 Okay, welcome back to SiliconANGLE and Wikibon's exclusive coverage of Sapphire Now. I'm John Furrier. I'm General David Floyd, the co-founder and CTO of wikibon.org. And we are here at SAP Sapphire, their annual event. Sapphire Now is the hashtag. Tweet us if you have any questions at Furrier. I'm happy to answer them for you. We are on the ground in the Global Communication Center in Orlando where all the action's happening. Press conferences, we're talking to the CEOs of SAP. A lot of their executives, customers, partners, and developers. We got them all here covered here at theCUBE. This is our flagship program. We go out to the event, extract the signal from the noise. Here with David Floyd. And we're going to view a deep dive here, David. David, you've been following research for the folks who don't know. David Floyd is the CTO, co-founder of Wikibon. Leads the research agenda on all our deep analysis on pricing, economic models, what's going on in the industry. More importantly, he's been leading the efforts with our software-led infrastructure research agenda. David, welcome to the segment. Thank you. We are going to go into a deep dive here on the virtualization aspect of consolidation. Obviously, consolidation's been a big part of the world. So just go in and give us an overview of what we're going to present here. And then we'll just dive right in. What's the background to this? Yes. Well, what's of great interest these days is the whole of software-led infrastructure and consolidation and virtualization. So what we looked at previously, the consolidation of Oracle. We wanted to take that one stage further and look at the value of consolidation, not only of Oracle, but of the application on top of Oracle, in this case SAP, very appropriately as we're here at Sapphire today. So while we're looking at, and we talk to a number of customers, or SAP customers, and looked at how they have gone about the issue of consolidation and virtualization of SAP. So what we looked at is the business reasons why they're looking at it and the technology foundation that they use to consolidate everything. The interesting thing is that the business reasons were the real reasons why people were doing this. We talk today, for example, we talk to West. And the infrastructure people were given their orders to make sure that they got this done in six months. The value of doing the business side of it was so high that they really pushed IT to get this implemented in record time. We talked to SAP at EMC today, what they were doing. And they were doing the same thing and a consolidation for business reasons. In this particular case, they took them 27 months. But that's still a very, very accelerated. And not only did they do the change, the IT change, they also did the business changes as well. So what they were trying to do with SAP is go towards a global single instance, a single version of SAP for all of the, in some cases, it was divisions. In other cases, it was the different countries. And in the case of EMC, it's both countries and divisions. And they were putting on to them a single version of the financial environment and the operating environment that SAP is giving them. That single version, the whole objective then is that they can have very quickly, for example, a single version of the backlog or the single version of the financial situations. And then you be far more effective in using that data and far less people, less movement of data from one system to another system. So that was the business reasons behind most of these migrations. The second piece is how they chose to integrate it, the platform they chose to integrate it. And all these examples chose to integrate it onto an Intel platform, the foundation, and to virtualize it, both the applications and the database and the SAP itself, virtualizing all of this to create a far more flexible version of the infrastructure. David, I've got to ask you, what was the reasoning for the research? Was it to really kind of understand the alternatives to Oracle, because you mentioned Oracle. Obviously Oracle, there's a lot of customers who are looking at moving off of Oracle or staying onto Oracle. I know you're doing some work there. But SAP's business model is a bit more broader with cloud. We've heard from EMC and VBlock and other folks there. A lot of different moving parts. So how do you frame the research? And who is it applied for? What group use case in particular? Well, it's applied for our members, the Wikibon members. So we are looking at ways that we can help them look at, first of all, the reasons why you would want to create a single platform. And secondly, what are the technology implications of doing that? What is best practice? What is the best design of system towards that? And sharing that with our members, sharing that with the people who are doing this. So that's the fundamental reason why we're doing this research and the fundamental reason why we're doing all of this type of research. Is there an environment for a customer environment that makes more sense here? I'll say it's SAP. But is there a specific configuration, infrastructure, scenarios, and some of those variables? What are those key variables? Well, the key here was consolidating SAP itself into a single global instance, or reducing the number of these very significantly, as well as consolidating it on a modern virtualized infrastructure. So those were the two parameters that we had in selecting who we talked to. And that's what we believed was fundamentally best practice, anyway, were those two environments. So that's essentially what we