SAP Announces Cloud ERP Option on Microsoft SQL
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Key Takeaways
⇨ SAP ERP, private edition, option for Microsoft SQL is now available for customers.
⇨ The offering provides a SAP ERP system on SAP cloud infrastructure supported by Microsoft Azure.
⇨ Moving to this offering does not impact the upcoming end of mainstream maintenance in 2027.
Most SAP customers are aware of the push to move to cloud ERP. Today this push is emphasized through the framing of a RISE with SAP or GROW with SAP purchase that leads to the deployment of SAP S/4HANA Cloud. However, there are lesser-known cloud ERP alternatives available, and SAP has just added an unusual option to that mix.
For several years SAP has offered SAP ERP, private edition, to customers that are looking to move their existing ERP system onto SAP cloud infrastructure. This allows organizations to benefit from having their systems in a managed cloud infrastructure that leverages subscription-based licensing. The caveat for these customers is that, until recently, this option was only available for customers that were using SAP HANA as a backend for their ERP systems, i.e. SAP Business Suite on HANA in a managed cloud infrastructure.
However, SAP ERP, private edition, option for Microsoft SQL is now available for customers that want to lift and shift their SAP ERP system into SAP cloud infrastructure that is supported by Microsoft Azure. While this is only applicable to those that are running their ERP system on Microsoft SQL Server, a relatively small proportion of the total SAP ERP customer base, this may make sense as an interim step for customers that are not yet ready to move to SAP S/4HANA. SAP also sees benefits for customers that are moving to RISE with SAP but are not able to transition all their ERP systems during a single project or rollout.
SAP made it clear that this offering is not an alternative to RISE with SAP and SAP S/4HANA. There is also no impact on the upcoming end of mainstream maintenance in 2027 or the switch to customer specific maintenance in 2030. Organizations using SAP ERP, private edition, option for Microsoft SQL will face the same end of maintenance challenges as every other customer still running a core SAP Business Suite application. But this may benefit those that are running their ERP system on Microsoft SQL Server and want to leverage a managed cloud infrastructure prior to their eventual move to SAP S/4HANA.
The real question is why SAP is making this announcement now. Most customers running SAP systems on NetWeaver environments, the architecture for SAP ECC, are doing so on Unix with either Oracle or IBM DB2 as the back-end database. Only a small proportion of SAP customers have ever run SAP ECC on infrastructure that supports Microsoft SQL Server. But SAP has been moving SAP ECC customers to subscription-based licensing on environments like SAP HEC for some years, and this new announcement seems like an extension of that model.
In addition, the announcement also demonstrates that SAP is looking for new avenues to recognize cloud revenue. Much of what SAP recognizes as cloud revenue each quarter is solutions with subscription-based licensing. This may or may not be running on private or public cloud infrastructure but, if SAP can recognize recurring revenue, it becomes part of their cloud revenue stream. This is part of the reason SAP essentially equates SAP S/4HANA running in an IaaS environment on a hyperscaler to be no different than SAP S/4HANA running on-premise. Neither provides recurring or subscription-based revenue to SAP.
What Does This Mean for SAPinsiders?
If your organization is running SAP ERP on SQL Server, then you can immediately leverage this new scenario if you want to move off existing infrastructure into a managed cloud environment. This may help split your move to RISE with SAP into multiple steps without necessarily increasing overall cost. It may also allow you to leverage some of SAP’s tailored migration offerings or the opportunity to complete more remediation of custom code or business processes as part of the move. Lastly, it may provide more direct access to Microsoft Cloud Services from an innovation perspective.
For those not running ERP on SQL Server, this move further demonstrates SAP’s emphasis on subscription offerings and cloud revenue. With overall adoption of RISE with SAP growing steadily rather than accelerating, like that of SAP S/4HANA, SAP needs to find new avenues for cloud revenue. This is one of those channels. Expect more announcements in a similar vein in the future.
