The Business Case for SAP Migration from Solaris/SPARC to Windows Server November 2009 795 Folsom Street, 1 st Floor San Francisco, CA 94107 Tel.: 415.992.7791 Fax: 415.373.3892 www.piquesolutions.com
Contents Executive Summary... 1 Methodology... 2 A Framework for Evaluating Migration from Solaris to Windows... 4 Framework Cost and Benefit Drivers... 5 A Model for a Migration of SAP from SPARC/Solaris... 5 The Business Case for Migration... 6 1. Summary Economic Analysis... 7 2. Cash Flow Summary Analysis... 8 3. Migration Cost Analysis... 9 4. Migration Cost Savings Analysis... 10 5. Migration Value Drivers... 12 6. Strategic OS Migration Drivers... 13 Migrating to Windows Server vs. Linux... 14 Conclusions and Guidance... 16 Appendix A: Description of Cost and Benefit Drivers... 17 Microsoft and Windows Server are trademarks of the Microsoft group of companies. Solaris is a registered trademark of Sun Microsystems, Inc. UNIX is a registered trademark of The Open Group. Linux is the registered trademark of Linus Torvalds in the U.S. and other countries. All other trademarks are property of their respective owners. 2009 Pique Solutions. All rights reserved.
Executive Summary Microsoft Windows Server is an increasingly popular platform for the hosting of enterprise application workloads such as SAP. More than 65,000 SAP installations run on Windows more than all other platforms combined and almost two-thirds of all new SAP installations are deployed on Windows. That being said, there are many customers with SAP installations running on proprietary Sun RISC-based (SPARC) hardware and the Solaris operating system that have migrated, or are now considering a migration, to Windows Server. There are numerous advantages as a result of this migration, ranging from hard cost savings to IT alignment with strategic initiatives. This paper provides a compelling business case for the migration of SAP from the SPARC/Solaris platform to Windows Server on standard hardware platforms. We present a cost and value model that clearly demonstrates the quantitative benefits of the server hardware, operating system and even database software platform migration. The benefits include both tactical, hard costs savings as well as strategic, long-term benefits. The ROI of migrating SAP from SPARC/Solaris to Windows Server is 293% over a 5-year time horizon, with a payback of 15 months; a migration to Windows Server provides 110% better ROI than a migration to Linux. Prior Pique Solutions survey research, as well as the research participant screening as part of this project, indicates that more companies are migrating SAP from UNIX to Windows Server as compared to Linux. Our previous research indicated as much as a 3:1 ratio of companies moving to Windows over Linux. Certainly, a key factor to explain this difference is the economic benefit of migration of the server operating system, and even the underlying SAP database, to Microsoft Windows Server and Microsoft SQL Server, respectively. As our business case demonstrates, a migration to Linux, despite the possible savings in operating system software licenses, clearly does not provide the level of cost savings and business value as compared to a migration to Windows Server. Pique Solutions research found the following key differences: The migration of SAP from SPARC/Solaris to Windows Server and SQL Server provides a rapid payback, an average of 15 months based on the companies studied. This payback even includes an upgrade to the SAP applications as part of the migration investment. The migration also provides a dramatic five-year return on investment of 293%, based on substantial cost savings and business value creation as compared to continuing with the legacy SPARC/Solaris-based installation of SAP. Key benefits include elimination of expensive support agreements, reduction in labor costs and database-related savings. The migration to a Microsoft operating system and database platform provides compelling advantages over a migration to Linux, including a 110% advantage in terms of ROI and a 6-month shorter payback. In addition to the compelling economic benefits, the migration to Windows Server is viewed as strategic, helping companies increase competitiveness, improve business agility and predict IT costs more accurately. 2009 Pique Solutions. All rights reserved. 1
