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As more SAP customers consider moving their SAP ECC implementations to the public cloud, they are faced with also migrating to S/4HANA.
SAP has encouraged customers to make the S/4HANA move as part of a public cloud migration through the Embrace initiative, which began in May 2019 as a partnership between SAP and the three major public cloud hyperscalers, Amazon Web Services (AWS), Google Cloud and Microsoft Azure. By the following October, SAP announced Azure as its preferred hyperscaler partner.
The initiative and the more exclusive relationship with Microsoft Azure was intended to make it easier for customers to migrate to S/4HANA. But the move is complex and while some may be ready to embrace the cloud, they may not be ready to undergo the necessary technology and process changes involved in an S/4HANA move.
AWS has another pitch for reluctant customers: Move to the cloud without moving to S/4HANA.
Have it your way
When it comes to a cloud move, AWS wants SAP customers to know that they can have it their way.
"We understand SAP's desire to get people onto S/4HANA, and we hear from customers who are ready and have made that S/4HANA move," said Steven Jones, director of EC2 at AWS. "We also have a number of customers who are looking to derive additional value that AWS can bring them, but they haven't yet been able to put that business case together for the S/4HANA modernization."
AWS has several customers that are modernizing their legacy SAP ECC systems directly to the cloud without moving to S/4HANA, Jones said.
"For us, it's not going against a sales strategy from SAP; it's really just meeting the customer where they would like to go," he said.
Interest in cloud appears to be gaining among SAP customers. A recent survey report on SAP customers' cloud strategies indicates that 81% of respondents currently use cloud services in some form. The survey was conducted by ASUG (Americas' SAP Users' Group) and sponsored by Syntax Systems, an SAP partner based in Montreal that provides a variety of cloud services.
The survey also found that of the respondents who don't currently use cloud services, 63% are considering adoption in the next few years.
Choosing the right approach is up to customers
SAP customers should take the public cloud approach that best suits their requirements, said Vince Lubsey, CTO of Lemongrass Consulting, a firm in Reading, U.K., that provides AWS-specific cloud services for SAP systems.
"From our perspective, it's really mixed and it depends on where the customer is," Lubsey said.
Some customers are ready to make the S/4HANA move, which is closer to a reimplementation than a migration, but some may be constrained from making the move because of limitations like data center capacity or lack of network bandwidth, he said.
"We've developed tools to overcome some of those limitations, but it's far easier to take a system that's been migrated into the cloud and then migrate that into S/4HANA because you then have the elastic infrastructure," Lubsey said. "Both ways are valid depending on where the customer is coming from and we support both. It just depends on where the customer is at the time."
The customer's reasons for making the S/4HANA move also influences the approach that they take, where some are looking at costs and others are looking more at the technical benefits, according to Lubsey.
"For some, it all depends on cost-benefit analysis, as they are very keen to evacuate their data centers and cost is a concern and they look at the cloud as a lower cost option," he said. "Others are looking at it from a transformation and agility perspective and the move to S/4HANA from a business perspective is more important to them than the simple lift-and-shift cost savings. So, it really does depend on what they're trying to accomplish."
Don't wait for S/4HANA business case
The lift-and-shift cloud migration strategy for SAP ECC makes sense for organizations that need to start modernizing their systems but have not been able to make a sound business case for S/4HANA, Jones said.
"[One customer] was looking for what was next, but they weren't quite ready for S/4HANA, so they migrated their entire landscape to AWS and saw a 23% reduction in TCO [total cost of ownership] because they reduced their footprint," Jones said. "They did go through a pretty extensive process to reduce customizations at the same time, and with that they saw an 83% reduction in the overall size of their footprint, which saves a lot on storage costs."
AWS has more than 5,000 active customers running SAP workloads on AWS, Jones said. About half of those have systems that are on SAP HANA, an in-memory database, many of which are running S/4HANA, although Jones did not provide specific numbers.
The extension of SAP's deadline to support SAP ECC systems until 2028 has not made a material decision in customers' plans to move to S/4HANA, according to Jones.
"Customers know that deadline is out there, and they have to make a decision at some point on when it's right for them to move to S/4HANA," he said. "It might have relaxed the pressure a bit, but I've not actually seen it make a material difference in the conversations that we're having."
Similarly, the COVID-19 pandemic does not appear to have accelerated or slowed down the move to the cloud, regardless of whether it's a lift-and-shift or S/4HANA migration.
"It's been mixed from our perspective. We had a number of customers that may not have necessarily been impacted [by the crisis], so we're really busy helping lots of customers onboard and run their systems on AWS," Lubsey said. "A lot of companies are feeling the pressure to build out infrastructure to support work-at-home environments, but I don't think that I've seen a lot of customers say that they have to accelerate our migration because of COVID. A lot are saying they have to get out of their data centers, but not necessarily move to S/4HANA."
Set long-term cloud goals
The problem with a lift-and-shift strategy like AWS' is that, while it may result in some benefits like lowered TCO, it's not really answering the real question that customers need to be asking about the cloud, said Jon Reed, analyst and co-founder of Diginomica.com, an enterprise computing analysis site.
One of the problems with the COVID-19 pandemic is that it has created urgency for companies to move systems into the cloud for basic reasons, such as allowing employees to access systems remotely, Reed said. The shift may have some immediate value, but it doesn't consider the real value of having modern, cloud-based ERP systems.
"The whole point of moving to the cloud is to open up your systems and make it easy to integrate with other cloud services for the purposes of better analytics and eventually layering artificial intelligence over everything," he said. "I wouldn't be looking to AWS for any type of guidance on that whatsoever, because they're happy to take the work. AWS really doesn't care what you put in the cloud, they're happy to just take your workloads."
SAP, and in particular its implementation partners, has the responsibility to help their customers think through how they can achieve ROI from a move to the cloud and gain business benefits, Reed explained. There are often cost savings from a lift and shift, but ultimately the cloud case is limited.
SAP and its partners need to advise customers on the long-term implications of a cloud move and help them set a sound cloud business strategy, he said. For example, it may be better to standardize on some SAP capabilities rather than have highly customized systems. However, many SAP partners are often not cloud-savvy and customizing SAP systems is often a revenue source.
"Cloud integration is all about being able to integrate, and the more customized you [are], the harder the integrations are," Reed said. "So, you need a lot of advice aimed toward the future and what you want to do with layering analytics and potentially workflow automation across different products. Really good cloud advisors can help with all that, and I'm not sure that a lot of SAP partners are good with that."