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SAP's vision underplays complexity of S/4HANA cloud migration, says Gartner

Difficult decision did not end with RISE with SAP, analyst tells The Reg

SAP’s plans for moving customers to S/4HANA in the cloud – the assumed destination for the majority of SAP's ERP users – belies the complexity of decision in terms of software licensing, infrastructure and business processes, according to Gartner.

In the latest research to address the pitfalls of SAP's efforts to get thousands of on-prem users of its ECC system or S/4HANA onto the cloud, Gartner said, "the reality is that the migration is not as simple as SAP and its partners claim."

S/4HANA was first launched in 2015, as the next generation of the German vendor's enterprise application platform, based on its own in-memory database. While some businesses have made the leap to the new system — either on-prem or in the cloud — plenty more are yet to migrate the applications on which their operations rely. Gartner researchers earlier this year showed 70 percent of SAP customers rely on ECC and have yet to upgrade to S/4HANA.

New research shows that the direction of travel for S/4HANA migration is to the cloud, given the number using cloud-based test environments.

"With S/4 HANA application architecture changes from ECC, there is a move from ERP systems to cloud services, where customized ERP is replaced with configured, cloud alternatives. This is evidenced by S/4 HANA test-and-development cloud environments, which now significantly outnumber those of on-premises solutions," said the research note, co-authored by Philip Dawson, vice president in Gartner Research.

At the same time, the majority of S/4HANA systems that had moved to the cloud were pre-production systems still in the test or planning phase.

Speaking to The Register, Dawson said the lift-and-shift of existing applications to the cloud was a "Trojan horse" approach to moving to the cloud, with some cost benefits but fewer business benefits.

“That’s the transition, but then going to the application migration, to S/4HANA is this transformational step. And my bottom line is here: you can do those things together or in sequence, but be aware of all of them.

“Are you just kicking the can down the road and saying how do I modernize it in the cloud? But if it's a three-year commitment on that contract, and then you get to S/4HANA in 2025 or 2027, it is not as far away as people think,” he said.

Meanwhile, infrastructural barriers remain in the move to the S/4HANA in terms of optimization to the cloud, sizing of databases or transfer of service level agreements, and configuration capability, he said.

In early 2021, SAP announced RISE with SAP, a programme designed to offer customers “one hand to shake” in an arrangement that promised a lift-and-shift of old applications to the cloud, and then the business transformation and re-architecture to move to S/4HANA. The German vendor argued the process was simplified because it was heading up the relationship in a partnership which included cloud infrastructure providers and well-known consultancies and systems integrators.

But Dawson argued RISE with SAP did not cut complexity for users and may have added another layer.

“What RISE with SAP has brought to the party is an element of customization that SAP will host themselves on the SAP Cloud. So now you've got S/4 HANA running on the public cloud versus the SAP Cloud or RISE with SAP running on the public cloud. Then getting that certification and packaging is an extra set of functionality that you have to consider on the project,” he said.

While Gartner points out the complexity in terms of commercial arrangement and infrastructure, users remain to be convinced of the business benefit of moving to S/4HANA in the cloud. Because it will not carry over the customizations businesses have created over the years in the ECC systems, they will be forced to go through a business transformation to adopt new business processes embedded in S/4HANA. The business case for such a move remains challenging to make, at least according to the SAP German-speaking user group DSAG.

Following the launch of RISE with SAP, Thomas Saueressig, who leads the SAP board in product engineering, told The Register that SAP would help companies to adopt more standardized processes on S/4HANA, but admitted the journey could be complex and take a number of years.

"We want to give [customers] a helping hand now to move them on a public cloud infrastructure as a service and help them on their way, step by step with the process intelligence to optimise the processes,” he said.

Despite SAP's efforts, analysts and users seem less than convinced that complexity is giving way to a more straightforward path. ®

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