Fresh color on the SAP R/3-ECC transition to S/4HANA post 2025

Profile picture for user gonzodaddy By Den Howlett February 9, 2020
Summary:
SAP's change in maintenance policies post 2025 sparked a number of interesting conversations. In this story, we endeavor to bring together the most common themes arising out of that story. There will be more as time passes.

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First up a big thank you to all those who engaged with my earlier SAP S/4 post 2025 story. Whether that was here or on the social channels there has been plenty of back and forth with fresh topics or expansion on existing arguments, all adding to what many consider an important topic. 

In this story I will do three things. First I address the unsaid, fresh or missed topics. Next I expand on the existing items. Finally, I precis one of the most complete and detailed S/4 transition stories I've seen to date.

Missing pieces

On-prem, private and public cloud

A number of respondents want to know the extent to which SAP is going all in on public cloud or SaaS as it is better understood. The answer is unclear although a variety of numbers are bandied about. The reason it is unclear is because of how SAP bundles products for this purpose. While clarity regarding public would be helpful, I am not convinced it matters in the short term but absolutely matters in the long haul.

In an extremely useful story Tim Crawford outlines Eight reasons why enterprises move workloads from public cloud back on-premises. I won't spoil the plot except to say that his list provides an excellent set of items you can readily include in your checkbox discussions on this topic. I will however quote his final observation:

With each of these, it is not an all-or-nothing approach with public cloud or repatriation. Enterprises are indeed moving some applications back to corporate data centers from public cloud. However, that does not represent a mass exodus from public cloud nor a failure of the public cloud solutions.

In the long haul, it is hard to imagine why SAP would maintain two codelines for on-premises and cloud 'versions' as is the case today. It makes no long term economic sense and ensures there are always double the support, servicing and enhancement costs. How that transition works out remains to be seen but whichever way it goes, SAP willl need to be extremely careful, providing customers with as close to a frictionless transfer as possible. 

On the other hand, SAP is definitely committed to the hyperscalers, as the "Project Embrace" announcement indicated, but their commitment to S/4HANA public cloud is open to serious question. The constant leadership shuffles, lack of significant updates, and burying this narrative under the S/4HANA private cloud has led to serious questions. Oracle, which is moving towards large enterprise SaaS ERP, is meanwhile licking their chops. Surely Workday is licking theirs also. SAP badly needs to clarify their public cloud S/4HANA plans and customer references at this year's Sapphire. 

Why 2040?

Some people thought it odd that SAP should choose what look s like an arbitrary death date for S/4HANA support. The assumption is that there will be some sort of S/5 in view by then. The answer is more prosaic. If you look back over what SAP did regarding R/2, R/3, ECC and now S/4 the lifecycles are roughly the same, hence plucking 2040 out of the air. However, it begs the question - does that mean those who make the transition right at the end of 2030 only have 10 years standard maintenance? I can confidently predict now that's not going to be the case and 2050 is the date to lobby for. Now.

Alternatives to S/4 - BusinessOne?

It was suggested that I speak with those who use BusinessOne since this has been on something of a roll the last year or so enjoying a user base of 67-68,000 customers worldwide. This is relevant to those who will not commit to S/4 and are candidates for 'love elsewhere.'  

According to Tim Guest, who is on the UK& Ireland SAP User Group board, BusinessOne is a well supported and well loved product where there is a vibrant ecosystem of partners with many extensions that run on both SQL and HANA. Field service and sales via mobile is supported. Crucially, BusinessOne pricing is attractive with pro users coming in at £2,600 per license and light users coming in at £1,300. Maintenance runs at 10% but resellers typically double that up, providing full support. And yes - there is a version 10 coming that is very different from past iterations with significant usability upgrades. 

So the next question - will SAP recognize and identify the long tail of R/3-ECC customers at risk of jumping the SAP boat altogether and create a sales program that helps those same customers make an informed alternative choice, perhaps in favor of BusinessOne?

And before anyone reminds me - no story of this kind would be complete without mention of ByDesign. The past confusion of ByDesign and Business One may be allieviated now that they are under one leadership tent. However the role of S/4HANA public cloud versus ByD in subsidiaries is one of those questions that always comes up, and rarely gets a satisfying answer. 

Expanding points

Resources part deux

I was reminded of the time when SAP was gung ho about HANA developers and how it wanted to encourage an ecosystem of startups to play in the HANA world. It made a decent fist of the venture but like so many things, it withered once enthusiastic leadership moved on. One of the problems was that of perception. Developers like doing cool stuff and SAP was not considered cool when stood alongside Apple, Facebook, Google and Amazon. That is still largely the case. As one observer noted, the ecosystem of SAP experts is ageing with a good number eyeing retirement. What does SAP do to make S/4 cool and attractive? It can help stuff the Big4 with certified engineers but that's nowhere near enough to satisfy the planned demand. 

On the question of resources needed to support a sales to implementation delta of 2,500 to 3,800 customers per annum through 2030, some observers think there needs tro be an increase of 30-40% in the number of consultants available in the pool of consultants capable of successfully taking on S/4 projects. That will vary according to the type of project (greenfield v brownfield etc) since each project has general and then specific characteristics. I put the figure much higher but we need to drill into this more deeply as the year progresses. Either way, those same consultants need very good reasons to select for SAP projects when there is choice available in far sexier topics. 

Versioning

I will simply put this out there from Ron Gilson with whom Jon Reed and I had a useful conversation last week but which didn't make the cut in my earlier story:

Each release of S/4 currently has a five year "life" under mainstream maintenance meaning at least some resources will be targeted at S/4 version upgrades over the upcoming years.  Customers will need to go through an upgrade cycle once every 5 years at a minimum in order to stay under mainstream maintenance.

