The True State of SAP S/4HANA in 2022

"By my estimate, more than 89% of the S/4 transformation is still to be done."

As I was preparing for a recent webinar, I was looking for data on the current state of S/4HANA adoption from ECC customers, and what I found was quite interesting.

Let's take a look at what SAP has said, what the data shows, and why the reality of the situation might be a bit more complicated.

S/4HANA By the Numbers

For most quarters over the past few years, SAP has claimed that adoption of S/4HANA has steadily increased with the most recent number from Q4 2021 at approximately 18,800 customers "on" S/4HANA. In their quarterly report, they said this was an increase of 18% year over year. This same report stated that of those companies on S/4HANA, 13,100 are live.

Overall, those don't sound like bad numbers for SAP considering Gartner estimates SAP had around 35,000 existing ERP customers running ECC when the move to S/4HANA began.

But what do those numbers really mean? If we take them at face value, that means more than half of SAP's ERP customers are now on S/4.

The truth is likely a little more nuanced.

For starters, those 18,800 customers are ones that currently have a license for S/4HANA. Of those 18,800, SAP claims that anywhere from 40-50% (depending on the quarter) are net new, so these brand-new SAP ERP customers are not part of the original 35,000 ECC customers. So, conservatively, we can say that around 60% of those 18,800 (11,280) are ECC customers with a license for S/4HANA.

But even this is a bit complicated. According to a recent article from Brightwork Research, some of those customers may not have required S/4HANA at that point in time. They found that quite a few of those customers were forced to get a license as part of a settlement for the whole "indirect access" issue from a few years ago. That number also does not specify how many licenses were bundled as part of other package or contract deals.

To break down the numbers even further, I looked at a recently published Gartner presentation on the adoption of S/4HANA and their research gives a bit more detail into what those numbers really mean. They found that at the end of Q4 2020 of the 60% with an S/4HANA license, approximately another 60% have either initiated their migration or are live in at least one system.

My estimation, based on Gartner's research and my experience planning S/4 migrations at large enterprises like Procter & Gamble, is that a further 60% of those who have a license and are live or in-flight, have fully replaced their ECC system with S/4HANA, and that's probably a generous number.

If we do a bit of math, that would put the number of customers who have fully migrated to S/4HANA from ECC at around 4,000, or to state it more plainly, a little more than 11% of the original 35,000.

Essentially, the data shows us that SAP customers have completed just around 11% of the transformation to S/4 since it was launched in 2015, seven years ago.

That's Just Part of The Story

As part of the initiative to push customers to adopt S/4HANA, SAP has announced it will stop supporting ECC officially at the end of 2027, but customers can purchase extended support to 2030 (for a higher premium of course) on a case-by-case basis. This date has already been pushed back since the launch of S/4, and there's reason to suspect it could be delayed again given the backlog of transformation highlighted above. Even so, when they finally do end support, companies will either have to use third-party maintenance services or switch to another ERP platform if they have not yet made the shift.

Regardless of when SAP does finally end support for ECC, that only applies to the ECC application itself, not the database it runs on. Even assuming SAP does delay the end-of-life date for ECC, companies might still have to migrate to Suite on HANA.

Many SAP users operate their ECC landscape on a non-SAP database such as Oracle or IBM's DB2. As of yet, neither company has announced plans to extend support for these databases beyond 2027. Oracle is ending support for standard maintenance in April 2024 and extended support in April 2027. For customers who purchased maintenance through SAP for IBM's DB2, they will be supported through April 2027. This could be different for customers who purchased maintenance services directly through IBM.

That means even if you choose to "play chicken" and just wait to see what SAP is going to do regarding ECC support unless Oracle or IBM announce extended support for their databases, you'll again either have to use third party maintenance services or move your database to HANA in order to keep using ECC.

Therefore, customers are left with, at minimum, two years before they might have to begin a large-scale transformation project. However, considering the state of the market today, companies will be hard-pressed to find the talent and resources required just as the need for technical resources and expertise begins to spike.

But Wait, There's More

The third piece of this puzzle involves the SAP Solution Manager (SolMan). As with ECC, SAP has stated they plan to end support for SolMan at the end of 2027, and of course, customers who move to third-party maintenance before then will lose support for SolMan when they leave their SAP contract. There's also no official word on extending support beyond 2027 but we can assume that if they do offer the option, it will cost more.

For customers wanting to stay with SAP for managing change delivery, they'll need to migrate to Cloud ALM as part of their S/4 migration project, which adds yet another layer of complexity. The challenge with Cloud ALM is that, at the moment, it doesn't offer nearly the same functionality or capability as SolMan, so again, customers will need to look to third-party change management solutions. 

Something's Gotta Give

This leaves SAP and their ECC customers in a challenging position. S/4HANA migration projects already promise to be extremely time-consuming and complex but every delay in beginning the project could lead to more complexities, which means more time and costs. It's not unforeseeable for companies to find themselves in a situation where they simply won't be able to begin their migration project when they want to.

My assumption is that SAP will be forced to push their end-of-life dates back again, but I wouldn't expect that to happen immediately. Most likely they will wait as long as possible to push it back in order to put pressure on as many customers as possible to begin their upgrades.

Conclusion

It's been seven years since SAP launched its latest flagship product and while it claims that the adoption rate for this new software is more than 50%, the truth is that most likely only about 10% of existing customers have fully migrated to the new platform.

For those who remain, the path to S/4HANA is a bit more complicated than you might think. If you haven't yet begun your migration to S/4, I wouldn't wait any longer.

If you want to learn more about S/4HANA, check out my other articles below:

• Deciphering the World of SAP S/4HANA
• Considerations When Moving To S/4HANA – Part 1
• Considerations When Moving to S/4HANA – Part 2
• Considerations When Moving to S/4HANA – Part 3