Legacy ERP users cautious as cloud migration looms

In the rapidly evolving landscape of enterprise software, businesses utilising legacy on-premises ERP systems are poised to take a measured approach to cloud migration, opting for software upgrades prior to making the transition to the cloud. This insight comes from Conor Riordan, the chair of the SAP UK and Ireland user group, who spoke to The Register about the current apprehensions within the user community regarding the migration process.

The backdrop to this cautious manoeuvre is SAP’s RISE initiative, launched in January 2021, aimed at facilitating the migration of complex SAP environments — including on-premises systems like SAP ERP Central Component (ECC) — to cloud architectures. By partnering with cloud hyperscalers and systems integrators, RISE with SAP was meant to allow organisations to transition to cloud environments without the prerequisite of standardising their software. SAP describes RISE as “a managed cloud service that helps organizations using on-premises ERP software – including SAP ERP, SAP ECC, and SAP S/4HANA – to migrate to the cloud securely and smoothly.”

Despite these efforts, Riordan articulated a discernible hesitance among ECC users to undertake simultaneous upgrades to new infrastructure and application software. He remarked, “The challenge with the initial [RISE with SAP] offering was that going from ECC on-prem to the cloud is a massive step,” adding, “It’s going to be a multi-year, multi-step journey.” For many large multinationals, this proposed ‘one-step process’ presents complexities and risks that make simultaneous migration less appealing.

Riordan’s comments reflect a considerable sentiment at the recent UKISUG conference in Birmingham, where SAP UK and Ireland managing director Leila Romane delivered a keynote speech. Notably, Riordan highlighted Romane’s omission of RISE from her address as indicative of a shifting narrative within SAP — one where customers are signalling a need for flexibility in their migration timelines.

SAP has set a deadline for mainstream support of ECC systems, which will end on December 31, 2027. Following that date, only enhanced support will be available for versions that meet specific criteria, limiting options for businesses still utilising older instances of ECC. Riordan, who has experience managing SAP ERP projects at a global biotech firm, noted the substantial investment many companies have made in developing stable ECC platforms and their likely reluctance to risk poorly planned migrations, stating, “For most organizations, the risk of doing this badly is too big.”

In terms of future planning, he emphasised the importance of starting discussions and strategy development by 2025 to ensure a seamless transition to S/4HANA, warning that it is critical for businesses to begin their preparations now as the deadline approaches.

As organisations take stock of their options, a recent survey from the UKISUG revealed that nearly 75% of SAP users believe enterprise AI will positively impact their organisations, with 58% indicating that SAP will play a significant role in deploying AI solutions. However, Riordan pointed to a lack of clarity from SAP regarding innovations related to AI, specifically the assertion that “AI is only available to customers on RISE.”

This commentary aligns with previous criticisms from both UKISUG and the German-speaking user group DSAG, which took issue with SAP’s CEO Christian Klein’s comments suggesting that AI innovations would be exclusive to cloud versions of S/4HANA. Such statements have left many SAP users feeling uncertain about the company’s communication strategy and the implications for their ongoing operations.

As the landscape of ERP continues to shift, early adopters of RISE are now confronting the end of their initial three-year contract periods. The challenges surrounding contract renewals and pricing negotiations have heightened, with Riordan observing that users are now more inclined to negotiate terms that align with their budgetary constraints.

In summary, as organisations navigate the complex considerations pertaining to ERP transitions and cloud migrations, the challenges remain multifaceted. Businesses must weigh their options carefully against the backdrop of evolving technological trends, including the growing integration of AI within enterprise applications. With deadlines drawing closer, decision-makers are tasked with formulating clear strategies that will dictate the future of their ERP systems.

Source: Noah Wire Services