Mainstream maintenance for SAP Business Suite 7 and its core component, SAP ECC, comes to an end in December 2027, roughly three-and-half years away. Considering that some migrations to S/4HANA can take six months to plan and three years to implement, companies that haven’t yet started the transition need to act fast. Yet, given current economic headwinds, and the fact that many CIOs are being asked to rein in costs by slowing or postponing transformation initiatives, I’ve had a number of people ask me lately if I think SAP will yield to customer pressure and postpone the date.
While I can’t say for sure, I can say that wait-and-see is a perilous strategy for a multi-year initiative of this nature—unsupported software that runs the core architecture of an enterprise at scale presents a huge risk, from the ability to perform basic business functions to the integrity and security of critical data. For me, that opens a broader set of questions—what is the context around SAP’s decision to end support for ECC, and why are companies really postponing migrating? Is it just about economics? And if the pace of adoption accelerates, how will so many companies staff their initiatives all at once?
SAP S/4HANA and RISE – Why Aren’t More Companies Making the Switch?
At the height of the pandemic, we saw a brief period of hyper-acceleration in adoption of S/4HANA, followed by a more recent slowdown. As I have previously written, I do think this is due in part to economic conditions, although I also think there is a broader set of issues at play.
In transitioning from SAP ECC to S/4HANA, enterprises must make foundational decisions about critical business infrastructure that will impact their processes, agility, and long-term profitability for years to come. Going from on-premise to cloud necessitates a completely new approach to how and by whom the solution is delivered and managed, and the foundational database is so different that it requires a complete reimagining of end-to-end enterprise business processes. It is an incredible opportunity to streamline and gain a competitive advantage, but for enterprises that have made deep investments in ECC over the years, extending, enhancing, and customizing it, it may be difficult to see the value in S/4HANA.
S/4HANA is available as part of RISE with SAP, SAP’s transformation-as-a-service solution consisting of six bundled services, or as a stand-alone service. Companies can choose to hand over the reins to SAP to deploy and manage it in their public cloud, which is a shared tenant environment; deploy it in a private cloud through a hyperscaler like AWS or Google that offer infrastructure-as-a-service, then self-manage the solution; or partner with a systems integrator that has built an offering around it, as Accenture has with SOAR.
SAP’s public cloud is a smart solution for small- to medium-sized businesses, and while no one knows the solutions better than the company that makes them, I expect we will see larger enterprises most frequently opting for hyperscalers and only in rare instances electing to implement the solution on-premise. For an enterprise that already has a trusted services outsourcing relationship with a company like Accenture, for example, SOAR would be a more natural progression.
Then there is the question of a greenfield, brownfield, or bluefield implementation vs. a compatibility mode transition. To go greenfield—essentially a brand-new implementation of S/4HANA—an enterprise must take a hard look at their business processes and in some cases completely reengineer and optimize them to align with S/4 standard functionality, in parallel with all the change management necessary to prepare thousands of users to work in a new environment. In a brownfield migration, companies maintain existing SAP processes and data, but transition to the S/4HANA technical architecture. This approach can be effective for organizations with processes not inherently supported by the S/4HANA minimum viable product, but they risk replicating inefficient processes and can be more difficult to support. Bluefield offers a hybrid approach with subsets of selected data and processes integrated within a new greenfield S/4HANA distribution.
Compatibility mode upgrade arguably provides the most risk mitigation but the slowest approach to S/4HANA migration. Through this process, clients can take a measured approach to introducing S/4 functionality in accordance with SAP’s compatibility matrix over time with an initial shift of the underlying database to S/4HANA. This provides a path to full S/4HANA migration with very little initial user disruption by enabling the company to move all their other legacy SAP systems incrementally as end-of-life comes up, or to reimagine processes that are not repeatable in the new system in a more iterative, agile manner, on an extended timeline.
For small- to medium-sized enterprises with less customization of their instance, it may be more straightforward to go greenfield and do away with legacy systems. For large enterprises that have been using SAP for years and have customized architecture, brownfield or compatibility upgrades may be a less disruptive and more practical approach.
I’m sure you’re beginning to get the picture—there’s a lot more to this than current economic headwinds, although they are certainly important.
The Human Capital Impact
Regardless of which path an enterprise chooses—RISE with SAP or stand-alone, public or private cloud, greenfield or brownfield—for any company undertaking a migration to S4/HANA, there will be a significant impact on their human capital. As they phase out SAP ECC, many dozens to hundreds of people who were engaged in maintaining it, as well as its adjacent solutions, and the associated on-premises hardware, will see their roles become obsolete. Although large-scale layoffs happen all the time, it makes it no less painful for both employers and employees. Add to it that once the writing on the wall, some people may proactively seek new roles elsewhere, so companies may struggle with morale and talent retainment issues until they are fully up-and-running on S/4HANA.
Conversely, as they ramp up S4/HANA, hundreds of people, many with highly specialized skillsets, will be needed to plan and implement the solution, and while some may be needed for the multi-year duration of the initiative, others will be needed for shorter durations. And if we see hyper-acceleration of S/4HANA adoption as the ECC end-of-life date draws near, competition for the right talent is going to be fierce.
All this puts an extraordinary burden on both internal human resources and IT groups who must maintain the resource capacity to support their existing systems through a years-long transition while standing up an implementation team to navigate the heavy lift and complexities of the transformation initiative.
A Precision Approach to Hiring Expertise
Regardless of what SAP decides to do, transformations are going to happen—including this one—and even under the best of circumstances, finding the right expertise, at the right time, for the right price in a highly competitive market is challenging. And while some of the burden will fall to the systems integrators (SIs), many companies will opt for a more economically sustainable joint staffing model in which they hire key initiative leadership through the SI, then partner with a third-party to help them identify the balance of the expertise they need.
For companies that take this approach, an ordinary technology staffing company won’t do. To minimize disruption and maximize success, it’s critical that they find an enterprise performance partner who understands current market dynamics, the way technology is evolving, the overarching directive of their specific initiative, and the necessary SAP and adjacent skill sets. The partner should also take a proactive, precision approach to identifying, vetting, and developing relationships with people who have the right expertise so they can act fast as needs arise, and minimize the burden on internal teams to screen candidates.
Unlike typical technology staffing companies, Baer is a true enterprise performance partner. We have a deep understanding of the scope of enterprise technology transformation initiatives 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, email@example.com, Executive Vice President, Sales, or John Wilson, Vice President of Strategic Accounts, at firstname.lastname@example.org.
We look forward to speaking with you and learning about your specific challenges.