Leclerque has been observing a trend toward “cloudification” in SAP hosting services for some time. According to the principal consultant from research and consulting firm Pierre Audoin Consultants (PAC), it was already becoming clear two years ago that some of the larger hosting providers were moving closer to cloud models in terms of the flexibility and scalability they were offering. In the meantime, almost all major providers have followed suit, he says. Leclerque and his colleagues at PAC made this observation while conducting research for a study entitled, “PAC Radar – Leading Providers of SAP Hosting in Germany,” for the German market – though Leclerque stresses that this shift toward the cloud is taking place on a global scale.
PAC used 70 criteria to rate hosting providers for its “Radar” study. Based on this information, Karsten Leclerque was able to compile a list of eleven criteria that enterprises should consider when selecting a hosting partner for their SAP systems.
- Knowledge, experience, resources
- Industry expertise
- International presence
- Employee transfers
- Cost reduction
- Flexible billing
- Additional services
1. Knowledge, experience, resources: This criterion should receive most attention, says Leclerque. At the very least, a potential hosting provider should be able to provide proof of its experience in similar projects. Potential customers also need to ask how many of the provider’s employees work explicitly on SAP hosting and, depending on the customer’s particular requirements, whether these employees are located in Germany or in other regions. Any decision should also take account of where the provider has its headquarters and where its data centers are located, “particularly in view of the current discussion about data protection,” says Leclerque.
2. Certifications: Customers should only consider a provider if it has an ITIL-certified quality management system (and ISO 9001 certification or similar in Germany) and ISO 27001 certification for its information security management system, says outsourcing expert Leclerque. The provider’s SAP platform must also be certified accordingly. The degree to which other certifications are relevant will depend on the customer’s individual requirements. “For example, ISAE 3402 certification is a “must” for companies that are listed on a U.S. stock exchange,” he explains.
Meeting strict compliance requirements
3. Industry expertise: In some industry sectors, such as financial services, enterprises have to meet particularly stringent compliance requirements. But whatever industry an enterprise operates in, says Leclerque, it should look for a SAP hosting provider with the relevant, industry-specific expertise. “Small and midsize automotive suppliers want to feel that their hosting provider understands where they’re coming from as much as a large financial services provider does,” he adds.
4. Equality: How important am I to the provider? The response to this question is central to the success of a customer-provider relationship. And, clearly, it’s one that will be of greater relevance to smaller companies than to larger ones. According to Karsten Leclerque, the atmosphere during preliminary discussions between a provider and a potential customer will provide a good indication of whether they are operating on an equal footing. “The human factor is very important,” he says. The way in which a provider treats a customer once the all-important contract has been signed is also very revealing. “It’s obviously a bad sign if your provider suddenly starts ignoring you the minute you put your signature to the contract.” Another indication that a provider is not really interested is when it gives the customer a constantly changing stream of contact people. However, it is all but impossible for a potential customer to gauge whether this might happen before it makes its choice of hosting partner. The PAC analysts attempted to assess the likely risk by asking providers for information about their employee turnover rates.
Finding out how much flexibility a provider can offer is also a key ingredient in the recipe for a good provider-customer relationship. Hosting services, says Leclerque, are becoming increasingly standardized. He describes this development as a double-edged sword: “On the one hand, it means that providers can deliver services at very affordable prices. On the other, it means that potential customers need to look very closely at whether individual solutions for specific requirements are actually very expensive.”
Check the provider’s international profile
5. International presence: The relevance of this criterion will depend on a customer’s individual situation. Are my requirements covered if the provider offers services in German and English, or do I need 20 or even 30 languages?
6. Employee transfers: This criterion is very significant in cases where an SAP hosting project involves a customer’s own IT personnel transferring to the provider’s payroll. The list of customer requirements varies considerably from country to country. In Germany, for example, the law stipulates that an employee’s rights and obligations under his or her “old” contract must be transferred to the new contract (transfer of undertakings) and not altered to his or her detriment for a period of twelve months after the transfer has taken effect. “However, there are providers who go much further than that. Because some customers demand that ‘transferees’ are given a guarantee of continued employment for between five and seven years,” says Leclerque. Apart from negotiating the contract term, it is important for the transferring company to find out what opportunities the service provider will offer transferees for their professional development in the future.
7. Cost reduction: If the aim of hosting is to cut costs, it is important to understand the provider’s strategy for offering affordable prices. Does it follow a near- or offshoring approach, for example? The response to this question will vary from country to country.
Fixed price versus usage-based billing
8. Flexible billing: “Cloud models with flexible, usage-based billing don’t always suit every customer,” says Leclerque. Some companies prefer a fixed-price model that allows them to plan with greater accuracy, he says.
9. Additional services: What does the provider’s portfolio cover in addition to SAP hosting? Leclerque advises potential customers to ask this question if their interest in outsourcing extends to other services too. “Customers may be particularly attracted to a provider that has reselling partnerships for Microsoft solutions, for example, or one that also offers SAP SaaS solutions.” Looking at a provider’s full portfolio is a good way of judging how much of a role SAP hosting plays for the provider overall,” he adds. If SAP hosting is not part of the provider’s core business, then this element of its portfolio may not be as “future-proof” as it would be at a competitor who concentrates primarily on providing SAP hosting services.
10. Stability: This criterion is linked to the previous one. As well as establishing how much importance a provider attaches to its SAP hosting business, it is vital to find out how well the provider is equipped to meet specific service and regional requirements. Potential customers should also sound out the provider’s financial standing, says Leclerque.
Lack of innovation receives the most criticism
11. Innovation: SAP hosting contracts usually run for a three-year term, says Leclerque. “Technology is advancing so fast that providers must be constantly on their toes and ready to supply state-of-the-art services throughout the contract term,” he says. However, “willingness to innovate” is the issue that receives most criticism in user surveys. It would seem that hosting customers do not perceive their providers as creative or innovative at any point during the provider-customer relationship, not even at the preliminary negotiation stage.