Weekly Finance News: SAP AI and Sustainability Innovations Only in Cloud
Meet the Authors
Key Takeaways
⇨ Customers are preparing themselves to pay heftier fees for enhanced maintenance service or the costly move to the cloud.
⇨ Every SAP S/4HANA customer now operating on a standard maintenance contract will transition to ‘extended maintenance’.
⇨ S/4HANA On-premise customers will be unable to leverage Gen AI within their environment because all innovation will happen s4 in the cloud.
Why many people were on vacation, SAP CEO Christian Klein announced that new innovations related to generative AI and sustainability will only be available to RISE with SAP and GROW with SAP customers.
Explainer
Customers had been able to borrow at zero percent interest or close to it. Now, the cost of financing a digital transformation goes up every time the Federal Reserve raises the interest rate. “It’s not upgrade you must buy new licenses. That’s just the start of it,” says Ogo Nwanyanwu, SAPinsider’s Research Director. “It will be the biggest investment they make in 40-50 years.”
To grow, these customers have likely made 10-15 acquisitions in the last few years —each with their own ERP. Now they must look at them and the integration and in the move to S/4HANA, are you going to move all subsidiaries and go into each company to look at the data?
Depending on the country or the industry, customers may have to keep 10 or 15 years of data. Many customers are struggling over what to port over and if they’re ready to be part of a unified single platform.
Ultimately, there’s not enough manpower in the industry to help these companies move and the longer this goes on, the more pressure they’ll feel with end of maintenance as a driver. The longer they wait, the more challenging it’s going to be with SLSs like Deloitte, KPMG, and Accenture, who lead and manage the transformation unlikely to cut anyone any discounts, explained Nwanyanwu.
Why it Matters
The majority of SAP S/4HANA customers have not moved to the cloud instead running S/4HANA On-premise. Earlier this year, Christian Klein said there would be no extension beyond 2027.
Customers are preparing themselves to pay heftier fees for enhanced maintenance service or the costly move to the cloud, which means they have zero budget for updates. This means they’re living with no updates so for the next one to three years, during which time they will have to live no third-party solutions or license extensions.
Every SAP S/4HANA customer now operating on a standard maintenance contract will transition to ‘extended maintenance’. It matters hugely because even if costs go up up 3 percent a year, you could be talking about hundreds of thousands or millions of dollars a year.
S/4HANA On-premise customers will be unable to leverage Gen AI within their environment because all innovation will happen s4 in the cloud.
“It’s going to be a battle user groups orgs like DSAG who are representing what they see as the interests of a large number of organizations who are not yet ready to move to the cloud versus SAP, who wants everyone to move asap,” adds Robert Holland, SAPinsider’s Vice President and Research Director. “Right now, it’s unclear how it’s going to play out. SAP has incentivized people to move to RISE, but now it feels more like they’re welding the stick than the carrot.”
By the Numbers: A breakdown of the data that drivers this week’s story.
SAP’s customers who’ve licensed ERP: Approx. 40%
Customers running an enterprise system: Approx. 55,000
Customers who’ve licensed S/4HANA: 23,000
Customers with a license for S/4HANA Cloud: 5000-6000
Existing ERP customers: 50%
Net new ERP customers: 50%
Time required for typical Implementation: 18-months.
ERP customers who haven’t licensed S/4HANA in any form: 30,000-35,000
ERP customers not running the cloud version: 75%
Need to Know
Track where SAP workloads are running, how they are shifting to the cloud, the drivers behind that move, and how that plays into the broader SAP landscape with our Enterprise Cloud Landscape report.
Join us at SAPinsider EMEA 2023!Taking place 14-16 November 2023, in Copenhagen, Denmark. https://sapinsider.org/events/sapinsider-2023-emea/
Dig Deeper: Interested in learning more about the future of the SAP cloud? Check out these articles!
Organizations are increasingly turning to cloud services to power their operations. https://sapinsider.org/blogs/maximize-cloud-value-and-efficiency/
Agility is the key to business success so what’s holding everyone back? https://sapinsider.org/webinars/transform-source-to-pay-with-servicenow/
Discover how you can reduce cost and increase satisfaction across the entire source-to-pay process. https://sapinsider.org/webinars/transform-source-to-pay-with-servicenow/
