t-Systems takes over SAP Hosting

After about 10 years of soul searching, SAP has finally decided to pull out of the hosting and outsourcing business. The original goals of this endeavor were:
Gain experience on the costs of operation
Developing best practises for service providers
Influence the product development process to improve the suitability of SAP products for hosting and outsourcing
Host beta-versions of new SAP products to improve time-to-market
Help partners and customers during the implementation process by providing the development environment scaling it gradually up until production capability was reached
Of these goals, only the last goal was achieved beyond the shadow of a doubt. The hope to develop this business into the directions of both SaaS and BPO was never fulfilled. It remained an illusion.
Why did this happen? First and foremost, SAP’s margin aspirations are just not attainable – a 30% margin in a hosting business is way out (especially, if it is burdened with SAP’s high cost of manpower and the need to pay for licenses at par with other system houses). Secondly, all hosting, outsourcing, and SaaS offerings start with investments creating negative cash flow way before a single Euro hits SAP’s accounts. Thirdly, there are partners competing with better cost structures that bring more business and frequently were irritated about SAP’s own hosting business. And, finally – SAP is primarily focused on selling licenses and, as of late, maintenance. SAPHosting never had the sales force it deserved.
Bottom line: the financial analysts will like this move. Not too many customers will dislike it. But SAP will be missing out on an opportunity to have continuous first hand insight into what it takes to actually tame the beast. That could have been turned into an edge over competition and a source of true COO improvements – too bad it did not happen. But, maybe, SAP did not even want to get smart about this. Ferri Abolhassan, up until recently SAP EVP EMEA, and now at the helm of T-Systems, can show his old employer what to make out of it.