Executive Summary: ISG Provider Lens™ SAP Ecosystem - Germany 2022

The individual quadrant reports are available at:

ISG Provider Lens™ SAP Ecosystem - Managed Application Services for SAP ERP - Germany 2022

ISG Provider Lens™ SAP Ecosystem - Managed Platform and Cloud Services for SAP - Germany 2022

ISG Provider Lens™ SAP Ecosystem - SAP Business Technology Platform - Germany 2022

ISG Provider Lens™ SAP Ecosystem - SAP S/4HANA System Transformation - Large Accounts - Germany 2022

ISG Provider Lens™ SAP Ecosystem - SAP S/4HANA System Transformation - Midmarket Accounts - Germany 2022

Making the transformation to S/4HANA a priority

The SAP HANA in-memory database and the applications based on it have now been well established in the enterprise software market for a few years and are continuously being updated by SAP. For core ERP applications, S/4HANA migration is a top priority for SAP. The timeframe to achieve the migration is based on SAP’s decision to end the standard maintenance of previous products at the end of 2027. Compared to its earlier decision, which ended support at the end of 2025, this decision represents a concession on the part of SAP because customers have hesitated to embrace the migration.

It should be mentioned here that the rapid expansion of the cloud-based infrastructure supporting SAP HANA has also significantly changed the migration conditions. Cloud migration is a key trend for SAP applications. The expansion of the presence by public cloud providers, the so-called hyperscalers, for HANA operations, which is being pushed, can ensure that in most pending projects, the option of a transition to a cloud-based operating model is being considered. In each case, it must be considered that the use of a public cloud requires a higher degree of standardization now than what was required in the past. The migration to such infrastructure has already made good progress in the area of development systems, test systems and sandboxes. However, many customers are reluctant to migrate production systems.

SAP is increasingly advertising the move to the software-as-a-service (SaaS) version of S/4HANA Cloud instead of the on-premises or private cloud version. Considering this step, the reluctance of many customers, especially in Germany, is even more pronounced than for the transition in general. The annual surveys published by the Deutsche SAPAnwendergruppe e.V. (DSAG) among its member companies, which includes a large proportion of companies using SAP software, confirm this trend. In short, these surveys show that the willingness to move to S/4HANA in the coming years continues to grow, but the willingness to move to cloud-based versions is somewhat behind. The details can be found here.

It should be noted that comparable figures from the corresponding user group in North America, the America SAP Users’ Group (ASUG), indicate a significantly higher readiness to move to cloud-based versions. In this context, SAP in 2021 launched an initiative with the RISE with SAP program (referred to as RISE in this report), to sustainably support the transformation to cloud-based infrastructures in the future. RISE offers a bundle of licenses and services for cloud transformation and subsequent cloud operations. SAP has partnerships with all hyperscalers; hence, there are no restrictions on which platform to choose. Several service providers have already qualified as SAP partners for RISE.

Since RISE was launched just last year, the experience is still incomplete. In addition, the composition of this package evolved during the year so that market estimates are also subject to further changes. The following aspects have emerged from discussions between ISG and service providers:

• RISE is sometimes seen as a complement to service providers’ offerings. Some global system integrators, in particular, see a significant overlap with their own offerings and, thus, a potential competitive situation with SAP. In general, there is a tendency to combine RISE with their own offerings to strengthen their position as the primary contact for customers during a transformation.
• RISE is attracting more interest from midsize customers, especially those that are still using less complex SAP environments. Larger customers that generally have long-standing, extensive and detailed licensing agreements with SAP for many products have so far been very reluctant to use RISE.
• Hyperscalers see RISE as an additional opportunity to advance the use of their respective platforms for SAP installations. Partnerships with SAP clearly point in this direction.
• In its statements, SAP so far sees RISE as a great business success. In the market, both customers and service providers are taking a rather wait-and-see attitude, because they are not yet sure whether RISE will be a sustainable success. The next two years will certainly bring more clarity on this subject.

The following observation, which ISG was able to make in numerous interviews with customer companies on the one hand and suppliers on the other, seems to be another relevant aspect regarding the upcoming transformations to S/4HANA. In many cases, the expected complexity of the upcoming transformation, especially for large enterprises, leads to a noticeable uncertainty about the best possible transformation path. Also contributing to the uncertainty is the fact that SAP continues to rapidly develop the products around S/4HANA, meaning conditions are changing quickly.

As a result, preparatory strategies and program planning projects are still being extended in many companies to adequately address these uncertainties. Questions that need to be clarified include the following:

• Should we simply upgrade existing systems (brownfield transformation), or should the possibilities of HANA be better exploited through a complete overhaul of the system architecture and the resulting transformation through a new implementation (greenfield transformation)? SAP’s focus here is the realization of a digital core with the implementation of S/4HANA. Furthermore, is there a suitable way to migrate to a new system and thus achieve a re-engineering of selected processes without a completely new implementation (selective data transition)?
• Should the transition to a cloud-based infrastructure be an integral part of the move to S/4HANA? In many cases, the answer is yes, but that leads directly to the next question.
• Should you start with the application conversion or the migration to cloud infrastructure, or should the two steps be combined as part of a reimplementation?

Another consideration is the possibility offered by S/4HANA to replace ERP systems, which are often heavily modified nowadays, with a standard process-oriented implementation. An essential tool for this is the cloud-based SAP Business Technology Platform (BTP), the use of which, in many cases, allows custom developments to happen outside the corresponding core system and thus maintain the standard. This strategy is generally described as “keep the core clean.”

It is obvious that due to all the aspects mentioned above, the development of a system strategy and the formation of a business case require much more effort, and the subsequent implementation usually leads to more significant changes in the business processes of the companies involved.

For this issue, as well as for the more technical issues already discussed above, it is worth mentioning here the problem of the unavailability of human resources in the coming years. The rather moderate pace of change so far means that the number of parallel projects in different companies will increase significantly in view of the target date at the end of 2027. The unavailability of qualified personnel to support these activities is already a limiting factor mentioned by many service providers. This is resulting in increased efforts to recruit additional staff. In many cases, there is also re-skilling, with staff being pulled from other areas and trained through appropriate qualification measures to participate in SAP transformations. SAP customers hope that these measures will enable the upcoming transformation programs to be carried out successfully and with virtually no disruption.

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