SAP legacy ERP users wise to ignore offer of single leap to the cloud

According to the chair of the SAP UK and Ireland user group, users of its legacy on-prem ERP systems are set to upgrade their software before they move to the cloud, eschewing the vendor's preferred method as a first step.

Speaking to The Register, Conor Riordan said users were cautious about migrating legacy ERP systems – which come under the banner of ERP Central Component (ECC) – to the cloud and the latest S/4HANA ERP system at the same time.

In January 2021, the German software giant launched RISE with SAP to lift and shift complex SAP environments into public, private, and hybrid clouds to help customers get to a new architecture working with one hand to shake, facilitating partnership deals with cloud hyperscalers, systems integrators, and other third parties.

It was designed to get users to the cloud without going through the standardization necessary for a software upgrade. From there, SAP promised to help move customers to S/4HANA. According to the company, RISE with SAP is "a managed cloud service that helps organizations using on-premises ERP software – including SAP ERP, SAP ECC, and SAP S/4HANA – to migrate to the cloud securely and smoothly."

However, Riordan said ECC users were likely to be cautious about moving to new infrastructure and application software simultaneously.

"The challenge with the initial [RISE with SAP] offering was that going from ECC on-prem to the cloud is a massive step, and for most organizations, just from a pure business risk perspective, you're not going to do it. It's going to be a multi-year, multi-step journey. You're probably going to go ECC on-prem to S/4HANA on-prem, to RISE with SAP, and then to the cloud."

He added: "Maybe smaller organizations have more flexibility to do it in fewer steps, but for a lot of the big legacy SAP customers such as large multinationals, that one-step process is just so complex and so risky."

Riordan welcomed SAP UK and Ireland managing director Leila Romane's keynote speech at this week's UKISUG conference in Birmingham, but noted that "she didn't mention RISE once, and she deliberately did that because I think they're getting the message that nobody's saying that RISE is a bad idea, just saying we need to do it on our time, and we get, we will get there.

"But it's such a transformation that it needs to be done in multiple steps rather than a single step," he said.

SAP says it will end mainstream support for ECC on December 31, 2027, after which more limited "extended support" will be available. Only ECC instances on "Enhancement Pack" EHP6 and later will qualify for the extension; the remainder will see support end at the close of 2025.

However, multinationals and other organizations that invested huge sums in creating a stable ECC platform for the business might accept and manage the risk in the support deadline, said Riordan, whose day jobs have included running SAP ERP projects at global pharma company Pfizer.

"For most organizations, the risk of doing this badly is too big, so you've got to do it right. If you haven't started planning, start planning. You need to be planning this in 2025, you need to give enough time to think out your strategy, pick a partner that's got the capacity, and then factor in enough time in 2026 probably 2027 to do it.

• Asda hits the brakes on tech tweaks to avoid festive fiasco
• UK council still hadn't fully costed troubled Oracle project 2 years in
• Europe's largest local authority slammed for 'poorest' ERP rollout ever
• Inexorable march of progress at SAP threatens to leave users behind

"In 2027, S/4 is going to be 12 years old. It's not a new platform, so retiring ECC is going to be key. If you're on the journey, they're going to give you an option of extended support. But if you're going to stay with SAP, it is a question of when, rather than if you're going to move to S/4. It's really important just to bite the bullet and get on with it. It's not going to get any easier in 2028 or 2029."

Last year, both UKISUG and the German-speaking user group DSAG publicly criticized SAP after CEO Christian Klein said "innovation" such as AI would only be available to cloud versions of S/4HANA. The critics argued SAP had previously said S/4HANA would be the platform for the future, regardless of whether it was run in the cloud or on-premises.

A new survey from UKISUG found that almost three-quarters of SAP users said enterprise AI will benefit their organization. Meanwhile, feedback from 327 SAP user organizations revealed that SAP would play an important role in deploying AI for 58 percent. On the subject of the cloud and innovation, Riordan said there had been some "poor communication" from SAP.

"SAP said, 'AI is only available to customers on RISE.' That was a very black-and-white statement. It is correct, but again, all the innovations happening at the edges: so if you're on a [supply chain management] Ariba service, [expense management] Concur or [HR system] Success Factors, all these applications that are cloud native, you get [SAP AI] Joule anyway, irrespective of whether you're on RISE or not."

SAP users who were early to sign up to RISE are now looking at the end of their three-year contract. When the vendor launched the offer, it wanted to impress investors with the number of customers signing up to its plan to accelerate cloud adoption.

"In the early days, there was probably a lot of heavy discounting, and obviously, customers are negotiating hard to retain those discounts," Riordan said. "As a user group, we don't talk to customers about their contracts, so we don't know, but we do know that there's lots of hard negotiation around the renewals and the pricing."

Earlier this year, Gartner found RISE sales were falling as a proportion of SAP's total sales. With commercial arrangements set to enter a fourth year, users will hope to find a sweet spot between the vendor's desire for growth and the need to improve margin. ®