With Sun s year-over-year product revenues dropping by 32% last quarter, the longer-term uncertainties associated with the Oracle acquisition, and the grim UNIX server analyst forecasts, organizations evaluating their long term operating system investments would be wise to consider Windows Server and SQL Server for their deployments of SAP. The economic and strategic benefits are demonstrated in this White Paper. Methodology Pique Solutions approach to the project consisted of a detailed research and data gathering process, which included developing and validating a cost and value model for evaluating the migration from SAP running on SPARC/Solaris to SAP running on Windows Server and/or Linux. The study hypothesis, based in part on extensive Pique Solutions survey research conducted earlier this year, was that there are substantial economic and strategic advantages of migrating SAP from SPARC/Solaris to Windows Server, and that these advantages are far greater relative to a migration to Linux. We constructed a preliminary migration cost, cost savings and business value model based on prior Pique Solutions research and input from SAP migration experts, including a large systems integration firm specializing in ERP migrations. Also included in developing the model was indepth input from two leading IT Advisory firms who analyze and forecast the server market. We selected ERP migration, specifically SAP, for several reasons. Firstly, it represents a businesscritical workload that has wide ranging, intra-company implications across business units, departments and functions. Due to the nature and scope of ERP applications, it also can affect supply and demand chain dynamics. These implications range from tactical cost cutting targets to long-term strategic initiatives. Secondly, in some cases it includes a migration of the SAP database and/or the underlying database operating system. This provides organizations an even greater opportunity for cost savings and business value generation. After a detailed screening process of a pool of 1,500+ potential candidates (a random sample of U.S. companies recruited via a proprietary panel of Sr. IT Decision Makers), we identified and qualified eight interviewees who participated in the detailed, blinded primary research and data gathering process. The data gathering consisted of two phases, a phone interview discussing the migration project, the high level before and after environment details, key cost and benefit information, and the qualitative migration story. The second phase of the interview involved populating a detailed data collection instrument that captured the migration costs, the actual/expected cost savings, the actual/expected business value drivers and the strategic benefits achieved after migration. A few details of the study participants are as follows: Participants were Sr. IT decision makers in companies with more than $1B in annual revenues. Industries represented included IT Systems Integration, IT Services, IT Advisory Services, Wholesale, Manufacturing, Telecommunications, Banking and Financial Services. The pre-migration ERP deployments ranged from a highly centralized, two very large server SAP data center deployment to a very distributed 500 SAP server migration based on a large number of company branches. All but one study participant experienced a server consolidation as the result of the migration project. 2009 Pique Solutions. All rights reserved. 2
All of the participants upgraded to a newer version of SAP in conjunction with the server OS migration; half of the participants also performed a database, or database OS, migration in conjunction with the SAP migration. Based on the primary research and data collection, along with analyzing both private and publicly available secondary research, we revised the migration cost and value model to reflect the results of the primary and secondary research. We also uncovered interesting directional data in the screening process utilized to source study participants. Of the 1,556 potential research candidates for this study, more than 45% affirmatively responded that they had completed some form of migration from Sun Solaris to Windows Sever or Linux. Of those, 17.1% indicated that they had migrated SAP from Sun Solaris to Windows Server, while only 10.9% indicated that they had migrated SAP from Sun Solaris to Linux. Windows Server leads Linux also in the number of migrations of "Other Mission-Critical Workloads" with a compounded advantage of 11.2% over Linux. These results are illustrated in Figure 1. Figure 1. Migration Experience Based on Screener Results Incidence of Migrations from Sun Solaris Solaris to Windows Server 17.1% 24.5% Solaris to Linux 10.9% 19.5% 0% 20% 40% SAP Other Mission-Critical Workloads N = 1,556 This directional data is consistent with prior Pique Solutions primary research, which indicated an even greater difference in past migrations of ERP systems from the UNIX platform. In the case of Pique Solutions May 2009 survey on UNIX migration, nearly three times the number of participants migrated ERP to Windows Server as compared to Linux. Figure 2 presents the data for the respondents who have previously migrated ERP from UNIX. Figure 2. Number of Respondents who Migrated ERP to Windows vs. Linux 25 20 15 10 5 0 20 ERP UNIX to Windows only Target platform for those who have migrated ERP from UNIX 7 1 ERP UNIX to Linux only ERP UNIX to Windows & Linux ERP UNIX to Windows only ERP UNIX to Linux only ERP UNIX to Windows & Linux N = 28 2009 Pique Solutions. All rights reserved. 3
