Faced with an impending deadline of March 31, 2027, Australian and Asia-Pacific enterprises currently reliant on SAP’s Enterprise Resource Planning (ERP) Central Element will need to make a strategic decision about migrating to the company’s cloud-based S/4HANA Cloud ERP solution, as mainstream support for the legacy platform is set to cease. Previously, SAP had been prompting potential customers to embark on a migration process leveraging its own ‘Rise with SAP’ migration and modernization offering earlier than that date.
While many organizations globally have shown hesitation in transitioning to SAP S/4HANA Cloud, those operating within a specific geographic area have been particularly slow to make this strategic move. Companies face the daunting task of deciding when to commit to a strategic pivot, juggling conflicting business priorities amidst intense market competition, with the added complexity of potentially costly and unpopular changes to SAP’s on-premise licensing roadmap.
As the looming deadline for corporate relocation approaches – with an extended window set until 2030 – Luiz Mariotto, global vice chair of SAP’s Rimini Street arm, cautions that many organizations are weighing their options, including exploring alternative ERP solutions.
SAP has set a September 30, 2027, deadline for its ERP customers to migrate to the S/4HANA platform.
SAP has announced that it will discontinue mainstream maintenance support for its SAP ERP Central Component as of December 31, 2027, with the company urging customers to migrate their applications to SAP S/4HANA Cloud by this deadline. SAP initially established a migration deadline of 2025, but subsequently extended it to 2027 in 2020 due to concerns raised by customers regarding the feasibility of meeting the original 2025 target.
As of 2027, mainstream SAP ECC support is set to end, leaving SAP prospects with no choice but to migrate to SAP’s cloud-based offering if they wish to remain aligned with SAP’s strategic direction and continue receiving support for their ERP systems. Despite not being able to complete their migration, eligible prospects can opt-in to a fee-based support extension programme for SAP ECC 6.0 Enhancement Pack 8, with a deadline of December 31st, 2030.
Organizations are grappling with another challenge: SAP’s intention to restrict many product enhancements, including AI capabilities, to its SAP S/4HANA Cloud solution. Without a robust migration strategy, on-premise users investing in S/4HANA may still be missing out on the benefits of forthcoming innovations.
Companies are increasingly transitioning their enterprise resource planning (ERP) systems to SAP S/4HANA Cloud, as this cloud-based solution offers enhanced real-time analytics, AI-driven insights, and simplified IT management. By leveraging the power of cloud computing, organizations can streamline business processes, improve collaboration, and drive innovation with greater agility.
By 2024, a leading accounting firm, traditionally hesitant to adopt “S/4HANA”, had only seen a handful of Australian and New Zealand clients successfully migrate to this advanced system, despite acknowledging that three years is insufficient time to complete such a complex process effectively. This cautious approach mirrors the prevailing attitude among global SAP users, who have been slow to enthusiastically adopt the latest advancements.
“The prevailing sentiment in the market suggests a notable lack of enthusiasm for large-scale transformation initiatives,” For many businesses, justifying an investment of AUD 50-100 million or more can be a daunting task, particularly when there are numerous competing priorities vying for attention.
According to PwC, a heightened level of market activity is anticipated in the six months leading up to May 2024, largely due to companies initiating their migration planning processes. “With SAP’s 2027 deadline unlikely to be extended, we forecast that numerous companies across ANZ will initiate their S/4HANA implementations in 2025 and beyond.”
Gartner discovers that SAP’s sales momentum is slowing, failing to rapidly gain traction among prospective clients.
According to an analysis released by Gartner in October 2023. Only about one-third (33%) of SAP’s customer base relying on its legacy ECC system has procured or subscribed to necessary licenses enabling a seamless transition to S/4HANA, as of the end of Q2 2023, according to available data.
According to Gartner’s findings, only a meager 20% of ECC customers have successfully implemented at least one aspect of the latest ERP platform update. “Gartner reports that, despite SAP’s aim to discontinue main support for ECC by 2027, there is still limited evidence of widespread migrations to SAP S/4HANA, casting doubt on the company’s goal.”
Asian-Pacific markets diverge in their approaches to embracing improvements?
