Last week, the UK & Ireland SAP User Group issued the results of a recent survey that makes for tough reading. The key findings are:
The research reveals that cost and availability are the biggest contributors to this growing skills gap. When asked what are the main challenges they face when it comes to recruiting for SAP roles, more than a third of organisations cited the cost of salaries (35%), followed by limited skills in the market overall (24%), and limited skills availability due to their geographic location (18%). At the same time, the research reveals that the current coronavirus situation is influencing organisations’ recruitment strategies when it comes to acquiring SAP skills. Just under half (49%) say it is slowing their investment in SAP skills, and almost two-thirds (65%) say the increase in remote working is making future recruits’ geographic location less important.
Yesterday, Ensono showed the results of its study into SAP cloud migrations. According to its research, a mere four percent have completed their public cloud migration saying that:
Of those yet to complete their cloud journey, 80% said they had postponed or cancelled their migration of SAP applications to the public cloud due to the SAP skills shortage; 74% have taken a similar decision due to a lack of public cloud skills.
Ensono’s research found businesses are clear-eyed about the benefits of migrating to the cloud. 70% of UK IT leaders said they believed migrating SAP to the public cloud will provide more benefits than running SAP on private cloud or on-premises.
But if the skills gap is not addressed, the majority of SAP applications still hosted on-premise face an uncertain future.
- 14% businesses plan to move off the SAP ecosystem over the next 3 years
- A further 15% plan to reduce their SAP application portfolio
- Together nearly 1/3 businesses have some intention to either reduce or abandon the SAP ecosystem.
While the two surveys provide different perspectives, at the high level they're saying broadly the same thing. That makes these independently produced surveys especially valuable in understanding the direction that the market is taking.
Both a current and anticipated skill-shortage represent significant challenges for those with on-premises SAP estates. It's not difficult to understand why this situation arose. On the one hand, SAP makes plenty of noise to the financial markets about the volume of SAP S/4 HANA sales it has made but on the other hand, it remains coy about the number of customers that have gone live and silent on the numbers of those who are adopting one of the hyperscalers (Google, AWS, or Microsoft Azure) for hosting. We believe the reasons are tied to the way SAP has bundled S/4 into deals and counting those as wins even though much of what has been sold remains as de facto shelfware for the time being but with a buildup of demand arising in the next 24-36 months.
According to Ensono:
Looking specifically at ECC, under one third of organisations using SAP for ERP have moved to S/4H HANA. The remaining two thirds are still running SAP ERP Central Component (ECC). Resistance to push ahead with the migration owes much to the skills shortages that IT leaders are facing. Around one third of those still running ECC cite the lack of appropriate skills as a reason for failing to migrate over the next three years.
I'm surprised Ensono counts the number of migrations at that level but it is still a relatively small number. In aggregate that is likely around ten percent of the SAP ERP installed base.
Our background checks suggest that Microsoft is winning the bulk of the SAP business today and has a very good set of processes in place to help customers shift their workloads to the public cloud. But that's not the same as saying those customers are operating cloud apps. They're simply managing the overall cost of workloads better than either on-premises or in a managed data center.
The Ensono report points clearly to COVID-19 as the number one gating factors in customers pausing or postponing a decision. That's no surprise, neither is the citation of security concerns as the number two factor, with the skills gap coming in at third place.
Returning to the UK&ISUG survey, the following color was added:
- 75% say they are either using or planning to use S/4HANA
- 72% of respondents think the extended ECC6.0 maintenance deadline gives their organisation enough time to move to S/4HANA
- 30% say COVID-19 has delayed their move to S/4HANA
- Of those users planning to move to S/4HANA 25% say they plan to move to S/4HANA in the next 24 months, 33% in 24-36 months, 42% in +36months
Again, there are pieces of this research that align well with what Ensono sees. The question comes - how does this get resolved? That's a question for an upcoming UK & Ireland SAP User Group symposium on this topic which I will attend. Right now UK&ISUG think therer are enough skills in the market to meet current demand. IT is the future with which they are most concerned.
What happens to the 29% of businesses Ensono identified as either moving off or shrinking their commitment to SAP? That's a number that surprises me. While I can readily see a good ten percent going away through natural attrition, hearing that organizations are actively considering a reduction in their SAP estate has to sound alarm bells for SAP. It is possible that all these numbers will change but much depends on the degree to which SAP helps its customers make the move to S/4 and out to the cloud as painless and cost-effective as possible.
In a recent conversation with Geoff Scott, CEO ASUG, Christian Klein, CEO SAP talked about reducing TCO at several points in that conversation. We argue that is a necessity. The ongoing cost of running SAP systems has always been comparatively expensive. Now, those costs are often cited as a principal reason why IT budgets are crimped. Add in the anecdotal evidence that S/4 skills consistently carry a premium and it's not hard to see where the problems lay both now and into the future.
In some conversations, it is leading CIOs to question whether an already difficult business case for an ECC to S/4 migration is increasingly impossible and that if anything, moving the commodity elements of SAP's ERP to a lower cost but functionally adequate alternative makes sense.