SAP Steps Up Efforts to Accelerate Cloud Migration

by Michael Pearson

In an apparent acknowledgement of its customers' slow uptake of SAP S/4HANA Cloud, SAP today announced a new program aimed at simplifying and streamlining the process of migrating ERP to the cloud.

RISE With SAP was announced today by SAP CEO Christian Klein. SAP defines RISE as "business transformation as a service, under one offer, one contract, one responsible party for SLA, operations, and issue handling.". Boiled down, it's some additional services to help customers migrate, and a simplification of the contracting process.

SAP is keen to migrate customers off the traditional perpetual license model in order to build a recurring-revenue model from subscriptions. While this will, and already has, put a dent in SAP's software sales numbers, the longer term goal is to move the majority of sales to subscriptions, which will create a more predictable recurring revenue model (and presumably more revenue).

Since the launch of S/4HANA Cloud most of the uptake has been from greenfield (new) implementations, not from existing SAP ERP customers migrating their ECC or S/4HANA systems, run on-premise or hosted on private cloud, to the Software-as-a-Service offering.

The announcement today seems aimed primarily at existing customers who, until now, may have considered that the time, cost and effort of an ERP migration to the cloud didn't create a compelling business case. What's the benefit of migrating to S/4HANA Cloud, public or private, when you can simply lift and shift your existing ERP system and move the hosting to a hyperscaler like AWS or Microsoft Azure?

While RISE with SAP attempts to remove the obstacles and objections customers might have regarding a cloud migration, it doesn't provide answers to all the questions that customers may have. For example, SAP claims to be able to analyze and remove custom code and modifications done by customers in order to get them back to standard, therefore being able to run on a public cloud system.

As someone who has personally developed custom code for many customers, I'm skeptical about replacing custom code with standard out-of-the box functionality. Undoubtedly many customizations developed over decades of R/3, ECC and S/4 are no longer necessary or can be simply replaced with new functionality, but this won't cover all situations. Some customers have developed very proprietary and unique processes that could never be replicated using standard options and configuration. I've seen customizations that are literally one-of-a-kind, and that no other company in the world would use.

At best, I could foresee these customizations being removed from the core ERP application and built as add-on solutions that exist outside of the ERP stack. This could require significant development work, especially in the case where a customer may have copied and modified an existing transaction to create a "Z" transaction. What might have originally been a relatively minor, but important, modification to standard, now becomes a major development undertaking to reproduce all the functionality of the original transaction in an external application.

Many customers just aren't ready or able to hand over control for the management and operation of their ERP platform to an external vendor, even SAP. They need to have control over when and how upgrades and patches are done, and who can access and control their system.

The majority of organizations are not interested in moving their ERP to the cloud simply for the sake of doing so. Nor are they likely to do so just because their vendor tells them they should.

For existing SAP customers to migrate to S/4HANA Cloud they're going to need a compelling business case, lower costs, and more flexible options for where, how and who manages their SAP instances.

About the author: Michael Pearson

Michael is President of CONTAX and claims to be one of the few people in the western world who understands SAP licensing.