality and scalability of a robust enterprise-class solution at a cost commensurate with their size and budgets.
Arguably SMEs have even more to gain than their LE counterparts by outsourcing the management of their SAP systems. SMEs need to preserve capital, maintain predictable costs and keep their limited resources focused on core competencies – all of which makes outsourcing their SAP application management work a natural fit. Meeting this need head on are select SAP partners – including Optimal of course – who offer a world-class SAP application management service (AMS) as certified Run SAP partners.
(Read Optimal Solutions Press Release: Optimal Solutions Now Certified in Run SAP® Methodology)
Some of these partners – also including Optimal – are authorized to offer a hosted, subscription-based delivery model for SAP Business All-in-One solutions. Under this new model, SME customers pay a flat monthly or quarterly subscription fee that covers everything associated with using SAP Business All-in-One – from up-front hardware setup to ongoing application hosting and management.
(Optimal Solutions is among the first SAP partners in North America to receive SAP certification to provide subscription-based hosting for SAP Business All-in-One solutions. Read SAP Press Release: Optimal Solutions Certified by SAP® to Market Hosted, Subscription-based SAP Business All-in-One Solutions)
According to industry pundits, this hosted, subscription-based model is spot on with market trends. According to Gartner, by 2012 at least one-third of business application software spending will be as service subscription instead of as product license, and a recent market study by In-Stat forecasts cloud computing and managed hosting spending by U.S. businesses will surpass $13 billion in 2014, up from less than 3 billion today.
Regardless of whether they opt for the traditional on-premise licensing model or the new hosted, subscription-based model, at bottom SME customers deploying SAP Business All-in-One are best served by outsourcing their application management responsibilities and focusing all internal resources on core competencies and growing their business.
Finally, small companies who choose SAP Business ByDesign are, by default, outsourcing their application management. As SAP’s integrated on-demand solution, SAP Business ByDesign is designed for SMEs with limited capital budget, limited IT support, and no desire to build and maintain in-house IT infrastructure.
Growth is an objective shared by businesses of all sizes. Small companies strive to become midsize companies; midsize companies work to become large companies; and large companies strategize to become even larger players, either by acquisition or entering new markets (or both).
Depending on the company’s size, SAP has a solution tailored specifically to drive efficiency and growth, and while these SAP solutions differ, it is rapidly becoming common practice for SAP customers of all sizes to leave the ongoing maintenance and support of their SAP applications to either SAP or an experienced AMS provider.