chose. And for a single instance of a very small SAP environment, probably the value of making the change is not that high. But for most SAP environments, have grown slowly over time. There are multiple instances. For example, in one customer, we had one version working on HP 3000 and another piece working on IBM i-series, all over the place, all these different versions. And bringing those together, consolidating them, made both IT sense and it made business sense. And the reason why these get out of control over time is you put these different instances in, you have a whole lot of applications moving data from one place to another. Most of the applications are not with end users, but they're moving data, transforming data from one place to another. Band-aids, if you like, on this complexity that's behind the scenes. What we heard from EMC, for example, is that they reduced the number of those applications from 500 down to just over 100, a fourfold reduction in the number of those applications. And that leads to simplification of the environment. It leads to higher availability. It leads to much faster ability to make change, agility to make change in the future. What are some of the cost numbers that we look at? Can you just walk through some of the savings? Sure. Well, what I've done is to break those down into three. One of which is, what's the IT value? And the second is, what is a low end of the IT and business value? And the third is a sort of more normal, a higher end of the business value. So if we look at slide one on the system, then what we've got here is the first column is the current and I've normalized that to a hundred. The second column is the IT costs of the system once it's been virtualized and centralized. And the third column is the savings. So what we can see in the elements that we're looking at. Just walk through the colors and what the legend is in case they can't see it on the screen. The first column is the operations cost, that's the people cost, that's the purple color. The green color is the cost of the SAP software and the orange color is the cost of the Oracle licenses and the blue is the cost of the infrastructure. So what you can see here is that the biggest single cost is the Oracle license cost. And by going towards a virtualized infrastructure, you can optimize your environment for this optimize it and virtualize it. You can reduce the hardware costs, you can reduce the Oracle costs. The SAP cost doesn't, it's a very slight reduction in that but not very much at all. And you can reduce the infrastructure, the infrastructure cost, the hardware cost and the people cost. So all of those reduce and you can see the savings. As you said, the SAP savings are very small. The Oracle savings are the biggest and the operational savings are the biggest. So that's a very clear saving. You obviously have to put effort into that saving. So the return would be about two years probably if this was done for IT reasons. Return or payback? The return, the payback period would be two years. So essentially SAP gets a little bit of savings but because of their business model but Oracle really takes the big hit. Oracle takes the hit and the operations people take the hit. Those are the two big. So that's the innovation and opportunity. Yes, yes. The hardware cost, you save something but that's not really what you should be focusing on. It should be the Oracle savings and the hard. Well, it's inherent hardware cost with savings with the virtualization but also there's some growth too, right? They can eat, but they don't have to replace all their servers. No, no, no. This works focusing on the servers for SAP. Got it. Which often have the latest hardware anyway because it's large database. Great. So if we go to slide two, we see the same set of numbers in one and two but this time we're looking at the savings from the lowest level of saving which would be, for example, the saving of financial analysts to analyze the data. It's the low level savings for the business. What is that, the orange? That's the orange piece over here under the savings piece and you can see already, it's about the same size as the IDT. But it starts out as zero? Well, the first one was just saying just IT. Okay, got it. And this one is saying, okay, now let's add on the business benefits and the business benefits here are simple. They are just the business benefits for the simple savings of lower number of people, financial analysts, for example, at the end of the month because you have a single instance, you don't need somebody from each of the countries to be doing that, for example, and rolling it up and sending it off. So operational efficiency in the business side? In the business side, on the business side. That's net new savings that's kind of incremental. Exactly, but that's a sort of minimum, that's not really a game where the savings are. Got it, yeah. So if you go to the third one, you're looking at now the true benefit of that and the customer today said that their objective of doing this whole exercise was to increase their revenue by from 1.4 billion to 1.2 billion to 1.4 billion while keeping their people costs constant. So they wanted to grow that. And if you look at that growth as a percentage of IT spend, that's about five times the total IT spend, and if you look at the proportion that's dedicated to the ERP systems, that's probably 10% of that. So you're talking about some really high multiply here of 25 to one on the investment that you're making. Okay, so pretend for a minute that I don't know what I'm, that I don't understand the charts. The blue piece. I