A Framework for Evaluating Migration from Solaris to Windows Pique Solutions has developed an intuitive framework for evaluating the cost savings, business value and strategic benefits for migrating SAP from SPARC/Solaris to Windows Server running on standard hardware. This framework includes four key elements: 1. SAP operating system and database migration cost analysis 2. Post-migration cost savings analysis 3. Post-migration business value improvement analysis 4. Post-migration strategic benefit analysis The framework was designed to support our hypothesis that there is a spectrum of cost savings and value creation ranging from an incremental hardware refresh to a dramatic savings and value creation associated with a migration of SAP to Windows Server and SQL Server as the underlying SAP database. Some SAP customers running on Sun hardware and software may also evaluate a migration to Linux, so our framework quantifies and compares the relative cost and value of Windows Server vis-à-vis Linux. Figure 3 illustrates the decision points for SAP customers currently running on Sun SPARC hardware and Solaris and the impact of those decisions on cost savings and business value. Figure 3. A Framework for Evaluating a Migration of SAP from SPARC/Solaris Cost Savings, Business Value, Strategic Benefit 1. SPARC/Solaris to Windows Server Migration Migration cost Cost savings Business value Strategic benefits SAP Solaris (RISC) Database (Oracle?) Migration or Hardware Refresh?? Migration to Windows Or Linux? SAP Solaris (x86/x64) Database (Oracle?)? SAP Linux Database (Oracle?) SAP Windows Server Database (SQL Server) 2. Relative Cost & Business Value Advantages of Windows vs. Linux Migration cost Cost savings Business value improvement Strategic benefits SAP Migration Decisions 2009 Pique Solutions. All rights reserved. 4
Framework Cost and Benefit Drivers Table 1 provides a list of the cost, cost savings, business value and strategic drivers included in the migration business case framework and economic analysis. A description of each of these line items can be found in Appendix A (Tables 3 6). Table 1. Business Case Framework Cost and Benefit Drivers Migration Cost Line Items Cost Savings Line Items Business Value Line Items Strategic Benefit Line Items Migration planning Implementation (Internal) Implementation (3rd party) Training Hardware costs OS licensing costs OS support fees DB licensing costs Travel Admin/Misc. Software license (growth) Hardware support/ maintenance OS software support/ maintenance DBMS software support/ maintenance Management/monitoring software Infrastructure software SAP/OS administration labor Database administration labor SAP/OS operations labor SAP/OS help desk labor Remote/extended workforce enablement Environmental (power/cooling) Platform leverage (integration, collaboration, BI, etc) Future upgrades/releases Other costs/savings Availability related value improvement Increase in user adoption of SAP Process or cycle time savings/ value (order entry, etc) Competitiveness Overall business agility / time to market Predictability of costs Access to IT resources IT standardization / IT best practice approach Reduction in risk A Model for a Migration of SAP from SPARC/Solaris Based on the cost, cost savings and business value drivers in the preceding table, Pique Solutions developed a comprehensive, comparative cost and benefit model to quantify the migration return on investment (ROI) over a five-year analysis horizon. The costs and benefits were based on the actual and expected costs and benefits validated in the primary and secondary research phases of the project. A discounted cash flow analysis was employed to account for the relative timing of the costs and benefits spanning the five years. The cost savings and benefits in the first year were factored down to account for the length of the migration deployment and were factored up in years two through five to account for general growth in the SAP environment. 2009 Pique Solutions. All rights reserved. 5
The Business Case for Migration Using the framework and model, we present the economic and strategic benefits for a migration of SAP from SPARC/Solaris, based on the synthesized data from our primary and secondary research. There are two levels to the analysis. Firstly, we address the cost savings and business value derived from a migration from SPARC/Solaris to Windows Server and SQL Server. Secondly, we address the relative cost savings and business value derived from a migration to Windows Server as compared to a migration to Linux. To summarize our findings, several of the key points from our analysis include: A migration of SAP from SPARC/Solaris to Windows Server and SQL Server can yield a five-year return on investment of 293%, with a payback period of fifteen months. This return and payback include the upgrade of SAP done in conjunction with the migration. Based on the study participants, the average SAP migration project to Windows Server, including a database migration, lasted six months and cost $675K. The net present value (NPV) of the