Executive Summary: ISG Provider Lens™ SAP Ecosystem - Germany 2023

The individual quadrant reports are available at: 

ISG Provider Lens™ SAP Ecosystem - Managed Application Services for SAP ERP - Germany 2023

ISG Provider Lens™ SAP Ecosystem - Managed Platform and Cloud Services for SAP - Germany 2023

ISG Provider Lens™ SAP Ecosystem - SAP S/4HANA System Transformation - Large Accounts - Germany 2023

ISG Provider Lens™ SAP Ecosystem - SAP S/4HANA System Transformation - Midmarket - Germany 2023

With increasing movement in the S/4HANA market, service providers are well prepared

Service providers participating in this ISG Provider Lens™ study are universally satisfied with the German market and, in some cases, expect exponential growth in the coming years. According to a survey by one of the providers, Germany is regarded as the epicenter of major SAP projects. A primary reason for this is the increasing pressure on the SAP installed base due to the discontinuation of standard maintenance for SAP S/4HANA predecessors starting in 2027. While German companies have opted for a wait-and-watch approach, there is an increasing movement in the market, indicating that this subject can no longer be ignored.

Service providers are well prepared for these future demands.

Regardless of whether the providers can position themselves as leaders in their respective quadrants, they are filling gaps in their portfolios, and the apparent service scope of providers’ service catalogs is becoming increasingly similar in terms of content for all four quadrants. When viewed objectively and ignoring industry-specific details, hardly any difference is observed in the final service provision from a customer’s viewpoint.

Many providers are significantly expanding their partnerships with SAP and, in the infrastructure environment, with large hyperscalers, leading to portfolio alignment, provided customers do not have an absolute preference at the beginning of their projects.

Therefore, in the future, emphasizing unique selling points and added value of providers will be even more critical when addressing potential customers in the German market. The basis for this is an understanding of the respective target groups and a description of the company’s expertise regarding industry-specific and, in some cases, regional challenges from a customer’s viewpoint. Providers are increasingly developing and expanding industry-specific templates and function packages to provide technical responses to these challenges.

Previously standalone competencies and services are increasingly becoming the market standard in other fundamental and industryindependent relevant areas. Here, increasing efficiencies and directing resulting benefits to customers become vital. These benefits include easily understandable service packages tailored to customer requirements, customer-oriented billing models and reduced overall costs.

As the time window until the discontinuation of standard maintenance for predecessor products of the S/4HANA platform in 2027 continues to shrink, the number of transformation and managed services projects is increasing in Germany, similar to other regions worldwide. This increase applies to all industries and company sizes. It will intensify in the coming years so that the shortage of available market resources, which is already noticeable today, will become even more acute.

In particular, many providers respond by continuing or increasing their efforts and resources in automation tools. The use of RPA, ML and AI has increased compared to the last few years. Likewise, more and more partnerships are being established with specialist providers from these environments.

Templates, automation and partnerships stabilize service quality, improve and predict results easily, shorten runtimes for individual activities and complete transformation programs, which, in turn, help enhance the customer experience in the real project environment. They further assist in freeing up resources on the supplier side for other nonautomated activities.

Service providers invest to expand their workforce in Germany through access to external experts and talent and the establishment of additional delivery centers within the country or in nearby countries. These aspects increase the proximity to customers in the German market.

The priority given by providers to contentrelated training and further education on internal and external certification paths has resulted in a significant increase in the skill and certification level of employees in some areas, along with a substantial increase in the number of certified employees in the global and regional workforce.

Listed below are additional findings observed in the German market:

● Increased demand for cloud-based SAP offerings: Aligned with the general trend, providers are offering a comprehensive portfolio to cater to the increasing market demand for SAP Cloud offerings. Companies continue to prioritize private cloud offerings, particularly in the SAP environment.

● RISE with SAP: The keyword RISE with SAP plays a key role in many discussions. However, providers offer mixed feedback. Although SAP has increasingly invested time and effort in promoting the RISE with SAP program, there is still some hesitation in the market. Individual providers report that this program is well understood and increasingly accepted. In contrast, others continue to observe certain reservations among companies, which, in turn, is reflected in a large proportion of projects that do not operate under the RISE label. However, almost all providers have expanded their RISE with SAP portfolio and demonstrated their preparedness to answer to the demand for RISE with SAP.

● Localized delivery models: Many global providers have recognized the relevance of local presence as a factor that should not be underestimated, especially for the German market. As described above, some of these providers have significantly strengthened their German-based workforces to support them with global functions. Customers receive local services based on global best practices.

● Greenfield vs. brownfield vs. bluefield transformations: All transformation approaches are still in demand in the market. Greenfield, in particular, is an opportunity to move forward on the digital agenda, and vendors support this with templates and accelerators. However, as the discontinuation of standard support for environments with S/4HANA predecessors in 2027 inches closer, there is a decline in relatively long-running, complex greenfield projects and an increase in migration toward simpler, template-based greenfield or brownfield projects. The consensus on the customer side is that expensive investments in company-specific customizations made in the past should be repeated. To address these concerns, vendors equip themselves with self-developed tools based on their individual projects and operational experience and/or tools based on appropriate technical partnerships.

● Increased use of managed services: The number and scope of managed cloud and managed platform projects are increasing, irrespective of their connection with the RISE with SAP program. Companies should focus on value creation and treat platform operation as a commodity service. Providers surveyed are expanding their capacities for managed cloud/platform services regarding the functionalities in their portfolios and the development of corresponding personnel capacities using automated or autonomous tools. This development is also reflected in the number and depth of partnerships between service providers and hyperscalers. Variants of provider-owned cloud are increasingly being introduced in the market and accepted by customers.

● Focus on sustainability: Sustainability is one of the buzzwords of the hour. Many providers have this topic on their official agenda and have launched related programs within their organizations. Proactively or on demand, providers undertake many measures to achieve net zero goals until the end of this decade. However, when it comes to supporting such initiatives at client organizations using their portfolio of offerings, many providers have failed to provide evidence of successful customer implementations with measurable results.

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