was going to say pretend for a minute I'm an idiot. I am, but no, I know all seriousness. So that number is significant. That new blue chart is a maximum. Explain that piece. So that piece there is the business benefit of a reasonable investment to the business, the value of this investment. Which includes new revenue. Which includes making, for example, the people that you save in the business as a whole. Because you're able to run the business on a fastest turnover cycle, the EMC guy today, Bill Reed, he was talking about, for example, knowing exactly the financial state. Knowing exactly any business that was in progress at month end so that they could apply that business or not to decide about it. So it's execution efficiency as well. Execution efficiency, more revenue from the people because they can direct them more effectively. Not having a meeting to figure out what's going on, just kind of that lag that goes on from the... Absolutely. So both EMC and the guy from West were talking about very significant increases. Now these don't happen on day one. So this is the end point of where they're going to get to. But the point is that those are very, very big numbers indeed with very high return on investments. So for example, it makes every sense to try and get this in as fast as possible. If you remember when we were talking to the West people, they wanted that in in six months. Why? That's the reason. That's huge. It's one of those things where, as we always talk to customers and people talk about new solutions, it's always like, oh yeah, we can save you on the hard costs. But then there's the untangible business benefits that you're talking about. It's always like the customers know. They get a feel that it's the blue sky. We know when it's not raining. We know when the sun's out and things are happening in a good way. That's really what you're reflecting in here, right? That kind of value where it's obviously been a project. The business value delivered in terms of increased revenue, reduced risk, reduced costs. So let's tie that together with Sapphire because obviously this is very relevant here at Sapphire. The reason why we wanted to go through this was whenever we talk to the executives at SAP, we always ask them questions about speeds and feeds and technology, how can I do this and this can do that. And they automatically, it's like a script. They go right to business benefits. So talk about what you see here at Sapphire, hearing some of the CEO's talk about some of those business benefits. We hear mobility, we hear agility, analytics. So how can you tie this to some of the specific points that they're making here? Well, one good example is the points they make about HANA and why it's important. They are emphasizing that HANA enables them to make decisions in real time. They're analytical decisions on the SAP data, being able to get that up into HANA and decide things in 20 seconds instead of two days or 20 days, which was one of the examples given today. So you asked that great question. You know, what's the most awe-inspiring thing that you heard about HANA? And he said, was it 25 seconds from 25 days? Yeah, 25 days to run a report to 25 seconds. I mean, it's earth-shattering. So the point is that it goes from looking at it a month later and being a long-term project. Well, we asked Wes Pharmaceuticals, who came on theCUBE, a customer of SAP, came on and we asked him some of those things and he goes, he literally said, quote, people aren't standing around. Standing around is reflected in that number. That's right, because they're doing something more productive and they're going out and we can direct them. And they get the normal savings, check the boxes on, okay, we knocked down a few servers, we've got some operational efficiency. So Oracle License, we've heard that one, kind of the old model to the new modern era of, hey. We can make those savings, yes. Those are legit, those are legit. Those are legitimate savings. But the real reason that you're doing it is not for savings, it is because you're virtualizing it, you can bring up new instances quicker, you can put in a production system more quicker. You don't have to go through all the testing of a new version against everything else, the regression testing, that's all done as far as a converged infrastructure. It's all of those things that's around. Is that why we're hearing EMC talk about this co-innovation with some of their partners? We've heard from CSC, we've also heard from some of their customers about this integration testing center of exit. Is that why they're doing that? Absolutely, because you and I know from our previous lives that life in an operations room, when a new version goes in, is difficult. You have to test everything. You have to test the network if it's changed. You have to test the servers of the new version of it. A microcode goes in. There is often a long testing process which can take three months at least before a new version can go in, just to make sure it's working correctly. If you reduce the number of working parts and if you then can look at the fewer number of working parts and work with SAP or Oracle, you can have a much, much smoother and faster introduction of the changes that matter. This is amazing research. David Floyer from wikibon.org, really laying out what is essentially data around why people are so excited about the business value conversation. And I think just my observation and I want to ask you a specific question around this is this is why we're seeing a lot of investment in IT right now. We're seeing a lot of investment saying, hey, the cost