Is SAP S/4HANA Adoption Accelerating?

⇨ Over 30,000 customers are still to adopt SAP S/4HANA

⇨ RISE with SAP may be complicating the adoption process

⇨ It seems unlikely that SAP will extend maintenance again

With 2023 a matter of days away, we are within five years of the upcoming end of maintenance for core SAP Business Suite applications. While all SAP customers running enterprise ERP systems are aware of the deadline, it is worth exploring SAP S/4HANA adoption, the impact of RISE with SAP, and whether there are any indications that SAP is planning to extend the deadline beyond 2027.

SAP S/4HANA Adoption

When SAP S/4HANA was released in 2015, SAP had between 42,000 and 45,000 enterprise ERP customers within their customer base. While most of those customers were running a version of SAP ECC or SAP Business Suite, a significant proportion had not moved from SAP R/3 despite SAP ECC release over 10 years ago. This lagging adoption curve is a challenge that SAP is still trying to address today.

Since the SAP S/4HANA launch in 2015, SAP has announced in their earnings calls that approximately 20,000 customers have licensed the product, with between 13,000 and 14,000 running it in their organization. However, according to the statements made by SAP executives in those same earnings calls, nearly half of those who have licensed SAP S/4HANA to date are net-new to enterprise ERP at SAP. This means that while SAP’s overall enterprise ERP customer base has grown to approximately 55,000 customers, there are still some 35,000 customers who are yet to either license or deploy SAP S/4HANA.

The rate of adoption for SAP S/4HANA does not seem to be accelerating. Despite being only a few years away from the end of mainstream maintenance, SAP has reported an average of about 500 new SAP S/4HANA licenses per quarter for most of the last two years. Some quarters have exceeded that number—Q4 of 2021 had approximately 650 new licenses, for example, but the pace of adoption has not accelerated. Given that we are less than 20 quarters away from the end of 2027, SAP should be seeing around 1,700 new licenses per quarter if all 35,000 customers that have not yet moved to SAP S/4HANA are to do so by that date.

Impact of RISE with SAP on SAP S/4HANA Adoption

The announcement of RISE with SAP in January 2021 somewhat complicated the SAP S/4HANA adoption scenario for customers. Initially launched as a Business-Transformation-as-a-Service offering with a single contract that included an ERP system, infrastructure, a development platform, business process intelligence tools, access to the SAP Business Network, and the tools necessary to implement that ERP, RISE with SAP is now being positioned as a solution supporting innovation, cloud adoption, and the platform for an intelligent sustainable enterprise.

But while most SAP customers are at least somewhat familiar with SAP S/4HANA Cloud ERP product that is a part of RISE with SAP, there has been less engagement with some of the other components. Also, while SAP has been aggressive in urging customers to move to RISE with SAP, for many large organizations running existing SAP ERP systems, there is significant doubt as to whether their organization is likely to adopt the solution.

Many large existing ERP customers are also apprehensive about adopting a Software-as-a-Service ERP solution given that they have been running on-premise for many years and may have complex implementations with large data sets. Even though SAP supports new implementations, system conversions, and selective data transitions using SAP S/4HANA Cloud, private edition, SAP’s emphasis on RISE with SAP may be preventing larger SAP ECC customers from moving to SAP S/4HANA.

Potential for Additional Maintenance Extensions

While SAP has said nothing about extending mainstream maintenance for core SAP Business Suite applications beyond 2027, the initial unexpected extension may encourage some organizations to think that it is likely to happen again. However, there are multiple reasons why this seems unlikely.

First, while mainstream maintenance is ending at the end of 2027, extended maintenance is available until the end of 2030 should an organization wish to purchase that option. This means that the real deadline is already 2030. Second, SAP S/4HANA was announced in 2015, 10 years after SAP ECC was launched in 2005. While SAP has committed to supporting SAP S/4HANA until at least 2040, it is likely that they may want to launch an even newer ERP system in the next decade. They will not still want organizations on SAP ECC when that happens. Third, SAP wants organizations to commit to cloud ERP, and SAP S/4HANA and RISE with SAP are at the center of that commitment. While SAP is currently on track to achieve their medium-term cloud goals for 2025, they need customers to move to the cloud to truly become the cloud company they want to be beyond 2025.

Additionally, the SAP executive board has changed significantly since 2020. Christian Klein became sole CEO, while Jennifer Morgan, Adaire Fox-Martin, Stefan Ries, and Michael Kleinemeier stepped down from their positions. Long-serving CFO Luka Mucic is set to step down in mid-2023. During the same period, Scott Russell, Sabine Bendiek, and Julia White joined the executive board. The current leadership team may be less inclined to consider any sort of maintenance extension given their focus on the cloud.

What Does This Mean for SAPinsiders?

We are less than five years away from 2027. Unless you are planning on purchasing extended maintenance, what should you do if you’ve not yet licensed or deployed SAP S/4HANA?

• Don’t plan on a further extension of mainstream maintenance. SAP caved to customer pressure in 2020 when they initially extended support for SAP ECC and SAP Business Suite to 2027. While that could happen again, it seems unlikely. Organizations should formulate their ERP plans assuming that maintenance will not be extended beyond the end of 2027.
• Commence your preparations for SAP S/4HANA immediately. If you are a large SAP ECC or SAP Business Suite customer, any move to SAP S/4HANA will take time to happen. SAPinsider research on SAP S/4HANA deployment suggests that the average deployment time, not including building the business case, is around 18 months. Adding planning and preparation, building the business case, and securing budget to that timeline takes the total project to nearly three years. Do not put off your plans until it is too late.
• Start conversations with implementation partners as soon as your plans are finalized. With a large number of customers likely to move to SAP S/4HANA over the next few years, partner resources will be stretched. Ensure that you are in conversations with the partners you want to use to ensure that they will be available when you need them. Failure to do so may result in not finding an experienced implementation partner when needed.