The release and maintenance strategy for S/4HANA is changing. In a recent announcement SAP said the changes will give customers more flexibility preparing for the cloud, and more opportunities for “continuous innovation”.
SAP has said companies need to adapt to the changing demands on the modern commercial enterprise, and the pace of change has become so rapid that many consider continuous change to be the best strategy. Cloud technology has provided the possibility to maintain business operations while also adapting to new commercial conditions like customer demand or supply chain pressures.
According to SAP, release 2023 of SAP S/4HANA, available in October of 2023, represents a go-to release for next-generation technology and compatibility with legacy software. From this release, SAP S/4HANA will change to a two-year release cycle, a longer seven years of mainstream maintenance per release, and more easily adoptable feature packs.
In October 2023 SAP will release version 2023 of S/4HANA, which will be equally compatible with legacy software and new technology.
The new release will have a new two-year release cycle and new feature packs will be easier to adopt. Mainstream maintenance will also be extended to seven years. Customers currently using releases from 1709 to1909 are being offered extended maintenance: allowing them to upgrade directly to version 2023. SAP has previously stated that until 2040 there will always be on release of S/4HANA in maintenance.
With extended maintenance customers who have subscribed to legacy subscription models like SAP HANA Enterprise Cloud, will be able to upgrade to Rise with SAP and from there can change their infrastructure.
SAP has been keen to demonstrate that they are covering all scenarios for upgrading S/4HANA: by making it possible to upgrade from legacy versions to the new 2023, release and also because the new release will itself be more easy to upgrade going forward.
This represents a larger trend of more flexibility in SAP’s relationships with their customers. This is presumably to counter-balance the need to encourage those customers on on-premise systems to migrate to the cloud. In a statement SAP said it:
“respects and understands that there are important factors to consider when customers choose to become an intelligent and sustainable enterprise. SAP embraces and recognises these factors by offering a solution that adapts to any organisation’s unique needs.”
Those customers who want to remain on on-premise legacy systems will still be able to take advantage of extended maintenance but with an additional 4% increase in maintenance fees.
Not only does SAP want its existing customers on legacy systems to adopt cloud services, they also want customers to upgrade more regularly, to the extent where they are promoting the benefits of continuous innovation. So they are employing the carrot-and-stick approach to moving their customer base to the cloud, with a lot more carrot than stick.
Once on S/4HANA 2023 customers will be able to integrate six-monthly feature packs so although SAP uses the phrase “two-year release cycle” the feature packs will effectively bring about more regular updates to an SAP environment.
This process of regular updates will allow customers to adapt their SAP systems to suit their needs but also have a longer “productive use time frame” and reduce the interruption of business operations for large-scale root and branch implementations with potentially zero downtime.
User groups have consistently asked SAP to ensure that legacy systems are provided for as there is a lot of wariness among their members who are naturally concern that the SAP implementations that they carry out should be future-proof and adaptable to any business context. This change in the release and maintenance strategy for S/4HANA by SAP is partly a response to this feedback.
At the same time user group surveys have also shown that the majority of respondents have agreed that they need to migrate to the cloud, that they intend to, but not yet. IgniteSAP has previously discussed this natural tendency among SAP customers and IT professionals to wait and see how others find the migration works out before making the jump themselves.
SAP has a growing user base for its new products and who are beginning to cause a wave of change from on-premise to the cloud: because these users are providing a series of success stories that can be used as a point of comparison for potential cloud migrators. While this wave is pulling customers along the S/4HANA path we should not yet overstate the adoption of S/4HANA.
The current state of the S/4HANA market is due primarily to two competing needs: the need to keep a stable ERP system and business operations functioning, and the need to innovate to adapt to changing economic conditions and find new revenue streams.
SAP has been making substantial changes to its own business model over the past two years as it becomes first and foremost a cloud software services provider. Offerings like Rise with SAP and the changes to existing software and services such as the new S/4HANA release and maintenance strategy are intended to make this transition easier for everyone involved.
SAP has given this most recent announcement well in advance of the changes to the release and maintenance strategy, and this itself is evidence that they understand the needs of their customers and are respectfully providing for these needs. The change itself is also a move toward more flexibility for their customers which also balances the need for cloud technology.
One of the most notable aspects of cloud deployments of SAP systems is that it also gives customers an option for partial or hybrid deployment, through extensibility, using modules from the SAP Business Technology Platform or using ABAP development if the business requires more detailed customisation, these hybrid systems are now more easily deployable due to SAP’s drive for further compatible options for their users.
“Based on their existing investments in SAP software, customers can decide to reallocate elements of their installed on-premise solutions to the respective public cloud or private managed cloud solutions from SAP, replacing on-premise[s] license and maintenance with public cloud or private managed cloud subscription.”
SAP is bending over backwards to accommodate its customers concerns because they still have a long way to go with persuading customers to adopt S/4HANA in any form.
As recently as July this year, Gartner research suggested that, despite S/4HANA growing “at record levels”, many customers are still using ECC: seven years after the release of S/4HANA. This means that although from SAP’s point of view it is far better for their customers to be on the most recent version of S/4HANA, they simply have little choice but to ensure there are multiple options for customers to move at their own pace, and in their own way.
Rise with SAP has been created as a means to facilitate this, and has added flexibility by allowing customers to have direct relationships with hyperscalers.
But it is partly the sheer variety of offerings by SAP for their customers that is to some extent obscuring the messaging behind SAP’s drive of customers to the cloud. The Gartner report said:
“SAP’s continued introduction of new S/4HANA commercial models can create confusion for existing and prospective customers that do not understand what options are available and the considerations of each.”
SAP therefore needs to make these changes, but also must put more effort into interactions with partners, user groups, and their customer base in order to educate and inform these interested parties about the many options available to them.
It is undeniable by now that there are substantial advantages to all businesses to leveraging cloud technology, but SAP can make greater efforts towards guiding potential customers to the particular form of SAP implementation that would best suit their business needs.
Often this conversation about type and scope of an SAP system is the first aspect of an implementation project, and requires input from both parties as well as time, so many prospective customers do not want to commit even as far as this.
While there is a growing set of examples of use cases for S/4HANA, each time there is a new version customers wait and watch what their peers will do, and before they know it an even newer version has arrived.
So along with continuous innovation, SAP must set in place more channels of continuous conversation about S/4HANA and other products: with all stakeholders, in order to get everyone on the same page.
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