In other words 1511 and 1610 are done by end 2021. What were we saying about third party business critical application support and the appetite of third parties to come to the S/4 party? Yes, post S/4 go live upgrade planning will become a constant. Don't forget that when you're considering your S/4 project timeline. 

A love for SuccessFactors?

SuccessFactors is a whole story of its own that has seen comparatively little open attention from SAP's leadership. SuccessFactors customers are now effectively in the same boat as S/4 customers. However, those same customers want to see a LOT more innovation from the SuccessFactors team than has been evident in the recent past. How does that dovetail to developments in S/4?

Deferrals?

A number of people wonder whether SAP's announcement not only provides a breathing space for those in the discovery phase but also effectively freezes the sales momentum. Others note that delaying a move or a decision could have significant cost implications down the road. On the cost side, SI/consultants are urging customers to weigh the risks of resource constraints. iTelligence is typical of advice offered saying:

  • The longer you wait the higher the risk and cost to your organisation will be as the best resources become scarcer as the deadline approaches.
  • Even if your company decides not to adopt S/4HANA immediately, you still need to consider the changes imminent with S/4HANA and create your plan.

The sales picture is one that SAP will be keen to address, most likely through bundling deals. But we can assume that while interest may not be as strong as the company would like, SAP have enough SKUs to keep customers on the proverbial hook. 

It is difficult to argue against the action advice although we already know that resources are constrained today so it's not unreasonable to assume the picture will not get better over time. Couple that with my remarks about SAP's attractiveness generally and you'd be hard put to envisage a risk free path. 

However, we believe SAP could do a great deal to alleviate some of the time consuming heavy lifting by offering and promoting better tooling and automation kits. Some SIs and specialist tooling vendors are working hard to overcome limitations in SAP's tooling. We think SAP should actively promote those efforts now, alongside its own tooling, casting aside the notorious 'not invented here' syndrome that has plagued the SAP partner ecosystem for many years. This one step alone would, in our view, set a precedent for demonstrating SAP's commitment to the whole of its customers and partners. This is not about 'leaving money on the table' but putting back a little money for a greater reward over time. 

Regardless. each customer would do well to undertake a risk analysis exercise to determine what might happen and use that as the starting point for both evaluation and RFPs. It won't be easy but the assistance of independent, seasoned cnosultants will make that exercise a lot easier. 

Maintenance cost

I missed this completely so here goes. The two percent increase for those in what I am now calling the Twilight Zone of 2027-30 is actually the equivalent of a nine percent cost increase. That's a big chunk of change for an IT department that will give some customers heart burn - especially when they're most likely seeking board approval for a significant S/4 project spend. Third party maintenance providers are there as an alternative that could help save budget. Think about that one. 

The case study - Newcastle University

Sometimes you need to see the detail of a case study to be convinced that a migration of the kind S/4 represents is indeed the right choice. And while the picture presented won't always be true for you, this set of stories from Newcastle University should be on everyone's reading list.

It will take about 90 minutes to work through each one and then more time to break down and apply appropriate lessons to your situation. My view is that the relatively short time investment will provide way points that help identify critical areas for attention. Each story has copious diagrams to assist technologists. Critically, the author explains the reasoning behind a variety of decisions. Of particular note is how they overcame the problem of 'blackout' days.

Do bear in mind that this is a very fresh case that has only just gone live. There will undoubtedly be plenty to follow up on as user experience is fed back to the technical team. 

Resource library

It would be easy to get overwhelmed by the sheer weight of available S/4 related literature and I know from conversationos with both customers and partners that wading your way through SAP's content can be particularly frustrating. To that end, here is a short compendium of articles/stories we've found to be accessible and worthwhile as part of your overall S/4 transition discovery process. Some of these are linked in the main part of this story but are equally worthy of separate reading.

Third-Party Certification: A Barrier to SAP S/4HANA Adoption Part One - we've found this is a topic with which relatively few customers are aware.

Third-Party Certification: A Barrier to SAP S/4HANA Adoption Part Two - as above with more detail.

Alexander Greb's 10 part guide to S/4 HANA - yes - there are 10 stories to work through and yes, this is SAP content but there's plenty of useful help and answers to questions that get asked time and again. 

SAP EXTENDS MAINTENANCE OPTIONS TO 2030, BUT THE DEVIL IS IN THE DETAILS - more detail referencing cost buckets.

DSAG provides planning security for digital transformation - SAP commitments by 2040 - The German speaking SAP user group recently issued a flurry of press releases with their latest S/4HANA positions and user data (see also: DSAG press archive).

SAP Extends Maintenance Timeframes - an HR view from Steve Bogner. SAP HR is a crucial part of the maintenance roadmap. Bogner and his podcast compatriots have been on top of S/4HANA's impact on SAP HR - on-prem, and with SuccessFactors. Here is his short update, with a link to his prior HR payroll direction column.

Eight reasons why enterprises move workloads from public cloud back on-premises - don't be confused by the indiscriminate use of 'cloud' by sales people. 

SAP Announce Mainstream Support Extensions for S/4HANA & Business Suite 7 – The itelligence View - a typical approach but be careful to avoid getting caught up in FUD.

BoyumIT - If BusinessOne is a potential alternative then this firm has a lot of extensions that make using BusinessOne much better than the vanilla package. This is not an endorsement but a resource for some to consider. 

ResultingIT produces a series of useful reports on the do's and dont's of an S/4 migration along with assessment guides. 

Brandon Toombs produces the weekly Employee Central Intelligence. In this edition, he summarizs the S/4 position. Worth subscribing if you're in the SAP HR boat. 

Endnote - Jon Reed helped with fact checking, addressing some parts of the S/4 puzzle I'd missed on a first pass and additional story links that will be useful for all S/4 customers.