five-year cost savings and business value generated are $1.56M and $1.09M, respectively. The hardware and software costs associated with the migration were a relatively small portion, only 12% of the five-year cost. Internal and third-party implementation costs were the largest area of the investment (56% of five-year cost), mainly because the migration included an upgrade of the SAP applications and, in several cases, a migration of the underlying SAP database to Microsoft SQL Server. Our research validated a significant number of cost-savings areas in the model, including fifteen unique cost-savings line items. The three biggest areas of cost savings included a reduction in the labor headcount for server administration, the elimination of expensive Sun hardware and software support agreements and, finally, the considerable savings based on migration of the database including licensing, vendor support and on-going database administration. The three primary business value drivers consistent in our research were increased availability, increased user adoption of SAP and improved efficiency in the order entry process. The migration from SPARC/Solaris to Windows Server and SQL Server provides dramatically better payback and return on investment as compared to a migration to Linux. A migration to Windows Server and SQL Server provides 110 percentage points higher ROI than that of Linux, primarily due to labor cost savings, database savings, better platform/infrastructure leverage and increased user adoption of SAP. In many cases, it is at the time of an SAP upgrade when the OS migration happens. The typical payback period for these SAP OS migrations is 1.5-2 years for Windows, and this is based solely on the cost savings. - $5B Global Systems Integration Firm 2009 Pique Solutions. All rights reserved. 6
1. Summary Economic Analysis The following analysis provides a summary of the return on investment and expected breakeven based on Pique Solutions migration cost/benefit analysis over five years. The results are based on the net present value (NPV) of the cost and benefit cash flows over the five year period. All of the participants upgraded the SAP application as part of the OS migration project, so the cost of the upgrade is also included in the analysis. Based on an average five-year migration cost of $675K, with an average migration length of six months from initial planning to production deployment, the companies interviewed cited substantial cost savings and business value drivers, yielding a total five-year benefit of $2.65M. This results in a five-year Return on Investment (ROI) of 293% and a payback of 15 months from the completion of the migration. The summary results are illustrated in Figure 4. Figure 4. A Five-Year Summary of a Migration of SAP from SPARC/Solaris to Windows Server $2,000,000 $1,500,000 Five Year SAP Migration Cost/Benefit Summary $1,000,000 $500,000 $0 $675,407 Migration Cost (Investment) $1,561,618 Cost Savings $1,092,458 Business Value Migration Cost (Investment) Cost Savings Business Value Business Case Summary Migration Cost (Investment) $675,407 Cost Savings (NPV* of Cash Flows) $1,561,618 Business Value (NPV* of Cash Flows) $1,092,458 Five Year Benefits (NPV*) $2,654,076 Net Benefit (Return Less Investment) $1,978,669 Return On Investment 293% Estimated Payback (Months) 15 *Discount rate for NPV of cash flows = 10% The financial impact of migrating to Windows was a lot more appetizing than the upgrade on Solaris. - $1B IT Services Firm 2009 Pique Solutions. All rights reserved. 7
2. Cash Flow Summary Analysis Figure 5 illustrates the annual analysis of the migration cost (investment), cost savings and business value for the initial year through year five. Also illustrated are the cumulative costs/investment and the cumulative economic benefits. The cumulative cost lines in the graphic illustrate the payback in the first quarter of the second year after the migration from SAP running on SPARC/Solaris to Windows Server. Figure 5. Annual Financial Analysis of SAP Migration from SPARC/Solaris to Windows Server Annual SAP Migration Cost/Benefit Summary $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 Year 1 Year 2 Year 3 Year 4 Year 5 Migration Cost (Investment) Cost Savings + Business Value Cumulative Benefit Cumulative Investment Cumulative Cost/Benefit Year 1 Year 2 Year 3 Year 4 Year 5 Migration Cost (Investment) $675,407 $18,333 $18,333 $18,333 $18,333 Cost Savings $204,633 $429,730 $451,217 $545,444 $497,466 Business Value $147,787 $310,353 $325,871 $342,165 $359,273 Cost Savings + Business Value $352,421 $740,084 $777,088 $887,609 $856,739 Cumulative Investment $675,407 $693,740 $712,074 $730,407 $748,740 Cumulative Benefit $352,421 $1,092,504 $1,869,592 $2,757,201 $3,613,940 *Cash flows are actual and not discounted 2009 Pique Solutions. All rights reserved. 8
