As of Q2’ 24, approximately 37% of SAP ECC customers worldwide had bought or subscribed to licenses for S/4HANA, according to Gartner. With a large addressable market remaining, the 2027 end of mainstream support for ECC drawing near, the high cost of extending that support, and major uptick in RFP activity, all signs are pointing toward an emerging mass adoption cycle for the other 63%. In that same period, 60% of S/4HANA sales were to new customers, with 41% of those choosing RISE and 45% choosing GROW, both Public Cloud offerings. As these numbers make clear, a steadily growing set of new customers are adopting S/4HANA through these approaches.
Looking ahead into 2025, Public Cloud is going to be increasingly relevant from an implementation perspective, both for ECC incumbents and new customers. This has powerful implications for SAP systems integrators, other service providers, and the SAP labor market. In a mass adoption cycle, where will there be enough Public Cloud resources with skilled expertise to meet demand?
I’ll walk you through my take on that question, but first, let’s take a step back and explore what’s happening in the SAP ecosystem to drive adoption of Public Cloud.
SAP’s strategic directive is to become a true SaaS company with a recurring revenue model like Salesforce or Workday. For the company, it’s both a technologically and financially sound approach. It better supports continuous innovation; streamlines deployment, maintenance and upgrades; and is more stable and predictable from a revenue standpoint. That, in turn, means investors can have greater confidence in earnings estimates. And as CEO Christian Klein made clear at Sapphire, AI is where their innovation efforts are focused and RISE is the most direct route to leverage it.
Until quite recently, however, large enterprises were reluctant to embrace Public Cloud. A big reason was that despite SAP’s best-in-class, vertically focused solutions, most were running discrete processes with complex customizations that they were wholly committed to. With the end of mainstream support for ECC drawing near and the premium attached to extending it, as well as the competitive advantage of AI, enterprises are seeing RISE in a new light.
In addition, some enterprises have quickly spun up Public Cloud instances for companies acquired via M&A activity, and the relative ease and success of these projects has been eye-opening. There are other drivers, too. For instance, PWC’s own successful Public Cloud implementation in Europe has helped position them as an authority on the subject while demonstrating how a large, multinational consulting company can benefit from it. I expect as early movers in other verticals demonstrate Public Cloud success, more of their competitors will follow suit.
At Baer, we’re seeing a large increase in RFPs for S/4HANA implementations, which is signaling a supercharged 2025 adoption cycle mirroring 2021 and 2022. This has us, as well as the systems integrators we work with, asking where all the resources are going to come from. We do anticipate a very compressed labor market across all flavors of SAP, but a shortage of Public Cloud skills is particularly concerning due to the certifications required to work on an implementation.
Certainly, anyone with experience in S/4HANA Private Cloud will have transferable skills and can get certified quickly through SAP Learning. But people with ECC skills will face barriers to entry since the foundational databases and related table structures are so different. They can anticipate longer, more complex training pathways.
There is no easy answer. We must all do our part to upskill the workforce.
In the meantime, at Baer, we continue to look down the innovation curve, mine our data for trends, and proactively build relationships with proven resources. Our knowledge of the SAP space means we can take a precision approach in identifying the right expertise, at the right time, for the appropriate investment.
Unlike typical technology staffing companies, Baer is a true enterprise performance partner. We have a deep understanding of the scope of enterprise digital transformation and the highly specialized skillsets you will need at different stages of the process.
To learn more about how Baer can make a positive impact on your enterprise transformation, please reach out to Brian Trout, Executive Vice President, Sales, at btrout@baergroup.com, or John Wilson, Vice President of Strategic Accounts, at jwilson@baergroup.com.