By Robert Holland, VP Research and Publishing, SAPinsider
On January 23 the German-speaking SAP User Group (DSAG) released their 2020 Investment Report which was based on interviews with representatives from 288 different companies. The highlight of the report was that, for the first time in four years, planned investments in SAP S/4HANA exceeded planned investments in SAP Business Suite.
The turning point that DSAG highlighted was that “large and medium-sized” investments in SAP S/4HANA on-premise and public cloud (52% of respondents) exceeded those in SAP Business Suite (35%) – last year the numbers were 42% and 43% respectively. Forty-six percent of respondents said that their overall IT budget would increase in 2020, and 49% said that they would invest more in SAP solutions during 2020. The DSAG report did not provide any insight into the reasons behind these numbers, though it did indicate that this increase in investments was not consistent across sectors. For example, 24% of organizations in the manufacturing sector reported that their budgets had fallen.
Figure 1: DSAG statistics on investment shift from SAP Business Suite to SAP S/4HANA
More importantly, DSAG also indicated that they are seeing a threefold increase in the number of organizations that already have SAP S/4HANA in use since their 2019 report, and the number of respondents who indicated that they planned to complete their migration to SAP S/4HANA this year nearly doubled. Their finding on this topic, as explained by DSAG Chairman Dr. Marco Lenck, was that: “SAP S/4HANA finally arrived on the market in 2019. It is expected that this number will continue to rise over the next three years. An impressive 40% of respondents expect to make the transition during this period.”
These numbers align with what SAPinsider has seen over the course of 2019 in our own surveys, particularly in our “SAP S/4HANA in the Cloud” research report that we published in December. While the respondents to our survey showed a slightly higher number of European customers that had already deployed SAP S/4HANA, this was a larger regional base than the customers DSAG was interviewing as it included both German and non-German speaking Europeans. Although we did not break down our respondents in an identical manner, the proportions of those who already have SAP S/4HANA deployed, are in the process of deploying, or are still in the process of evaluating the business case reflect very similar trends.
For example, we saw that 10% of European respondents were in the process of deploying SAP S/4HANA vs. 9% of DSAG respondents who indicated they would complete their deployment this year. In addition, we saw that 62% of respondents indicated that they were running proofs of concepts (PoC) or were evaluating the business case for SAP S/4HANA, while 63% of DSAG respondents said that they would perform a migration either within or after the next three years.
Figure 2: DSAG statistics on plans for SAP S/4HANA deployment
While DSAG’s data is showing that businesses surveyed are shifting to SAP S/4HANA, they also found that the percentage of organizations using the SAP S/4HANA public cloud remains in single digits. Despite slow adoption of public cloud, 24% of respondents indicated that they planned “large and medium-sized” investments in Microsoft Azure, a clear leader in terms of potential investment as an application platform, as reported by DSAG. Fourteen percent of respondents said they planned “large and medium-sized” investments in SAP Cloud Platform and 8% of respondents said they planned “large and medium-sized” investments in Amazon Web Services. Dr. Lenck’s conclusion was that: “SAP’s existing customers need to be better informed when it comes to the general functionalities of the cloud solutions.”
Lenck’s conclusion very much aligns with what SAPinsider has heard from our customers, including responses publish in our July, 2019 report “Enterprise Cloud Migration: State of the Market,” where even those who were leading in the area of cloud migration did not rate their knowledge levels as strong or very strong in most areas.
While our “SAP S/4HANA in the Cloud” report published in December, 2019 showed us that adoption of a public cloud environment was slower than private cloud, we did see that 19% of respondents were running in the public cloud, of which nearly two thirds were using a hybrid environment. In addition, in our “Enterprise Cloud Migration: State of the Market” report published in July we saw that 21% of respondents were currently using the public cloud, and 24% planned to do so within the next year. This tracks very closely with the fact that public cloud platforms represented 32% of “large and medium-sized” investments in the DSAG report.
What Does This Mean for SAPinsiders?
Based on our research and the results from the DSAG report,
- Expect an acceleration in SAP S/4HANA adoption. While European customers have been slightly slower to adopt SAP S/4HANA and the cloud than those in other regions, and are being driven by different factors when it comes to that adoption, DSAG reports that the growing momentum behind customers’ shift towards SAP S/4HANA represents a tipping point. Investment in SAP S/4HANA is growing globally, and that will result in an acceleration of the platform being deployed both in 2020 and in coming years.
- Decide on your SAP S/4HANA strategy soon. The DSAG report indicated that 13% of their respondents had still not reached a decision on their migration strategy. While this is a slight reduction from 2019, the fact that adoption is accelerating and that an SAP S/4HANA deployment is a significant investment of time and resources, those who are undecided or evaluating their business case need to reach a decision on their strategy soon. One possible repercussion of a failure to do so will be the inability to leverage their System Integrator or consultant of choice.
- Educate yourself on cloud-based solutions and technologies. DSAG indicated that they believe part of the reason for a lack of adoption in the public cloud is that customers need to be better informed. SAPinsider’s research has shown that knowledge is key to any successful cloud adoption. Now is the opportunity to learn while most customers are still not very far into their digital transformation. A huge opportunity to not only learn about the cloud but also to hear what other customers are saying about their own SAP S/4HANA journey is to attend the SAPinsider Las Vegas conference in March.
- Leverage SAP tools to help make your decisions. While Dr. Lenck indicated that customers needed more decision-making aids for SAP S/4HANA, SAP already has many tools available such as the SAP S/4HANA Readiness Check, SAP Transformation Navigator, and SAP Pathfinder. While these may not cover every possibility, they do provide a strong starting point to understanding what a migration to SAP S/4HANA will entail.