3. Migration Cost Analysis Figure 6 represents the average migration-related costs for the SAP SPARC/Solaris to Windows Server migration project along with the percentage of the total (5-year) cost for each cost line item. Figure 6. Average Migration Cost Analysis Cost Line Item Migration Planning Implementation (Internal) Implementation (3rd party) Cost (5YR) % of 5YR Cost $111,000 15% $168,000 22% $144,000 19% Training $75,000 10% DB licensing costs 3% OS support fees 12% Travel 5% Admin / Misc. 5% Migration planning 15% Hardware costs $46,667 6% OS licensing costs $24,000 3% OS support fees $91,667 12% DB licensing costs $24,500 3% Hardware costs 6% Implementation (internal) 22% Travel $36,667 5% Admin/Misc. $36,667 5% Total (actual; not NPV) $758,167 100% OS Licensing costs 3% Training 10% Implementation (3rd party) 19% A few key elements of analysis from the migration cost research are listed below: The labor costs for the migration planning and implementation represent the majority of the cost of the migration, 56% of the total five-year cost. The primary reason for the substantial amount of cost is that the migration includes an upgrade of the SAP application itself as well as the underlying ERP database migration to Windows SQL Server/Windows Server. Software support fees are the next major cost element, primarily because this is a recurring annual cost of approximately $18K that amounts to about $92K over the fiveyear period. This cost amount is far less than the cost savings from the retirement and repurposing of the SPARC/Solaris OS servers, as illustrated in the next section. New hardware purchase represents 6% of the total five-year cost, with a cost of $46K. Server OS Licensing Costs represent only 3% of the total five-year cost, with a cost of $24K. 2009 Pique Solutions. All rights reserved. 9
4. Migration Cost Savings Analysis Figure 7 presents the average migration cost savings for the SAP migration project along with the percentage of the five-year cost savings for each cost line item. Figure 7. Migration Cost Savings Breakdown Platform leverage (integration, collaboration, BI, etc) 8% SAP/OS help desk labor 7% Environmental (power/cooling) 2% Remote/extended workforce enablement 6% Future upgrades/releases 3% Other costs savings 1% Software license (growth) 7% Hardware support/maintenance 8% OS software support/maintenance 12% SAP/OS operations labor 5% Database administration labor 8% SAP/OS administration labor 14% DBMS software support/maintenance 11% Mgmt & monitoring software Infrastructure 1% software 7% Cost Savings Line Item Cost (5YR) % of 5YR Cost Software license (growth) $142,393 7% Hardware support/ maintenance $175,897 8% OS software support/ maintenance $251,282 12% DBMS software support/ maintenance $238,717 11% Management/ monitoring software $25,128 1% Infrastructure software $150,769 7% SAP/OS administration labor $301,873 14% Database administration labor $180,923 8% SAP/OS operations labor $103,193 5% SAP/OS help desk labor $144,068 7% Remote/extended workforce enablement $117,265 6% Environmental (power/cooling) $36,855 2% Platform leverage (integration, collaboration, BI, etc) $175,897 8% Future upgrades/releases $71,667 3% Other costs/savings $12,564 1% Total (actual; not NPV) $2,128,490 100% 2009 Pique Solutions. All rights reserved. 10
Based on an analysis of the cost savings of the SPARC/Solaris to Windows Server and SQL Server migration, following are the key points: There are a substantial number of cost-saving opportunities fifteen distinct costsaving line items quantified in our research for companies looking to migrate SAP from SPARC/Solaris to Windows. The largest single cost-saving line item results from the reduction in SAP/OS Administration labor at 14% of total five-year cost savings. In nearly all cases, companies were able to reduce the headcount required to support the SAP installation and leverage staffing from other IT projects. From an immediate perspective, being able to eliminate 3 positions was a huge cost saving. Longer term, it is having consolidated servers and having the same consistent licensing across our locations. - $1B Wholesaler OS Software support/maintenance (12% of total five-year cost savings) and hardware support/maintenance (8% of total five-year cost savings) collectively represent the largest reduction in cost (20%) and are related to the fact that companies are able to retire expensive SPARC hardware with costly annual hardware and OS software support agreements. In the past, SAP just ran better on Solaris, but we found that the efficiencies gained from migrating to Windows now made it worthwhile. The cost of Solaris was going up, the cost of SPARC support was going up and, after doing some testing, the Windows version was able to handle it. - $1B IT Services Firm The savings associated with migration of the database are also very significant, including $239K in savings in DBMS support/maintenance and $180K in Database Administration Labor. We can save a huge amount on the UNIX box; the licensing fees and the Oracle licensing are more costly than the SQL Server licensing and the management cost is also a factor. In summary, migration of an SAP/ERP to Microsoft SQL Server provides a rapid return on investment and persuasive ongoing cost savings. - $1B Telecommunications Firm 2009 Pique Solutions. All rights reserved. 11
