At Liberty, our advisors have planned, managed, and rescued many large-scale SAP projects. A common, current consideration of our clients, specifically those who are still running ECC, is when to move to S/4 given the fact that mainstream maintenance ends in 2027, with more costly extended maintenance ending in 2030.
We’ve written numerous thought pieces on how S/4 implementations are not “slam dunks”. These implementations require careful planning, strong business leadership support, and top company prioritization. Clients who undergo substantial upfront preparatory work such as process analysis, architecture definition, and data cleansing are much more successful than those who do not. With that said, it’s no surprise, given the complexity of launching an S/4 journey, that according to The Register, as of September of 2024, only 37% of their surveyed ECC customers had signed an agreement for S/4 licenses.
Considering all this information, many in the industry have wondered when, not if, those deadlines of 2027 and 2030 would change. In the last couple of months, SAP has provided innuendo suggesting flexibility in these deadlines, however, with critical caveats.
What is the announcement?
To be clear, nothing official has been announced. On an earnings call, SAP CEO Christian Klein acknowledged that given the complexity of SAP landscapes, some flexibility would be needed for “very few large customers” to allow them enough time to complete migrations to S/4. The only publication at the writing of this piece to receive any meaningful clarification to this comment is Handelsblatt, a German news publication. Allowing room for translation error, SAP has told this website that while maintenance still ends per the previously published schedule, certain customers will be provided maintenance for “business continuity purposes” while transitioning to SAP S/4 RISE. There are two major pieces of information given away in this statement.
The first is that this isn’t going to be a blanket maintenance extension. To us, it sounds much more like some limited form of maintenance. We interpret this as meaning that only critical issues that jeopardize priority business functions will be supported by SAP. Moving products, collecting cash from customers, and paying vendors are likely safe, but complex, non-standard enhancements or reporting and analytics capabilities may not be covered.
The second key piece of information is that this offer is only for customers who have signed an S/4 RISE agreement. Said another way, customers who have signed a license agreement for RISE will receive this extra, business-continuity-only support during their migration process.
It is important to understand that this also specifies RISE customers. We’ve written pieces in the past on the implications of RISE, and if the reader is unfamiliar with what RISE is, you can learn more here. SAP is trying to incentivize customers to RISE, a more “all-inclusive” subscription model that includes limited BASIS support, along with hosting in the hyperscaler of the customer’s choice. This model allows SAP to move away from the perpetually licensed model from decades past.
Cloud and subscription models certainly aren’t new; virtually every industry in the world is trying to move towards the recurring revenue model, software being the leader. Software companies make better margins, while investors like the steady, predictable revenue stream. SAP, in particular, benefits from this approach because it’s so challenging to move away from SAP once implemented, essentially locking in that recurring revenue for decades.
What are the implications of the announcement?
Unfortunately, this isn’t any major reprieve ECC customers have been hoping to hear. There also is no clarity on what customers will qualify for the coverage through implementation. Christian mentions “very large customers.” Large can likely only be defined in two ways: customer revenues or the customer’s spending with SAP. Until more clarity is provided, customers should continue to act as if they will not qualify.
If a company wants to avoid the increased costs from “extended” maintenance, and a Greenfield implementation takes 2-5 years to complete (depending on geographies, business processes, and industry complexity), those companies should have begun execution already. If a company is going to go Brownfield and do an in-place upgrade, those implementations can take 6-12 months (again, depending on environmental complexity), and those companies should begin planning this calendar year, targeting to launch in 2026.
How we can help?
Liberty Advisor Group has experienced professionals who have helped companies of all industries and sizes plan for, manage, and even rescue their SAP implementations. If you need help setting a strategy, rallying business support, or even just having a sounding board, we’re here to assist.
Contact us today to discuss how we can support you in managing your SAP implementation or migration and drive meaningful results for your business.
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