S/4HANA is a Leader

SAP S/4HANA Cloud has been named as a leader in Gartner’s Magic Quadrant for Product-Centric Enterprises after it’s evaluation of S/4HANA.

Gartner recognised SAP S/4HANA Cloud for its completeness of vision and ability to execute cloud ERP for Product-Centric Enterprises. In July 2022 SAP also achieved leader status in the Magic Quadrant for Cloud ERP for Service-Centric Enterprises.

The core capabilities for product-centric cloud ERP suites according to the Gartner report are operational ERP functions including provision for supply chain, and manufacturing functions like management of demand, order, inventory and materials planning, procurement and manufacturing control, as well as distribution and logistics.

Other core capabilities include functionality for financial management such as financial accounting, subledger accounting, consolidation and financial reporting.

What is a Cloud ERP Leader?

Gartner defines the leader category of the report:

“Leaders demonstrate a market-defining vision of how ERP product-centric systems and processes can be supported and improved by moving them to the cloud. They couple this with a clear ability to execute their vision through products, services, and go-to-market strategies. They have a strong presence in the market and are growing their revenue and market shares. In the cloud ERP suite market, Leaders show a consistent ability to win deals with organisations of different sizes. They have a good depth of functionality across all areas of operational and administrative ERP. They have proof of multiple, successful deployments by customers. Their system integrator partners frequently use their offerings to support business transformation initiatives.”

SAP S/4HANA Cloud has been shown to be an enabler of transformational processes of enterprises as it allows companies to grow and optimise their business operations while also facilitating frictionless integrations with a minimum of downtime. SAP modular cloud ERP uses standardised industry-leading best practices and automated processes. This results in efficiency of business operations and reduced errors.

Extensibility is a key feature of S/4HANA Cloud. This can be achieved by both users and developers so it is easy to make changes to the SAP system when business conditions demand it.

Cloud ERP for Product-Centric Enterprises

The Gartner report describes the cloud ERP market for product-centric enterprises as: “a market for application technology that supports the automation of operational and financial activities for the manufacturing, distribution, delivery and servicing of goods.”

By 2024 60% of businesses and organisations will implement cloud ERP: leveraging a selection of application and technology platforms from a variety of vendors. 50% of existing customers will go through an initial period of evaluation of products by multiple vendors rather than continuing with their current systems.

Elsewhere, a Gartner survey has found that almost 70% of respondents indicated that their organisation’s ERP strategy is not closely aligned with their business strategy, and this complicates the process of adapting to new business requirements.

Significantly, nearly 80% of participants in that survey were intending to replace or upgrade their existing ERP system within 12 months.

Gartner suggests in the report that although ERP is one of the top application categories to move to the cloud, product-centric enterprises have been lagging behind service-centric enterprises. This is because it requires a greater degree of business process complexity and change management to implement cloud-based solutions for product-centric companies. As a consequence this specific area of cloud ERP is still an emerging market.

However it is also true to say that traditional business models are changing and many companies that were originally totally product-centric are adding services to their portfolio of offerings: resulting in recurring revenue streams rather than one-off sales. Cloud ERP solutions like S/4HANA Cloud can make this process of adapting from solely product-centred to hybrid product and service business models far easier.

Gartner’s Pros and Cons of SAP S/4HANA for Cloud ERP

As a leader in cloud ERP for product-centric enterprises, overall SAP S/4HANA has been evaluated favourably by Gartner.

The strengths of SAP’s offering here are described by Gartner, recognising SAP’s enterprise and industry expertise. The report highlights SAP’s Industry Cloud which provides a variety of capabilities developed by SAP and their partners for specific industry contexts that can utilise S/4HANA Cloud.

The innovations that come with access to SAP Business Technology Platform are also listed as a strengths as modular deployment allows organisations to integrate a large number of added value services like AI, data analytics, process automation and application development.

The report emphasises the benefits of S/4HANA Cloud analytics capabilities as part of SAP ERP solutions and also within ancillary SAP products such as SAP Integrated Business Planning for supply chain planning and SAP Analytics Cloud, which allows companies to visualise and interpret large volumes of data and extend planning.

The report also raises some issues which warrant caution for those evaluating S/4HANA Cloud.

Prospective customers of SAP may need to select their preferred deployment with care as there are many versions of SAP ERP systems which are designed for different types of SAP customers. Gartner suggests that SAP S/4HANA Cloud is more appropriate for “greenfield” implementations by customers who want a substantial digital transformation, whereas SAP S/4HANA Cloud, Private Edition is seen as more flexible. The variety of potential deployments also means complexity in determining the total cost of ownership.

Other SAP S/4HANA Successes

Analysts Forrester have also recently named SAP S/4HANA as a leader in two of their own reports: “The Forrester Wave™: Digital Operations Platforms for Manufacturing and Distribution, Q3, 2022” and the “The Forrester Wave™: Digital Operations Platforms for Services, Q3 2022”.

The Forrester Reports pointed out: “SAP remains the largest vendor in the DOP market and services dozens of industries in nearly every geography… Key strengths include their product vision and execution roadmap as they’ve laid out a very clear, modern vision for helping customers get to the ‘intelligent enterprise.’ It continues to invest in not only the right features but also customer adoption and success.”

S/4HANA Cloud Adoption

These most recent reports on the cloud ERP market by analysts have added to the growing body of evidence that S/4HANA Cloud (and SAP’s Software-as-a-Service business model more generally) is becoming better understood in the cloud ERP market.

One of the fundamental challenges for a technology company, when bringing a new product to market is to educate users of legacy versions and potential new customers regarding what it is, and why they need it.

Now, over five years since the release of SAP S/4HANA Cloud we are starting to see accelerated uptake of the offering after a slow start. In part this initial hesitancy has been due to the need to provide different types of SAP customer with different versions: increasing the burden on SAP to explain and clarify the nature of the product. Other reasons for hesitancy among existing SAP customers includes concerns about data security and privacy legislation in various territories, and also pricing and subscription models.

However, since SAP’s own move to the cloud has taken off, with the added stimulus of the introduction of Rise with SAP, the number of success stories with SAP Cloud ERP solutions are increasing. This educational and marketing drive by SAP is being supplemented by SAP partners like Google, IBM and Accenture, as providers of cloud infrastructure or System Integrators.

The exact nature of the technological and operational benefits is becoming more clear with each adoption and the feedback from these to SAP is closing the loop so that the product itself is improving as the user base becomes more aware.

In the world of IT consultancy there is very little doubt that in the end there will be very few companies running on-premise systems, and despite the general wariness even SAP customers know that they have to make the move to cloud provision if they are to maintain market share among competitors who are keen to gain any advantage.

There is a tipping point that has been passed and now the wave of cloud ERP adoption is accelerating. S/4HANA Cloud skills are now required knowledge for SAP consultants if they want to participate in the ERP market, which according to Gartner grew to a worldwide total of $44.4 billion.

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