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New report says users aren't eager for SAP S/4HANA migration

A survey from Rimini Street says that almost 90% of SAP users have no plans for an S/4HANA migration, in part due to satisfaction with their existing SAP ERP.

SAP might have to work harder to get its customers to endure an S/4HANA migration, according to a new report from...

Rimini Street.

The report finds that 89% of 208 surveyed SAP customers plan to continue to run their current SAP ERP releases because the functionality meets their business needs and they plan to use it as the foundation for a hybrid IT model. This means that an S/4HANA migration might not be in the cards.

Rimini Street is a Las Vegas-based independent vendor of support services for SAP and other enterprise vendors. The report, "Rimini Street Survey: 2017 SAP Application Strategy Findings," is the result of a survey that Rimini Street conducted with 208 CIOs, CTOs, IT VPs and other executives from companies of various sizes around the world.

The report indicates that 65% of respondents have no plans for or are not committed to an S/4HANA migration, primarily because there is "no strong business case and unclear ROI." Respondents are also wary of high migration and reimplementation costs. Of the respondents who have committed to S/4HANA, 56% estimated that it would cost between $10 million and $100 million to migrate to S/4HANA.

"This survey highlights that CIOs and IT decision-makers prefer to maximize the value of their current robust SAP ERP system that more than meets their business requirements, rather than advancing to a new platform that is still in development with no current business case to support a full reimplementation," Seth Ravin, Rimini Street's CEO, said in a statement. "It also illustrates how they are pursuing innovation strategies, such as hybrid IT, to help their business gain competitive advantage now, without having to wait indefinitely for meaningful new innovations and capabilities from SAP."

More success with cloud apps than S/4HANA migrations

The results of the report indicate SAP's difficulties in getting customers to deal with an S/4HANA migration, according to Vinnie Mirchandani, an independent analyst and founder of Deal Architect.

New ERP products take four or five years to stabilize, and the user base takes another five to 10 years to migrate.
Vinnie Mirchandaniindependent analyst and founder, Deal Architect

SAP has been pushing customers to S/4HANA, but is having more success with its acquired cloud applications, including SuccessFactors, Ariba and Concur, Mirchandani said.

"It's having a much tougher time getting them to look at S/4HANA, partly because S/4HANA is really only Simple Finance, essentially," Mirchandani said. "They say they have logistics, but that's still relatively new, and even then the footprint is pretty small."

Mirchandani also said that an S/4HANA migration was a tough sell for SAP because until the recent introduction of SAP S/4HANA Cloud, the implementation options for S/4HANA were limited to on-premises and private cloud. The two other main reasons are the lack of maturity in the product and the high cost of migration.

Migration problems not unique to SAP

Every vendor faces problems getting new products to mature, and faces high costs of migrating customers to new systems, especially when moving from on premises to cloud, Mirchandani said, but these costs are a real obstacle for many organizations. This is even more acute for S/4HANA.

"With S/4HANA, you've got a very different structure because in moving to in-memory, they moved away from traditional transactional relational database concepts," Mirchandani said. "They don't have to store as much data, and they can do calculations on the fly in memory, so all of that requires quite a bit of rethinking in terms of data format, so it's not just a magical, easy conversion. Then you've got to think about systems integration, testing, end-user retraining -- all those costs are not trivial."

None of S/4HANA's obstacles are unique to SAP, Mirchandani explained.

"Every vendor goes through this problem, and new ERP products take four or five years to stabilize, and the user base takes another five to 10 years to migrate," he said. "But another thing that kind of hurts SAP is that R3/ECC has been a very stable system -- not cheap, but it's been a very stable system."

SAP says cloud ERP momentum inevitable

SAP would not comment specifically on the report, according to Sven Denecken, senior vice president and head of product management and co-innovation for S/4HANA at SAP SE.

"By 2020, 60% of the ERP workload will be in the public cloud, according to market statistics like IDC Market Cap, including 40% of the largest companies, and this is what we're preparing for," Denecken said. "I don't think that anyone will argue that the trend [to cloud ERP] has already started and is in full swing. There's no market leader in the ERP cloud, it is ours to get there and this is what we are preparing for, and the rest is a lot of noise."

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