Today’s theme is Cloud ERP and the tendencies among technology customers towards adoption or conversion to the Cloud. In addition to this week’s update on Oracle financial performance indicating building momentum, noted enterprise blogger and friend Vinnie Mirchandani tweeted our attention to a recent survey among SAP ERP customers.
Rimini Street, a provider of enterprise software products and services, and a support services provider for Oracle and SAP applications, released the findings from a recent global survey of SAP licensees to better understand SAP ERP application strategies and future needs.
The report, “Rimini Street Survey: 2017 SAP Applications Strategy Findings,” was based on responses from CIOs, CTOs, IT VPs, directors, and managers from a broad range of industries and company sizes across North America, Europe, Latin America, and Asia-Pacific.
A key finding, according to the authors, indicated that 65 percent of the survey respondents have no plans to, or are currently not committed to, migrate to SAP S/4 HANA, with the number one reason for not committing cited as “no strong business case and unclear ROI.” Further indicated by 89 percent of respondents, was to continue running their proven SAP ERP releases, given that the rich functionality met existing business needs and further formed the foundation of a preferred hybrid IT model. Regarding the latter, 30 percent indicated that they are already adopting a hybrid IT strategy to maximize the value of their core SAP system as a system of record, while freeing up funds and resources that can be used to drive innovation through systems of engagement more quickly and flexibly. According to the authors, a hybrid IT strategy offers the best of both worlds – providing the ability to reliably run the business on a robust core ERP application, and at the same time enabling an organization to more quickly adopt new innovative applications and services, including cloud, mobile and analytics.
What we found as a rather important technology buyer indicator, was the following statements:
“In addition to citing “no strong business case and unclear ROI,” for the low commitment to S/4 HANA, another top reason by survey participants for the low commitment to S/4 HANA is the “high migration and reimplementation costs.” Of those respondents who have committed to S/4 HANA, 56% estimated the total cost of reimplementation for a move to S/4 HANA to be between $10 and $100 million, an expensive undertaking which makes it difficult to build a positive business case for the move and is financially untenable for many organizations.”
No enterprise Cloud software provider wants to read or hear such statements from existing customers. If not already, this should be a clear call-to-action to both fully understand what a strong business case needs to be to prove to customers that such applications are flexible and robust enough to support needs for business and process innovation. For the specific area of existing SAP applications supporting supply chain management, manufacturing and product lifecycle process needs, we believe that the business case for upgrade is reflective of a perception in lack of understanding in various applications and technology roadmaps, coupled with functional and line-of-business uneasiness on the disruption, cost-of-ownership and/or performance tradeoffs of adopting SAP HANA as a backbone database. Instead, customers are indeed turning toward select supply chain edge systems for such needs.
At the recent annual SAP Sapphire and ASUG customer conference, there was a special emphasis on communicating the existence of product roadmaps and in declaring that the bulk of ERP innovation was completed. Kudos to SAP for at least listening and processing customer feedback. However, from the feedback and discussions we have had, more work remains in any compelling business case for upgrade adoption. Meanwhile, market introduction of added innovation of edge systems is increasing every week.
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