SAP users still wrestling with business case for S/4HANA

A decade later, ERP giant struggles to convince legacy customers to upgrade

More than a decade after SAP's S/4HANA in-memory ERP system debuted, 95 percent of legacy users say building a positive case to migrate requires a big effort or is genuinely challenging.

A survey of 455 CIOs, senior-level IT roles, SAP specialists, and business managers found that SAP's push to change the way customers pay for software was also unsettling them. Eighty-three percent of respondents in the Freeform Dynamics research said they did not fully understand SAP's latest migration policies and deadlines, while 84 percent expressed concern about current messaging and how it would impact their operations.

SAP has set what some see as aggressive support deadlines for its legacy system, ECC, which some customers have invested years and millions in getting tailored to their business needs. Mainstream support for ECC ends in 2027, and extended support ends in 2030. Under special circumstances, and if customers sign up to a cloud migration package well in advance, users can see support extended until 2033.

In the survey sponsored by enterprise application support provider Rimini Street, 94 percent of respondents see significant value in extending existing SAP systems.

The report criticized SAP's decision to change support deadlines, create new transition programs, and rename products. This added to users' uncertainty and made strategic planning more difficult. SAP's behavior was encouraging users to explore alternative paths forward, the report said.

Dale Vile, distinguished analyst at Freeform Dynamics, said SAP customers were embracing the idea of open "composable" architecture in which users loosely couple third-party solutions to meet their ERP needs.

"This business-led rather than supplier-led approach has been commonplace in other areas of IT for a while as it pays dividends in terms of flexibility, control, and access to new innovations," he said.

Following S/4HANA's launch in 2015, users were given the option of on-prem or cloud deployments. However, SAP now strongly favors a cloud SaaS model, and says "innovations" such as AI will only be available via these deployments.

Last month, DSAG, the SAP user group for Germany, Austria, and Switzerland, called for greater transparency in cloud licensing to enable migration and upgrade of on-prem systems to the cloud after SAP ended its RISE with SAP product package, replacing it with SAP Cloud ERP Private, with pricing based on a new Full-Use-Equivalent metric (FUE), which was different from licensing in other cloud and on-prem deployments.

SAP has said it is committed to guiding and supporting every step of its customers' move to "integrated, cloud-powered operational excellence."

"The SAP Cloud ERP Private Edition package is not just a solution; it is a gateway to a future of limitless potential and unprecedented business agility," it said.

The move from ECC to S/4HANA is not simply a technology upgrade. SAP recommends users strip out any customization they have built in the legacy software and either adopt new business processes or rebuild software in its cloud platform.

In March, Gartner found that 61 percent of SAP customers using its legacy ECC ERP platform had yet to license its S/4HANA software.

SAP provides core business applications for some of the world's largest companies, particularly in Europe, where giants such as VW Group, Siemens, and Airbus are customers. Around 35,000 organizations continue to use ECC globally, including some of the world's largest industrial groups. ®