5. Migration Value Drivers Figure 8 presents the average migration business value drivers based on the SAP Migration project along with the percentage of the five-year benefit for each cost line item: Figure 8. Business Value Summary for SAP migration from SPARC/Solaris to Windows Business Value Driver Line Item Value (5YR) % of 5YR Value Availability related value improvement Increase in user adoption of SAP $477,435 15% $502,563 22% Process or cycle time savings/value (order entry) 34% Availability related value improvement 32% Process or cycle time savings/value (order entry) Total (actual; not NPV) $505,451 19% $1,485,450 100% Increase in user adoption of SAP 34% Among the participants interviewed, the three key value drivers that were consistent across the SPARC/Solaris to Windows Server migration participants were increased availability, increased SAP user adoption, and improvements in key financial processes such as order entry. These three elements have roughly an equal impact on total fiveyear business value. The improvement in the order entry process cycle time ranged from 9-20%, with an average improvement of 15%. This positively impacts the OrderToCash business process and has direct economic implications in terms of time to cash. A 15% cycle-time improvement in the process can equate to over $500K in value based on the time value of money. Based on the performance and ease of use of the Windows Server-based SAP deployment, all of the interviewees cited an increase in user adoption after migration. The value associated with this is primarily the leverage of existing licenses. We did not have a uniform system or a centralized system beforehand; so, naturally, when we went to a centralized system that was more uniform and more standard across the company, we had a lot more usage; I would probably estimate the additional usage at 20%. - $1B Wholesaler 2009 Pique Solutions. All rights reserved. 12
All of the interviewees cited an improvement in unplanned downtime, which directly impacts business value by eliminating the disruption to core financial, and human resource business processes and reducing lost revenue for customer and partner facing applications. Cost savings are not the only motivation to migrate. The resulting landscape is more reliable and scalable, with less unplanned downtime. - $1B Telecommunications Firm 6. Strategic OS Migration Drivers Figure 9 presents the average rank order of the strategic migration benefits based on the SAP migration project. Participants were asked to rank a set of six strategic migration drivers from most impact (rank 1) to least impact (rank 6). The top two ranked items competitiveness and business agility are of particular business value that spans beyond the IT organization and affects the entire organization. In addition to those listed, there were others cited by interviewees including the strategic value of collaboration. Figure 9. Strategic Drivers for Migration of SAP from SPARC/Solaris Strategic Migration Drivers Average rank (1 = highest impact) 1.00 2.00 3.00 4.00 5.00 6.00 Competitiveness Overall business agility / time to market Predictability of costs Access to IT resources IT standardization / IT best practice approach Reduction in risk 2.75 3.00 3.25 3.75 3.75 4.50 Collaboration was probably one of the other strategic benefits, using SharePoint Server in conjunction with the CRM processes; we definitely see a lot more efficiency from the end users. - $1B Wholesaler 2009 Pique Solutions. All rights reserved. 13
Migrating to Windows Server vs. Linux As discussed in earlier sections of this paper, a smaller portion of companies have chosen to migrate SAP from SPARC/Solaris to Linux as compared to Windows Server. Our study included several companies that performed a migration to Linux and, as a result, we evaluated the relative costs and benefit s of a migration to Linux vis-à-vis a migration to Windows Server. Table 2 presents the summary return on investment analysis for a migration from SPARC/Solaris to Linux. While SPARC/Solaris to Linux migration investment is comparable to that of Windows Server migration, it does not provide nearly the level of cost savings and business value as compared to the migration to Windows Server. Table 2. SAP SPARC/Solaris to Linux Server Economic Summary Business Case Summary Migration Cost (Investment) $669,633 Cost Savings (NPV* of Cash Flows) $1,022,524 Business Value (NPV* of Cash Flows) $873,966 Five Year Benefits (NPV*) $1,986,491 Net Benefit (Return Less Investment) $1,226,858 Return On Investment 183% Estimated Payback (Months) 21 *Discount rate for NPV of cash flows = 10% Figure 10 presents the relative advantage of migration from SPARC/Solaris to Windows Server (and SQL Server) as compared to Linux as the underlying