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Rise with SAP evolves, but struggles to make a case for some

Rise with SAP offers a path to the cloud for SAP customers, but adoption is still hindered by customer concerns over costs, flexibility and SAP's cloud-only innovation strategy.

Three years after first introducing its cloud migration program, SAP still faces challenges in convincing customers that moving to the cloud is necessary or that its Rise with SAP program is the right path for the move.

Launched in 2021, Rise with SAP offers SAP on-premises customers a simplified path to the cloud with SAP as the sole vendor to manage cloud deployments on a hyperscaler of the customer's choosing.

SAP has been steadily adding and tweaking elements of the Rise with SAP initiative since its launch, offering customers both carrots and sticks to encourage a cloud migration.

Earlier this year, for example, SAP began offering credits for customers running S/4HANA on premises. To help ease implementations, SAP introduced the Rise with SAP Migration and Modernization program, designed to address costs and ROI around cloud migrations. Now, SAP also offers the Rise with SAP Methodology, a set of best practices based on more than 1,000 successful implementations.

But SAP is also placing pressure on customers to use Rise with SAP as the vehicle for new capabilities. In 2023, for example, SAP made it clear that new capabilities such as generative AI and sustainability reporting would be available only to customers that moved to S/4HANA Cloud using Rise with SAP.

There are indications that more customers are beginning to prepare for an S/4HANA migration in one form or another, but it's not clear whether they will choose Rise with SAP as the means to do so.

A 2024 investment report published in March by DSAG, the German-speaking SAP user group, indicated that budgets for SAP technologies continue to rise, although at fewer companies than the year before, and that the willingness to invest in S/4HANA is growing.

However, questions around the S/4HANA cloud strategy remain unsettled, and Rise with SAP has still not caught on with the majority of SAP customers. The DSAG survey found that 61% of respondents did not plan to use Rise with SAP, while just 16% were already using the program or planned to use it, and 8% said they had not heard of the initiative. The report noted that the survey was conducted before the launch of the Rise with SAP Migration and Modernization program.

"Many of the companies surveyed want to stay on-premises with their SAP ERP systems. At the time of the survey, they did not see any advantages of migrating to the cloud and there is also a lack of trust in SAP in some cases," said Jens Hungershausen, chair of the board of directors at DSAG, in a press release.

Respondents cited several concerns around Rise with SAP, including a questionable cost-benefit ratio, increased testing efforts, limited expansion options and the high dependence on SAP with a lack of exit options.

SAP claims strong growth

Although SAP does not break out the specific numbers of Rise with SAP customers, the company's official stance is that the program continues to attract new implementations.

"It's one of the cornerstones of our strategy, and it continues to grow like a bullet," said Lloyd Adams, president of SAP North America.

In the first quarter of 2024, several SAP customers selected Rise with SAP as their vehicle for a cloud migration to S/4HANA, including Churchill Downs and Clearway Energy Group.

"Increasingly, quarter over quarter, more customers are saying that they understand that now is the time to move to the cloud," Adams said. "They like the cloud ERP operating model that Rise provides, with the accountability model from SAP being more persistent in the transformation program and not just being the technology in the company."

An inevitable Rise?

Looking at Rise with SAP from an SAP perspective, there are several reasons why the company is pushing the program, said Len Riley, chief advisory officer at UpperEdge, which consults with companies on enterprise technology and is based in Boston.

The first motive is financial, as SAP looks to drive more recurring and predictable revenue streams. The second is protecting SAP's position in the enterprise space versus hyperscalers including AWS, Google Cloud and Microsoft Azure, Riley said. Otherwise, customers might just go to the cloud directly.

"They might consider going from ECC to S/4HANA or staying on S/4HANA, but they'll go to the hyperscalers and accomplish an element of their cloud journey that's broader than just SAP," he said. "SAP is effectively shutting down that avenue of disintermediation and saying, 'You're going with Rise.'"

We think that the move to Rise with SAP is inevitable -- maybe not necessarily a year or two away, but there's little likelihood of SAP strategically going backward or maintaining the status quo over time.
Len RileyChief advisory officer, UpperEdge

However, there's another, more current reason for wanting customers to move to the cloud and S/4HANA -- the burgeoning influx of AI functionality, including SAP's generative AI assistant Joule, Riley said. Rise can provide SAP access to the customer data it needs for large language models (LLMs) to generate business value.

"If they don't come up with a packaged solution with Rise, where they have the contractual right to look at anonymized data, they can't inform their LLMs that are going to inform their next-generation AI applications," he said. "So part of this is a product development roadmap play."

SAP is not providing the financial discounts and incentives that it has in the past for perpetual licenses, Riley added.

"[This will] crater your TCO [total cost of ownership] on the perpetual license side by not giving aggressive discounts," he said. "We think that the move to Rise with SAP is inevitable -- maybe not necessarily a year or two away, but there's little likelihood of SAP strategically going backward or maintaining the status quo over time."

Rise evolves, but customers have options

While Rise with SAP was "fairly unappealing" for SAP's large enterprise customers when it debuted, SAP has continued to grow the program, making it broad enough and offering enough incentives to make sense for most customers, said Liz Herbert, an analyst at Forrester Research.

The bigger questions that customers need to wrestle with are what Rise with SAP looks like for them and sorting out the various service partners, many of which have different Rise with SAP programs or extensions, Herbert said. Customers are also asking if they should reframe the question around moving to S/4HANA at all or look at a composable ERP model.

"For example, in the enterprise performance management space, a lot of our clients in that space are looking at other options even if they're an SAP-centric shop," she said.

One problem for SAP now is that customers that are wavering have options, and not just from SAP's traditional large enterprise rival Oracle, Herbert said. Vendors such as Workday, IFS and Infor have ERP systems that could be attractive depending on the customer's industry segment.

"Some customers are even looking at fairly novel or small alternatives like Odoo, the open source ERP, or Ramco," she said. "Everything SAP is doing with Rise is fine in terms of the lever to move people to cloud and offer some motivation, but I still see them struggling with the broader ability to capture the hearts and minds of ERP buyers."

Rise needs more flexibility

However, Rise with SAP is evolving both in the functionality that it provides and the flexibility it offers customers, said Joshua Greenbaum, principal at Enterprise Applications Consulting. The early iterations of the program were confusing and then became doctrinaire, but SAP is now recognizing that there are many ways to a cloud transformation.

"Now you're getting a little more bang for your buck with Rise," Greenbaum said. "But as a customer, you're also getting a little more respect that your path to transformation to the cloud needs to be unique to you and not necessarily how SAP would like it."

The fact is that no matter how much impact Rise with SAP has now, SAP is still sitting on a huge percentage of its customer base that will be out of maintenance and support before they can be reasonably expected to migrate to the cloud, he said.

"Independent of how much success Rise has had or will have in the foreseeable future, there's still this looming question of where you find the people, the time and the money to migrate everybody in the time frame that's currently being offered," Greenbaum said.

While Rise with SAP has been evolving toward serving more customers, using it is not inevitable for customers, as there will always be exceptions where it doesn't make sense, he said. For example, Rise with SAP does not take in customers that are running hybrid environments.

"That may be one of the next innovations and they find a way to do this," Greenbaum said. "There can be a creative solution to this problem -- it doesn't have to be so doctrinaire that it prevents customers from finding their path to transformation."

Jim O'Donnell is a senior news writer for TechTarget Editorial who covers ERP and other enterprise applications.

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