ISG Provider Lens™ SAP Ecosystem - Managed Cloud Services for SAP ERP - Germany 2024
Service offerings and delivery capability for S/4 transformations are increasing, with emerging trends and best practices.
Transformation and trends
As the 2027 deadline for standard maintenance of SAP S/4HANA predecessors approaches, an increase in migration initiatives is observed, coupled with a shift in transformation approaches from greenfield to brownfield and bluefield. Providers have demonstrated readiness for this transformation on multiple fronts. They have been diligent in addressing possible gaps in their consulting offerings, resulting in a convergence of leading providers’ service portfolios.
Customers have supported the transformation strategy and business case development with comprehensive, tool-supported assessment services and readiness checks. They increasingly emphasize industry expertise and in-depth process knowledge offered through comprehensive prefabricated best-practice templates with industryspecific add-on solutions, which significantly reduce implementation risks.
The most significant specializations and distinguishing features can be found in the transformation segment. Industry-specific characteristics can also be found in the SAP human experience management (HXM) area; however, these are far less recognized as competitive advantages.
Innovation and cost pressure
Innovative solutions and the strengthening of innovation capabilities are of pivotal importance. Leading providers rely on global innovation centers, maintain innovation collaborations with SAP, hyperscalers and
customers, and increasingly use AI, ML and RPA capabilities in their solutions. Operating models are evolving from traditional service management to a continuous improvement process, seamlessly integrating innovation, prototype development and deployment.
Leading providers are responding to the increasing cost pressure with numerous innovations for automation. Examples include code or data analysis to simplify entire transformation steps and operations, automation of standard tasks and avoiding manual intervention. Overall, this approach improves margins and minimizes
implementation and migration times.
Local and global resources
The ongoing shortage of skilled workers, an obstacle to transformation in the German market, can partially be offset by nearshore and offshore capacities. Customers increasingly embrace global delivery teams, primarily due to the minimized disruptions across delivery units or regions facilitated by harmonized delivery
approaches. Nevertheless, local presence remains a decisive competitive factor, and leading providers continue to invest in local delivery centers, strategic acquisitions and a local workforce. This commitment is evident in the observed expansion of the headcount and increasing proportion of certified experts.
Sustainability and resilience
In recent years, external transformation drivers have become increasingly influential due to various crises. Resilient business processes, supply chains and sustainability issues are frequently mentioned. Sustainability is a vital component of providers’ service and solution portfolios. They set and communicate their
sustainability targets. Many IT services partially meet sustainability requirements and have corresponding certificates. However, the demand for sustainability solutions is lagging behind expectations.
A regularly mentioned transformation goal is the digital core for an intelligent company that offers a consolidated, cross-process database with new analytical, AI-supported insights to contribute to strategic decision-making.
Trend toward cloud migration
Although heterogeneous approaches persist, the trend toward cloud migration continues, with the RISE for SAP proposition playing a vital role. Alongside offerings on the leading hyperscaler platforms, sovereign cloud offerings hold significance in Germany, particularly for individual sectors. For operations, leading providers offer central platforms that manage complex hybrid and multicloud environments. Intelligent automation tools are also increasingly gaining traction, and price transparency for customers continues to increase with pay-per-use models and self-service offerings.
Digital core and HXM
The use of AI-controlled tools is gaining prominence in the human experience management (HXM) field. In addition to improving UX with central access points, GenAI improves user interaction, with selection or sourcing processes having accelerated growth due to AI. Local data protection and other regulatory requirements impose specific demands on providers. Overall, a clear trend toward cloud migration is observed. Traditional payroll and time management solutions are becoming a significant part of the Digital Core, with integration, data storage and analysis requirements.
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