OS. Based on our research and analysis: A migration from SAP on SPARC/Solaris to Windows Server offers a better return on investment and a shorter payback period than a migration to Linux, an average of 110% better ROI and a six month shorter payback, respectively. The five-year cost for a migration to Linux is just slightly less (1%) than a migration to Windows Server. Despite the server operating system and user access licensing costs for Windows Server, Linux ongoing subscription support costs are much higher in years two through five. A migration to Windows Server has the potential to improve cost savings by 53% over a migration to Linux. The key areas where a migration to Windows Server provides cost savings advantages over Linux are Administration Labor (OS and DBMS), Database Software Support/Maintenance and Platform Leverage. A migration to Linux does not offer the opportunity for savings from migration of the underlying SAP database and does not offer a significant savings in OS administration staffing cost because a migration to Linux does not present a significant staffing skill-level transition. A migration to Windows Server also provides potential advantages for business value generation. Based on our analysis, a migration to Windows Server can improve business value by 25% vis-à-vis a migration to Linux over five years. 2009 Pique Solutions. All rights reserved. 14
Figure 10. Comparing an SAP migration to Windows Server vs. Linux Five Year SAP OS Migration Cost/Benefit Summary Comparing Windows Server vs. Linux as target migration platform $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- $675,407 $669,633 Migration Cost (Investment) $1,561,618 SPARC/Solaris to Windows Server $1,092,458 $1,022,524 $873,966 Cost Savings Business Value SPARC/Solaris to Linux Migration SPARC/Solaris to Windows Server SPARC/Solaris to Linux Migration Cost (Investment) Cost Savings Business Value 5YR ROI Potential Expected Payback $675,407 $1,561,618 $1,092,458 293% 15 Months $669,633 $1,022,524 $873,966 183% 21 Months Expected SAP/OS Migration Payback Period SPARC/Solaris to Linux SPARC/Solaris to Windows Server 6 Months 9 Months 12 Months 15 Months 18 Months 21 Months 24 Months SPARC/Solaris to Windows Server SPARC/Solaris to Linux No, I didn t [evaluate Linux]. I do have 2 or 3 Linux boxes out there, but my opinion is that ERP should not be on an open code system for performance, security, peace of mind, and support considerations. - $1B IT Services Firm 2009 Pique Solutions. All rights reserved. 15
Conclusions and Guidance The Microsoft platform, including Microsoft Windows Server and Microsoft SQL Server, provides an excellent host for enterprise business applications like SAP. In the not so distant past, an SAP migration of SPARC/Solaris meant a migration to that platform. Given today s economics and the competitive dynamics and trends of server operating systems, organizations are migrating from Sun s hardware and software to more open, widely deployed and assuredly long term solutions. They are doing so because there are substantial quantitative and strategic advantages, as evidenced in both Pique Solutions prior and current primary research. Based on Pique Solutions 2009 survey research of firms who have migrated from UNIX, enterprises that migrated to Windows Server ranked the benefits they achieved higher than enterprises that migrated to Linux in 92% of cases. As the analysis in this paper has demonstrated, the cost savings and value generated from a migration from SAP running on SPARC/Solaris to Windows Server are compelling in absolute terms as well as well as relative to a migration to Linux. Organizations can achieve 110% greater 5-year ROI and a 6-month faster payback by migrating SAP from SPARC/Solaris to Windows Server rather than to Linux. In addition to the economic and strategic reasons for migrating from Sun Solaris, the issue of risk mitigation is also of importance. Oracle s pending acquisition of Sun Microsystems presents many uncertainties as to the future of Sun products, and creates unnecessary risks for companies tied to Solaris and SPARC. Based on the results of this study, those organizations running SAP on Sun s hardware and software would be well served to: Evaluate their current cost profile for the SPARC/Solaris SAP installation and determine the future year cost increases based on aging hardware and software; Analyze new hardware options that may offer dramatic price/performance increases and environmental cost savings over existing hardware, including servers utilizing multicore processors from Intel and AMD; Look at the opportunity to not just migrate the SAP applications to a new operating system and server platform, but also the underlying database housing the SAP data; Consider an operating system migration to Windows Server if evaluating an upgrade from a previous version to a new version of SAP; Compare the costs and benefits of a migration to Windows Server and SQL Server to a migration to Linux, utilizing a similar framework as presented here that incorporates a broad range of cost of ownership, business value and strategic considerations; and Analyze and monitor risks associated with the uncertainty around Sun Solaris created by the pending acquisition of Sun by Oracle. 2009 Pique Solutions. All rights reserved. 16