to run the business as Dave Vellante always says is 70%, 30%. They want to shift that number down. So yeah, operational costs can drop down but this is really around investing in the business. That's why there's mobile apps. That's why analytics are hot. CIOs and CEOs and lines of business know the business value of using technology. So that's clearly this is a key part that speaks to that in my opinion. So my question to you is you talked to a lot of companies out there in your research. What are you hearing about them? Given the context of what I just said, what are some of the conversations that you're hearing around that blue area, that new savings? Well, there's two answers to that question. The one is that they want to reduce the complexity of their IT systems. And one of the areas which is hidden, people are not seeing it. But one of the enablers of this type of consolidation, remember you're taking 20 different systems and putting them essentially onto one system is that things like flash are a key component of doing that. Because otherwise the IO, the slow IO would actually cripple your ability to do that. So the modern systems, we talk to the VCE, for example, but the modern systems have large amounts of flash in them to do this. So that's something under the covers which meant that it was difficult to do before. But the second thing is they do want to reduce the complexity of their infrastructure and remove the applications which aren't adding value, get rid of those, replace those. The third thing they're looking to do, and this is coming from a number of people, is looking for ways that they can put stuff out into the cloud. Use Amazon, for example, use CSC, use any of these people to push some of their stuff out into the cloud. It makes more sense for a lot of stuff, for example, especially if it's coming from the internet and you're analyzing the internet, social data and things like that. Providing that as a cloud service makes every benefit. So on the technology side, there's a trend towards abstraction, abstracted databases, creates some simplicity around the platforms to enable, as Dave Vellante says, the API, the data center is now the API and developers are now hot. That's kind of the technology, kind of under the covers as you explained. The DevOps are now hot, yeah. The DevOps, right? So that's kind of going on. But above that, why do you think the CIOs are now running hard to get to those savings? What do you personally think is the real catalyst as accelerating the investment and accelerating the mindset of saying, hey, we're not going to be afraid? I think that's slowly happening and I think it's going to accelerate extremely quickly. And the reason is that if you have an infrastructure which can change faster and can deal with a single instance of the truth that you like about an organization and can analyze far, far greater amounts of data, if you have that sort of environment, you are able to improve the value that you can deliver to the business from IT and improve it very significantly. What we did some time ago was look in detail of what happened when a small distributor of electrical stuff went through this process and took their ERP system and made it totally integrated on a single database. The result of that was around a 20% improvement in productivity for the company as a whole. And they ascribed about 10% of that to IT itself. That is an enormous increase in value to that organization from being able to run the system, run the company faster, being more agile, being working together. That was over a 12 month period, 18 month period. That's an enormous return. And I think companies are starting to see that hyperscale, flash, software-led infrastructure, all of those major trends are starting something very big off, which is the ability to fundamentally improve by 20, 30% the productivity of a company and the ability to go after new ways of doing business, new ways that they can do things. We had today, didn't we, about a public transport system that was now making money from selling advertisements to the riders on that system. That's innovative. That's disruptive. That is essentially taking a product that was built for something else and turning it into a new opportunity. A new revenue stream coming into them, and they are the people that are driving it. Well, I think, you know, I'm sure you didn't think about that when you did your analysis, but if you add that into the mix. Absolutely. Your chart explodes. Explodes, that's right. That's even more nebulous to get your arms around. So, you know, I think it's still understated. Great research. David Floyd are actually quantifying and putting a framework around what is the top conversation at Sapphire here is the business value equation. And that's obviously two parts. Technology, simplicity around technology and deployment, integration. And then the second big part is show me the money. And now, ultimately, the business benefits is what drives a lot of these big companies. And SAP certainly is doing very well with that. For more information, always look at this video on youtube.com and let us look at an angle and go to wikibond.org and search for the research. It's going to be out there. It's all free. We're proud to present it here at Sapphire with our exclusive coverage here at Sapphire, presenting the latest research and numbers in quantifying the business benefits around virtualizing SAP. And it's amazing. So, David, thank you very much for presenting that. We'll be back here live from Orlando in the Global Communications Center at Sapphire now, right after this short break.