Schiller’s saying applies to many areas of life, not least IT. Here, it is rarely a matter of eternal bonds, but of medium-term decisions in sensitive service areas. Therefore, even in the choice of hosting provider, contract decisions should be well prepared.
The evaluation of a hosting contract (-work) is complex and time-consuming. In the following you will find a compilation of my experiences, in order to make the first steps in this not quite everyday undertaking a little easier for you. If you have any questions or comments, I look forward to hearing from you.
So much work
It may seem self-evident, but it is no less important because of that: First of all, you should ask yourself whether an evaluation makes sense at all. Because it is quite true that already the examination of alternative providers generates a not inconsiderable amount of work. This is often overlooked in the heat of the moment, so here are a few basic suggestions on the question: ‚Am I satisfied with my internal or external SAP hosting provider?
- Contact your IT managers – where are the current pains?
- Talk to the current operator – can they service changing requirements?
- Seek to talk to the industry leader to learn about the market situation.
- Look for practical experience in the DSAG or other IT decision-making circles.
This preliminary work will only cost you a few days of effort. Use this opportunity to weigh the risk of missed opportunities against unnecessary effort. If you see a potential benefit in a tender after this analysis, estimate the necessary effort. Enclosed are some estimates of the internal effort:
- Preparation, implementation of the evaluation (4-5 partners): approx. 30 days effort (3-4 months runtime)
- Preparation, implementation of the transition (1 landscape): 30 days of effort (3-4 months runtime)
- Each additional system landscape: 5-15 days additional effort (2-4 weeks additional runtime)
Thus, you should start evaluation considerations at least 9 months (better 12) before the end of the contract. Of course, in case of emergency it can be done faster, but you will lose important buffers for coordination, negotiation and unforeseen problems. The external effort for the evaluation is normally fully borne by the provider. For the transition, however, you should expect a mid-five to low six-figure sum for medium-sized SAP landscapes.
These figures are, of course, rough guidelines, and depend on a large number of factors. In particular, time and personnel costs do not scale linearly when you look at very small or very large IT landscapes. A consolidation project in the Deutsche Bank Group will probably take several years. In contrast, the tendering and transition for a single SAP HR 3 system landscape may only take 3 months.
But for orientation you are at least not completely off the mark with these estimates.
Time planning
You have decided on an evaluation? Well, as outlined above, you should plan at least three months for it. With the number of partners involved, the duration of the external timelines (indication, offer) does not increase, but the time required for the internal review does. A multi-stage process is recommended to focus the lion’s share of the work on those partners that most closely match your expectations.
Involve IT (60%), purchasing / legal (30%) and controlling (10%) in the project. Make sure that they are involved to an appropriate extent in the progress of the tender. This way, all colleagues are fully informed and aware of the current issues.
Roughly, the following phases of the evaluation can be distinguished:
Evaluation Yes/No (2 weeks)
- Interview with internal stakeholders
- Survey of current hosting partners
- Evaluation of other external information sources
- Termination conditions for the old contract (!)
Phase 1: Long List (8 weeks)
- Period 2 weeks: Preparation of tender documents (rough service description)
- Period 1 week: Identification of potential partners, cover letter with request for indication
- Period 2 weeks: Follow-up on feedback, conduct short workshops
- Period 2 weeks: Consolidate feedback, clarify final questions
- Period 1 week: Internal coordination of the short list, information to the providers
Both phases can vary depending on the project size, stakeholders and requirements. It is important that you communicate the project and the schedule to all internal and external stakeholders early on. This applies above all internally to the group of decision-makers that you will need to sign off on the project.
Timely notification ensures on-time signature, which is important in order not to delay any subsequent transition.
Requirements
The requirements definition varies, of course, depending on your IT landscape and the requirements of the business units. The much-quoted term ‚business enabler‘ once again finds practical application here. Even if the topic of SAP hosting is normally an IT topic, the requirements definition is the first step in the business department.
Possible questions
- What are the requirements for service availability?
- What are the requirements for response times
- Is the focus more on dialog operation or background operation?
- How volatile are the service requirements during the contract period?
- Which additional (non-SAP) products should also be part of the contract?
The central requirements for the specifications are derived directly from these requirements:
- Maximum downtime at a stretch / promised availability in percent (on a monthly basis)
- Hardware equipment / response time commitment
- Dedicated database server, use of secondary application servers / load balancing
- Physical environment or virtual environment
- WAN, archive, process automation tools (e.g. Automic), SFTP server, etc.
Try to keep the specification as factual as possible, and put little prose in it, this will make it easier to maintain and review. For vendor feedback, it is advisable to list the requirements sorted by context in a table where you can then clearly record the respective degrees of fulfillment.
Deliverables
Send the draft requirements (phase 1) and the detailed specifications (phase 2) to the vendor, and offer conference calls and workshops to discuss ambiguities on both sides. Make sure vendors all have the same level of information during the phases as well.
A few pointers:
- Weight your requirements internally (increase the significance of the criteria).
- Document reviews cost time (vendors will often deviate from your structure in offers)
- Document reviews cost multiple times (!) (5-6 revisions per contract are not uncommon)
- Ask vendors to mark / document changes (makes review much easier)
By the way, don’t be afraid to appear firm and keep the face-to-face vendor workshops rare and short in a large circle. Providers have a natural interest in seeing you as often as possible and spending as much time with you as possible (‚visibility‘). However, your internal effort increases significantly if you and your colleagues from IT, purchasing and controlling are stuck in one-day workshops with all 5 vendors of phase 1. For the first taster session, an indication presentation of 2h is completely sufficient – but good preparation is mandatory here.
For phase 2 you can take a little more time for each individual, but here you should also make sure that providers do not push themselves into the foreground for the duration of the workshop. The advantage of this approach is that you save time and learn something about the willingness of potential partners to respond to customer requirements.
Also, when comparing offers, don’t forget that in addition to just setting up the operating environment, there is almost always relocation work involved – even if you keep your current partner. Keep the offers comparable by including estimates for services that can be planned (e.g. number of system copies or Support Package implementations per year).
Conclude the contract
Consolidate all results in an overview, evaluate and weight them and (in phase 2) have Legal review the contract offers. Once all partners on the shortlist have been validated, work with IT, procurement and controlling to develop an ‚internal preference‘ that everyone feels comfortable with. Also pay attention to your gut feeling – how well did the sales process work, how informative were the presales colleagues, what was your general impression?
Present your preference alongside the other partners from both phases to the internal decision-making committee (30-60 minutes, consisting of the person authorized to sign and the subordinate management level), and clarify any queries promptly and finally.
After the decision has been made, the signature should follow as quickly as possible, because there is a lot to do – the transition project is already waiting.