Appendix A: Description of Cost and Benefit Drivers Table 3. SAP OS/DBMS Migration Cost Drivers Cost Category Planning Migration Implementation(internal) Migration Implementation (3rd party) Training Hardware costs Server OS licensing costs New server OS support fees Database licensing costs Other costs: travel Other costs: admin/miscellaneous Planning costs prior to migration Description Internal labor for migration activities including installation, configuration and testing 3rd party labor for migration activities including installation, configuration and testing Training investment for new OS platform New hardware purchased for the SAP migration Server OS licensing costs and user access costs On-going server OS support costs (annual) Licensing costs for new database/database migration (if applicable) Travel costs associated with migration Admin/miscellaneous costs associated with migration Table 4. Migration Cost Savings Cost Savings Category Software license (growth) Hardware support/maintenance OS Software support/ maintenance DBMS Software support/ maintenance Management/monitoring software Infrastructure software SAP/OS Administration labor SAP Database Administration labor SAP Operations labor SAP Help desk labor Remote/extended workforce enablement Environmental (power/cooling) Platform leverage (integration, collaboration, BI, etc) Future upgrades/releases 2009 Pique Solutions. All rights reserved. Description Consolidation, virtualization and increased performance potentially reduce ERP and related server application software licensing fees SPARC retirement, consolidation, virtualization potentially reduce ERP hardware footprint and retire legacy hardware support agreements Solaris retirement, consolidation, virtualization potentially reduce ERP software footprint and retire legacy software support agreements Database retirement, consolidation, virtualization potentially reduce database software footprint and retire legacy software support agreements Potential elimination of 3rd party management/monitoring software & associated support agreements Potential elimination of 3rd party infrastructure software & support agreements Savings in OS administration/mgmt efficiency; lower headcount and better leverage for infrastructure stack Savings in DBMS administration/mgmt efficiency; lower headcount and better leverage for infrastructure stack Savings in operations efficiency; lower headcount and better leverage for infrastructure stack Savings from fewer support calls to help desk; better skill leverage for help desk (no need for specialized training) Savings to support remote/extended workforce; WS08 provides more automated tools for provisioning remote workers Savings associated with consolidation/better hardware performance (reduced space, power and cooling costs) Savings associated with leveraging Windows infrastructure (collaboration, business intelligence, desktop OS, etc.) Savings associated with OS upgrades/major releases 17
Table 5. Migration Business Value Drivers Business Value Category Availability-related value improvement Increase in user adoption of SAP Process or cycle time savings/value Description Business value advantage based on the increased availability Business value of increased adoption rates of SAP and use of licenses previously purchased Certain business processes are completed faster resulting in process specific business value Table 6. Strategic Business Value Drivers Strategic Drivers Competitiveness Overall business agility / time to market Predictability of costs Access to IT resources IT standardization / IT best practice approach Reduction in risk Description Improvements in ERP after migration improve the competitive position of a company, particularly as it relates to supply and demand chain improvements As ERP is a mission-critical element of the application infrastructure, time to market advantages in deployment can translate into enterprise level time to market advantages Microsoft licensing, software assurance and support policies provide long term predictability of IT costs Access to a broader and more affordable skill base of employees and certified partners Standardizing more of the IT infrastructure on Windows Server enables more consistency in the application of best practices for IT UNIX and Linux infrastructures, by nature, have a high degree of tailoring and customization which can introduce risk in terms of staffing, agility and IT management This document is property of Pique Solutions. Reproduction is forbidden unless authorized. Visit www.piquesolutions.com to learn more about our consulting and market research services. 2009 Pique Solutions. All rights reserved. 18