In various markets, Rimini Avenue’s provision of extended third-party support for merchandise integrated with SAP’s ERP elicited diverse reactions to the software giant’s strategic roadmap. Mariotto observed that European customer teams demonstrated a marked reluctance to comply with certain aspects of SAP’s strategy, particularly the refusal to deliver core enhancements like AI to customers holding on-premise S/4HANA licenses.
Despite Mariotto’s assertion that SAP’s Australian clients traditionally exhibited strong affinity for the company’s products and models, the shift towards on-premise licensing has somewhat diminished this loyalty. SAP’s satisfied clients, whose successful enterprise funding enabled upgrades to the S/4HANA database, are now seeking to build a compelling internal business case to justify migrating their existing systems to a cloud-based solution.
As APAC’s broader landscape evolves, Rimini Street is finding notable success in Japan, where clients are increasingly open to its extended third-party support offerings. While Mariotto pointed out that many countries have significant opportunities for implementing SAP solutions, the enthusiasm has been tempered by a reluctance to move forward quickly with SAP’s proposed timeline for migration, leading some nations to consider alternative options instead.
Some companies in the Asia-Pacific region are opting to partner with SAP.
Despite some potential reservations about SAP’s pace of innovation, numerous customers are likely to opt for migrating to SAP’s cloud-based offering. Transfers of some prospects in Asia-Pacific are underway. Incorporated are Airservices Australia, the Christchurch Metropolitan Council, Chandra Asri Pacific, and Coles Group. By June 2024, the Australian Federal Government’s digital transformation agency is expected to support local businesses in upgrading their Enterprise Resource Planning (ERP) systems.
What’s driving companies’ hesitation to migrate to SAP’s cloud-based ERP solutions lies in concerns about data sovereignty, security risks, and integration complexities.
Faced with renowned financial constraints, mounting margin pressures, shifting business landscapes, and revolutionary technologies, organizations may hesitate in embracing the transition to SAP’s cloud solution due to these formidable pressures in PwC’s place.
SAP prospects considering a cloud migration may opt to delay this process due to various reasons, including concerns over data security and compliance, uncertainty surrounding the total cost of ownership, and apprehensions about potential disruptions to their existing IT infrastructure.
The migration would necessitate funding across a multi-year period, totalling tens of thousands or even hundreds of thousands, taking into account subscription and implementation costs. Companies must also estimate their anticipated value.
The proposed timing by SAP may not accommodate every company across various industries, particularly those grappling with significant market pressures or seeking to invest in innovative initiatives outside the realm of ERP upgrades.
PricewaterhouseCoopers identifies multiple routes to migration, including the “greenfield,” “brownfield,” and “combine and match” methodologies. The ultimate challenge lies in migrating large-scale operations, which will require a high level of sophistication due to the numerous customizations made to the on-premise version by many organizations.
As companies that have already committed to on-premise licenses begin to consider their next steps regarding SAP’s evolving cloud-first strategy, it is crucial for vendors to engage with these prospects and address any concerns they may have about the vendor roadmap, particularly in light of announcements surrounding AI, generative AI, and sustainability options exclusively available within the cloud product.
As of 2027, prospects considering an SAP migration have several key decisions to make.
The looming 2027 deadline poses significant challenges for some SAP prospects, who may be seeking an extension to 2030 to ensure the successful completion of their migration endeavors. As the migration deadline approaches, clients are likely considering a range of options.
Observe the SAP roadmap
Numerous prospective customers are gearing up to scrutinize the SAP strategic plan. While upfront investments in migration and implementation are necessary, as well as recurring SaaS subscription costs, this offering can still deliver significant value to customers by providing a modern, cloud-based ERP solution, particularly as SAP highlights the benefits of leveraging artificial intelligence.
Proceed to “wait and see”
In a 2023 report, Gartner cautioned organizations against rushing into an SAP S/4HANA transition, advising them instead to allocate sufficient time to effectively plan and execute the migration. Organizations should heed this advice, urging them to resist the urge to rush through planning and instead consider the far-reaching consequences of their decisions, ensuring consistency with end-of-life goals.
Select options
As concerns over SAP’s cloud offering escalate, potential customers are left contemplating alternative solutions. The market is saturated with competing enterprise resource planning (ERP) systems from prominent vendors such as Microsoft, Workday, and Oracle, alongside third-party support services like Rimini Street, enabling customers to extend the lifespan of their on-premise software while redirecting investments towards strategic initiatives.
