SAP still struggling to convert ECC customers to S/4HANA, says Gartner

Latest platform software has not been licensed by two-thirds of legacy users, despite strong growth

New data from Gartner suggests that SAP is continuing to struggle to get users from its legacy ERP platform ECC onto the latest version: S/4HANA, launched in 2015.

Despite seven years on the market, SAP S/4HANA has not been licensed by two-thirds (69 percent) of ERP Central Component (ECC) clients, according to data from calendar Q3.

"Currently, Gartner sees little evidence of the acceleration of migrations that would be needed to meet SAP's 2027 target to terminate mainstream maintenance support for ECC. After 2027, SAP will still offer extended maintenance until the end of 2030, but with a 2 percent premium for software support fees," the global research organization said.

In the last quarter, SAP S/4HANA had more than 20,000 customer sales, with around 60 percent net new customers.

As well as trying to get customers to see the benefits of migrating to its latest ERP platform, SAP is also pushing the idea that they move to a software-as-a-service model in the cloud. As a way of executing both strategies, it launched its RISE with SAP programme in January 2021. The commercial package has accounted for about 50 percent of SAP S/4HANA sales so far and accounted for 58 percent of S/4HANA sales deals signed in 3Q22, Gartner found.

Speaking to investors following the company’s Q3 results, CEO Christian Klein emphasised the company’s successes with S/4HANA sales, without revealing the number of ECC customers it was converting. He said S/4HANA cloud revenue was growing at 81 percent annually. “We are clearly expanding our leadership in ERP with net new customers once again representing nearly 60 percent of our new S/4HANA deals in Q3, together nearly 800 go-lives.”

Gartner said that although S/4HANA was the only upgrade option for ECC, there was no single approach that justified its adoption by everybody.

“CIOs need to focus on actions that will accelerate analysis of the suitability of an S/4HANA migration for their broader ERP strategy. If you have to make a thorough business case, you may need external support. You will also require engagement from your own organization, including business stakeholders to make it work,” the report said.

Customers have struggled to see the business case to move to S/4HANA and/or the cloud – as evidenced in users surveys – despite SAP’s insistence on the direct of travel.

According to a survey from German-speaking user group DSAG published in March, the proportion of organizations to which S/4HANA was relevant to their SAP investments fell to 50 per cent in early 2022, down from 56 per cent the previous year.

A willingness among users to spend on the Business Suite platform – the earlier generation of technology based on the ERP Central Component or ECC – also fell slightly, from 25 per cent to 24 per cent over the same period, the survey found.

But at least in the UK, there seems to be a softening of attitudes. A survey of 114 SAP user organisations by UK & Ireland SAP User Group published last week revealed that almost nine in 10 (89 percent) organizations are either using or planning to use SAP S/4HANA, compared with 74 percent in 2021. Of those organizations planning to move to SAP S/4HANA, 70 percent say they will move in the next 36 months. Reasons for doing so included the 2027 maintenance deadline for Business Suite 7 / SAP ECC 6 (70 percent), that they require new functionality (49 percent), or as a part of a wider business transformation (47 percent). ®

 

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