How do companies balance cloud migrations and core ERP upgrades? Fresh data reveals transformation plans and obstacles

Geoff Scott Profile picture for user geoff.scott December 13, 2022
ASUG's latest research delved into the drivers behind SAP customer transformation efforts and the role of MSPs. Geoff Scott mulls on the ERP obstacles being faced and the reasons behind cloud migration choices.

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Name an organization that is not interested in easier scalability, reducing resources to maintain systems, increasing flexibility, and lowering costs. But can cloud migrations bring organizations closer to these goals?

  • How are organizations tying cloud into their transformation efforts?
  • Are hyperscalers the cloud option of choice? What are the challenges for these types of projects?
  • How do ERP customers balance their core ERP plans with other cloud projects?

We got fresh answers to these questions in research we conducted on cloud migrations, digital transformations and SAP S/4HANA.

Organizations are almost evenly split between those that use cloud services to host their organization’s SAP applications, and those that don’t. The breakdown looks like this:

  • 30% – Private cloud – single provider
  • 21% – Public cloud – single provider
  • 18% – Hybrid cloud (at least one private and one public cloud).

Cloud migrations for SAP customers – what are the drivers?

We expect cloud users to continue to increase, as nearly half of those surveyed indicated plans to consider using cloud services for SAP applications, though the change may be gradual as 34% indicate they have plans to incorporate cloud services for hosting SAP applications more than 2 years from now (compared to 28% within the next year and 31% in 1-2 years from now).

Why is the move to cloud is appealing to SAP customers? These were the top drivers:

  1. Easier scalability
  2. Fewer resources needed to maintain systems
  3. Part of a bigger digital transformation strategy
  4. Increased flexibility
  5. Lower costs
  6. Improved performance and availability.

Use of Managed Service Providers (MSPs) continues with cloud migrations – over 57% plan to continue using MSPs at the same level or more. Why MSPs? The number one reason from the survey is access to specialists and experts. The other top reasons for using an MSP are: to fill internal skills gaps and to free up time/resources to work on innovation efforts.

To understand more about how working with an MSP during cloud transitions, check out our webcast on cloud migrations for SAP customers, hosted by SUSE and Intel Technologies.

But are SAP users leaning towards private or public clouds?

We found that most organizations are using or have plans to use hyperscalers. The key reasons why are:

  1. Scalability
  2. Added knowledge/expertise
  3. Reduced costs
  4. Increased flexibility.

One individual told us they plan to use hyperscalers because, “They are a known entity with the security and experience we would look for.” Another survey respondent plans to use a combination of both hyperscalers and specialty clouds because, “Various applications require different environments to ensure security and to share data among diverse system requirements.” At ASUG, we offer specialized interest groups, like this one specific to Migration SAP and Solution Manager Environments to Hyperscaler.

The most used cloud provider in this survey is Microsoft Azure, followed by AWS. The cloud provider that most respondents are not currently using but are considering for the future, is SAP’ IaaS offering (HEC or RISE with SAP). Research shows that scalability is also the top criteria considered when selecting a cloud provider, followed by expertise, easy to integrate with other systems/applications, and global capabilities, fair pricing, and the variety of services available. 

SAP cloud migrations – benefits and challenges

Members cited several benefits to hosting SAP applications in the cloud, including:

  • Reduced workload for IT
  • Cost savings
  • Easier to scale workloads up/down as needed
  • Speed to delivery, and
  • Improved operational efficiency.

What is especially interesting from our research is when looking at benefits received from hosting SAP applications in the cloud, organizations currently using MSPs are experiencing a larger share of key benefits than those who do not use MSPs. Customers who work with MSPs for cloud support are getting more from their investments, especially when it comes to reduced workload for IT and alignment with strategic business direction. Nevertheless, customers should choose their MSP carefully – and due their due diligence on industry references.

Moving SAP applications to cloud does not happen without challenges. The top challenges when migrating SAP applications to the cloud include a lack of in-house knowledge to manage the migration and the integration of on-premises and cloud-based systems. There is a similar correlation to what we found with benefits and use of MSPs – respondents who currently use MSPs experience a smaller share of challenges than those who do not use MSPs. For example, the challenge of integration of on-premises and cloud-based systems, is experienced by almost 20% more respondents who do not use MSPs compared to those who do.

Top priorities to optimize in the cloud are cost savings, availability, and security. Across all top three attributes, utilizing MSPs/third-party services was the primary way organizations plan to optimize cloud use.

Almost one third of respondents are live on SAP S/4HANA. A combined 54% of respondents are planning the migration or are in the process of moving. Respondents are aligned when it comes to their digital transformation plans, upgrading to SAP S/4HANA and migrating SAP applications to the cloud are of high importance. Looking ahead, the data indicates a slightly heavier focus on upgrading to SAP S/4HANA, but cloud migrations will still be front and center as they play an important role for almost 80% of respondents. Earlier this year, we wrote more on why SAP customers are doubling down on the cloud – you can read more about this here.

SAP S/4HANA use will increase soon as 57% of those planning to move anticipate implementation to occur within two years or less. Digital transformations are in alignment with cloud migrations - respondents view both as opportunities to increase their organizations’ scalability. While there is no shortage of reasons migrating SAP applications to the cloud are important to digital transformation plans, over half of respondents view the migration as a way to improve operational efficiencies or access emerging innovations.

I look forward to sharing updated insights in 2023 with you on how the move to cloud is progressing for organizations from ASUG’s 6th annual Pulse of the SAP Customer Research. In the meantime, I’d love to hear more about your organization’s cloud plans – as well as your questions and concerns. Are you getting what you need from SAP and ASUG in order to make these transitions? To share your stories with me, you can contact me directly at [email protected].

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