Businesses in Australia and APAC that use SAP Central Component as their main ERP system will soon have to move to SAP’s fresh cloud ERP S/4HANA Cloud by 2027, when SAP plans to stop providing popular support. SAP will first request that buyers use its own” Rise with SAP” movement and modernization service to migrate.
Companies in the region, like another world markets, have not been quick to undertake to the shift to SAP S/4HANA Cloud. Reasons include the required time to make a tactical decision, competing company priorities in a market environment, the price of what could turn out to be a very complicated migration, and unhappy previous changes to SAP’s roadmap for on-premise license holders.
Luiz Mariotto, world vice chairman of SAP Support at Rimini Street, told TechRepublic that companies are considering alternatives, which could include looking at competing It products or looking for third-party help options, with a prospective crunch coming up for companies wanting to travel by the deadline— or even by an expanded support deadline set for 2030.
What timeframe has Bark set for the movement of its It customers?
SAP announced that SAP’s SAP ERP Central Component product would no longer support popular support until December 31, 2027, despite the company’s initial expectations that customers may be moved to SAP S/4HANA Cloud by that time. Due to customer worries about meeting the 2025 date, SAP recently set a movement date for 2025, but moved this date forward to 2027 in 2020.
Customers of SAP’s fog product have no choice but to migrate to SAP’s cloud product if they want to pursue SAP’s roadmap because SAP will no longer support mainstream SAP ECC support until 2027. Customers who are unable to complete the movement may, however, be able to get an additional support improvement system for SAP ECC 6.0 Enhancement Pack 8 up until the end of 2030.
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An additional issue companies are considering is SAP’s choice to limit a number of goods innovations, including AI, to the SAP S/4HANA Cloud solution. This implies that some on-premise customers may not receive promising new features despite having invested in the migration to the S/4HANA database, which powers the cloud product.
Are businesses transitioning to the S/4HANA Cloud ERP system?
Even though” three years is not a long time to successfully execute a migration,” according to Big Four accounting firm PwC in an update on the SAP migration in 2024, it had seen “very few Australian and New Zealand customers migrate so far” to S/4HANA. This sentiment is in line with a reluctance of global SAP customers to enthusiastically embrace the upgrade at this time.
According to PwC,” the market is currently showing that there is very little appetite for large scale transformation programs.” It can be difficult to justify investing$ 50 to$ 100 million to install a new ERP, especially when there are so many competing priorities, the company said.
PwC did report” a high level of market activity” in the six months leading up to May 2024, which it attributed to business migration planning. ” With SAP’s 2027 deadline unlikely to be extended, we are expecting to see a significant number of companies across ANZ start their S/4HANA programs in 2025 and into 2026″, the firm wrote.
According to Gartner, SAP does not upgrade customers quickly.
Gartner published similar findings from global markets in research in October 2023. Only 33 % of SAP users who rely on SAP’s legacy ECC system, according to data available at the end of the second quarter of 2023, had purchased or subscribed to licenses to allow them to begin moving to S/4HANA.
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Only a fifth of ECC users had switched to the most recent version of the ERP platform, according to Gartner at the time. According to Gartner’s research,” Gartner still finds little evidence that migrations to SAP S/4HANA are occurring at the rate necessary to meet SAP’s goal of ending mainstream maintenance support for ECC in 2027.”
The approaches of the Asia-Pacific markets to the upcoming upgrade are different.
Rimini Street, which offers extended third-party support for products including SAP’s ERP, noted different reactions to SAP’s roadmap in different markets. User groups in Europe showed a greater willingness to back down against SAP’s plans, particularly those that did n’t offer key innovations like AI to those with on-premise S/4HANA licenses, according to Moriotto.
Mariotto claimed that SAP’s Australian customers have historically had a strong loyalty to the brand and the product, but the on-premises license change had put this on the test. He claimed IT executives who had won business investment to upgrade SAP’s S/4HANA database needed to create a new business case internally for a third migration to the cloud product.
Meanwhile, in broader APAC, Rimini Street is finding the Japanese market particularly receptive to its extended third-party support offering. According to Matitto, the nation has a sizable number of SAP customers, but they were also more open to “wait and see” rather than to rush through SAP’s migration timeline, which might lead to them choosing other options.
Some customers in the APAC region are deciding to use SAP.
Many customers will choose to switch to SAP’s cloud product despite some customers ‘ objections to an urgent SAP upgrade. Some APAC customers are beginning to relocate. SAP’s Q4 2023 results announced new brands that had chosen Rise with SAP included Airservices Australia, Christchurch City Council, Chandra Asri Pacific and Coles Group. The Digital Transformation Agency of the Australian Federal Government renegotiated an AUD$ 152 million three-year, whole of government agreement to assist agencies in improving their ERP systems in June 2024.
Why do people hesitate to switch to SAP’s cloud product?
In PwC’s update, it listed economic pressures, changing business models, disruptive technologies, and margin pressures as some of the factors that might prevent businesses from making the decision to switch to SAP’s cloud product.
Below are some additional justifications for SAP customers ‘ decision to delay the cloud migration.
Migration cost and business value: The migration will require investment across a multi-year timeframe, into the tens or even hundreds of millions when factoring in subscription and implementation. Businesses also need to calculate the anticipated value of their businesses.
Timing and priorities: The timing, which has been decided by SAP, may not suit all businesses in all industries, some of whom may be struggling with tough market conditions or seeking to invest funds in other forms of innovation, outside of an ERP upgrade.
SEE: We compare Workday and SAP’s HR capabilities in this review.
Complexity: PwC noted multiple pathways to migration, including “greenfield”, “brownfield” or “mix and match” approaches. Bottom line: Large organizations will find the migration to be very challenging because many have created numerous custom customizations for the on-premises product.
Vendor relationship: SAP customers may be concerned about the vendor roadmap after SAP stated that upcoming innovations like AI, generative AI, and sustainability features will only be offered as a part of the cloud product, especially those who invested in an on-premise license.
What options do customers have for SAP migration before 2027?
Some SAP customers may find the 2027 deadline problematic, with the expectation that many will need to extend support to 2030 in order to finish their migration project. Before their migration deadline, customers will be considering a wide range of options.
Follow the SAP roadmap
Numerous current customers are getting ready to follow the SAP roadmap. Although it will require customers to pay for SaaS subscriptions and migration, SAP will also have to pay for migration and implementation, but SAP could also provide value to customers by offering a cutting-edge ERP in the cloud, with SAP focusing on benefits like the ability to use artificial intelligence.
SEE: SAP SuccessFactors Review: Pricing, Features, Pros &, Cons
Continue to “wait and see”
Gartner’s advice in 2023 was for organisations to take their time, even though time was running out to plan the move to SAP S/4HANA. Many businesses may still be adhering to its advice, which states to “resist the temptation to cut the planning process short” and” consider the larger implications of moving forward to stay in line with the end-of-life target dates.”
Choose alternatives
Some customers are considering their options because SAP’s cloud product needs to be completely upgraded. This includes competing ERPs from Microsoft, Workday, Oracle, and others, as well as extended third-party support services like Rimini Street, which can assist customers in extending the life of their on-premises software while they focus on other strategic priorities.
