As SAP continues to raise its bet for S/4HANA, SAP customers find themselves at a crossroads. Is it time to migrate to SAP's new application, or is a wait-and-see approach the best option?
More than two years after SAP launched S/4HANA amid considerable fanfare, user adoption has been underwhelming. In the UK, just 5 percent of customers have deployed S/4HANA, a survey by the UK and Ireland SAP User Group found. Nearly half have no plans for S/4HANA.
Similarly, 60 percent of members of the DSAG German-speaking SAP user group have no S/4HANA plans or are undecided and 50 percent don't consider the early-stage product a "real alternative" to traditional ERP.
The lukewarm reception is not surprising. SAP launched S/4HANA in February 2015 billed as the "next-generation business suite" that could simplify business processes and deliver information in real time.
But more than two years later, SAP has yet to clearly articulate the product's roadmap, migration path and the costly hardware and middleware upgrades — not to mention the cost of licensing the HANA database, making it difficult for companies to make a business case.
Step by Step to S/4?
"We do recognize the fact that migration to the new product isn't necessarily easy," as Philip Adams, chairman of the SAP UK and Ireland user group, put it.
"What clearly we do need is to understand how do we get there, what are the steps that we need to make to move from where we are today to the new product."
For customers, the S/4HANA question boils down to risk vs. reward. While there is a lot of marketing hype around a faster in-memory processing of the HANA database, the question remains: Is it really worth a major reimplementation costing as much as tens or hundreds of millions of dollars?
But as low adoption rates and a dearth of S/4HANA customer case studies make clear, licensees are more concerned over the risk of a complex, lengthy and costly migration that can be disruptive to the business without a reasonable assurance of business value.
The Wait-and-See Alternative
Licensees are also rightly wary about functional parity between S/4HANA and SAP's Business Suite 7. According to industry experts, it could take 5-10 years before SAP can fully rewrite 400 million lines of code for S4/HANA to be on functional parity with Business Suite.
Of course, SAP observers are well aware of SAP's mixed track record for new product delivery. The company launched the cloud-based Business ByDesign suite for small and mid-sized businesses in 2007, but it's endured a rocky road while falling far short of SAP's lofty expectations.
For S/4HANA, a wait-and-see approach may make sense for many SAP customers. A couple of years down the road, a clearer picture of S/4HANA business value may emerge. But what to do in the meantime?
Innovating Around the Edges
After years of investment and customizations, most Business Suite applications are stable, robust and core to the business. Many SAP customers prefer to leave Business Suite in place while innovating around the edges with cloud, mobile, social and big data systems to drive the business forward faster.
Yet many customers remain saddled by costly SAP maintenance contracts that deliver diminishing value as SAP focuses more resources on S/4HANA and cloud company acquisitions, and less on Business Suite innovations and enhancements that provide new functionality.
It's time to rethink the SAP support value proposition and consider alternatives.
One alternative that numerous SAP ERP licensees have chosen is to move to third-party support. They're channeling millions of dollars in support savings into digital transformation, and boldly charting their own strategic course. They're finding that with third-party support, the rewards far outweigh perceived risk.
Assessing the ROI of Third-Party Support for SAP Applications
This in-depth ROI analysis of 65 Rimini Street clients can help organizations understand the business case for switching to third-party support. Nucleus Research, an independent analyst firm, has validated the findings in this report.
Hari Candadai, GVP, Global Product Marketing and Strategy
Mr. Candadai is a seasoned marketing professional with over 22 years’ experience in global product marketing and corporate marketing management. He has consistently demonstrated his leadership by building strong customer relationships and optimal cross-functional partnerships. The author of several thought-leading white papers on disruptive software and services models, and one of the chief evangelists for independent support, Mr. Candadai is a frequent speaker at industry conferences globally.