It’s cloud-first and cloud forever confirms SAP’s ERP chief
While support for on-premises options will continue, customers will miss out on all the integrated AI goodies that cloud can offer, says David Robinson
Migrating to a new ERP system is one of the most daunting tasks an IT team is ever likely to face. Little wonder, then, that ever since SAP first announced in 2015 the end of the road for its ECC ERP (then set at 2025), organisations have been worried about practicalities, costs and timescales of moving to S4/HANA or alternatives.
Eighteen months ago, Computing heard grievances from members of the UK and Ireland SAP Users Group (UKISUG) concerning the challenge of upgrading, SAP’s cloud-first push and what they perceived as a lack of clear communication from the software giant.
To discover what, if anything, has been done to address these concerns, we spoke to David Robinson, SAP's global president and CRO of cloud ERP, at the recent Sapphire event in Madrid.
First, the lie of the land.
According to a survey carried out in 2024 by UKISUG among 130 SAP user organisations in the UK and Ireland, 96% were either using (32%) or planning to use (64%) S/4HANA. Of those organisations that have already deployed S/4HANA, 77% had an on-premises or hosted deployment. Twenty-eight percent of those planning to use S4/HANA preferred an on-premises or hosted version. From this we can infer that around 40%-50% of respondents favour on-prem.
According to other estimates, there are around 35,000 ECC customers (the legacy ERP suite that SAP will stop supporting at the end of 2027 in most cases). Gartner found recently that 61% of ECC customers have not yet acquired licences for S/4HANA.
New tools and methodologies
SAP itself does not breakdown figures in this way, at least not in public, arguing that it’s hard to capture the nuance of multiple types of journeys. However, Robinson said more than 10,000 customers have chosen to move to cloud ERP, with more than half now in production, and that the trend is upwards.
“We've seen an increase, both in terms of the volume, the number of customers choosing to proceed with this journey, and the size of those customers - their estates are larger on average,” he said.
Customer size is relevant in the light of past complaints by some large enterprises that Rise, SAP’s managed migration service, was insufficiently sophisticated or well-supported by consultancies to match their complex needs.
S4/HANA’s adoption curve might be trending upwards, but will sufficient progress be made by the 31st December 2027 cut-off point (with additional support for some customers available until 2030), or will SAP need to move its goalposts again? Robinson insisted there were no plans to do that; instead, he said, the software giant is making it easier for customers to move away from their legacy systems to meet those deadlines.
“We're seeing an improvement both in the number of quality references and the scenarios of those quality references today that we did not have 18 months ago,” he said, acknowledging past resistance from some customers.
“[Previously] we were saying, ‘hey, here's what's going to happen, trust us’, and I think a lot of the market said ‘well, we'd like to see more evidence’.”
In addition to more case studies and best practices, new Rise options, and an improved onboarding process, SAP is bringing new tools to bear in Rise, including the AI copilot Joule for Consultants.
“These new tools and methodologies, these best practices, I think what they're doing is making those looming deadlines less [onerus]. They're providing more capability for customers to address the deadlines.”
SAP has been investing a great deal in “helping customers to unwind their technical debt, putting them on a path to modernising and doing it in a more efficient, cost-effective and less risky way,” Robinson went on. “That's getting more customers on the journey now, because there's less manual work needed to get going.”
Cloud first and forever
SAP would really like all customers to move to cloud-based versions of its solutions, which would make rolling out updates and new features and options much more straightforward and remove the burden of having to support multiple versions (not to mention the subscription-based recurring revenue model favoured by almost all software companies). It makes great play of its “clean core” ERP model, meaning that customers should need to make minimal, if any, customisations - with the additional promise that they might never need to go through the pain of an ERP upgrade again.
A sticking point is that a sizeable proportion of customers still prefer on-premises or hosted options, in many cases because they want to be able to customise their S/4HANA investment rather than being beholden to SAP.
Public information from SAP about the differences in support offered across its various deployment options is scarce, but the company has confirmed that innovations will be cloud-first, and that that on-premises customers will be supported at least until 2040.
As well as the promise of an upgrade-free future, the company is dangling the carrot of features and functionality to tempt customers to move over time.
“We're going to continue to make sure they get the value from their investments in SAP, but at the same time we're delivering new innovations that are truly transformative because of the architecture and the new applications, including agentic AI,” said Robinson.
“Putting agentic features in an on-premise architecture, while it's doable, it's not as cost efficient as being able to bring agentic AI and agents to life within a cloud ERP or a cloud suite environment. Why? Because all the platform services and all the interoperability and all the new features are purpose built for it.”
This is consistent with SAP’s view of the evolution of IT, he added, with the as-a-service model becoming the default, even for complex applications like ERP.
“I think what we're seeing is customers realising that to implement and activate those new features and functions is so much more simplified and cost-effective if they're running the cloud ERP variant.
“Most customers are saying, ‘hey, I don't want to keep building out something that feels kind of obsolete’. That's a fundamental shift, not only in how the applications are architected and the features and functions, but it refactors the IT operating model, the day-to-day work. The way that an IT organisation functions … will fundamentally change forever because of the shift to a new IT operating model that's based on the end-to-end enterprise estate being delivered and consumed as a cloud service.”
The end-to-end model
This end-to-end model, he argued, means that businesses can realise benefits more quickly and gain more from their investment. And the modular cloud architecture makes it fundamentally different from the on-premises monoliths of the past, SAP says.
“The rate in which you can activate new features and functions is accelerated, and the the profile of the resources that enterprises need to make that bring value to the business and to operate and curate the innovation is very, very different. It's less commoditised and more valuable. I would argue IT is becoming much more of a value creator than being about managing commodity workloads.”
Ultimately SAP would love customers to adopt its Cloud Business Suite, of which ERP is but one component, sitting alongside Data Cloud and managed by AI agents.
Asked about the most important announcements at Sapphire, Robinson mentioned “Joule everywhere”, i.e. the integration of AI across multiple applications with a single natural language interface, and new quick-start packages around finance, supply chain and customer experience. “These create real, tangible, short-term ROI, and I think that's going to open up the door for more and more use of all these features.”