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The Expansion of the SAP Services Market

The financial report for the first quarter of 2023 and the recent announcements by SAP of a wide variety of new products and services demonstrate that SAP and the wider ecosystem of SAP services providers have reached a tipping point.

This is the point at which a critical mass of companies running SAP systems, looking to migrate these systems to cloud deployments, begin implementation projects: the point at which the large majority of companies swing the needle from procrastination to action.

It is extremely important that SAP consultants and those companies using SAP products and services understand the way this is likely to change the market for SAP services, and take steps to ensure they can take full advantage of all of the new ERP technologies to which those who run cloud deployments have access.

This week IgniteSAP will review the recent changes and impending deadlines which have led to this new status quo in the SAP ecosystem, among customers and partners.

The stacking of several factors have contributed to the change in outlook for the SAP services industry. On their own, each of these elements have not been enough to make the business case for cloud deployment of S/4HANA and other SAP technologies, but together with the added value of AI powered technologies and business analytics innovations, these amount to a business imperative which it is difficult to argue against.

The reasonable objections to this industry-wide transformation from organizations like DSAG and some IT industry commentators such as Gartner revolve around the fact that some businesses (in the manufacturing sector for example) will always require on-premise components as part of a hybrid system, but this does not mean that much of their systems will be deployed in the cloud, and therefore require cloud migration projects.

Another question to be resolved is that those customers who have already invested heavily in SAP software systems will be required to subscribe for services that they have already acquired.

Of course the debate will continue, but the previous inertia and wariness has been reduced. SAP continues to make a case for cloud transformation.

SAP’s Own Transformation

Over the past few years SAP has structurally changed its business model so that rather than being a provider of on-premise software along with support services for that software, it has become primarily a provider of cloud-based Software-as-a-Service. Revenue growth for the last quarter compared with one year earlier was €7.44 billion, a rise of 10%. S/4HANA Cloud revenue was up 77%.

The SAP ECC and S/4HANA Deadline

The SAP legacy software SAP ECC support deadline, which has taken up a great deal of space in discussions between SAP and SAP user groups is not going to be pushed back again, so all those who currently run SAP ECC need to upgrade to S/4HANA by 2027.

While SAP has made some provision for customers who run on-premise deployments and hybrid systems, support and maintenance for SAP ECC beyond the deadline will only be available for those customers who pay for extended support which runs until 2030.

Rise with SAP

The Transformation-as-a-Service package Rise with SAP has been available for some years offering a simplified transformation process with flexible but packaged deals with consultancies and hyperscalers through SAP. SAP’s Executive Board member and Customer Success Leader Scott Russell said:

“With the move with Rise, when we announced that it wasn’t just a target architecture of being in the cloud, but it was helping customers on a transformation journey that fit their landscape. Some will have a longer period of time and leveraging their on-premises architecture; others go straight to a greenfield in the cloud using our public addition.”

A sufficient number of those large enterprises who have adopted Rise are now reporting on their success. This is creating the necessary evidence and knowledge resource to encourage those companies who needed to understand the new offering before investment and adoption.

Grow with SAP

A package of services similar to Rise with SAP has been released this quarter targeting those small-to-medium enterprises who seek to gain access to the technological benefits of cloud deployments of SAP systems. SME’s represent the largest sector of G7 and other economies, and consequently, as the technology is scalable to any size of enterprise, the appeal of Grow with SAP will increase as smaller businesses expand their operations in a sustainable manner: contributing substantially to the widening SAP services market.

SAP Business Technology Platform

Along with the industry-wide move from SAP ECC to S/4HANA, SAP consultants have been helping to move customers from NetWeaver to SAP BTP: reducing the complexity of SAP system landscapes. Commenting on this change to the SAP portfolio CEO and Executive Board member Christian Klein has said:

“When the whole application logic sits on BTP [it is] the easiest thing to build all of these industry… extensions on the platform which drives consumption, adoption… [and] with that, more and more cloud revenue. The BTP is one of the biggest growth assets we have in the years to come.”

SAP BTP is an important underlying set of components to any cloud deployment of a modern SAP system, and makes it easy for customers to access new technology on the cloud platform like AI and integrated analytics.

Other New SAP Services

SAP continues to add new services to the SAP BTP, including most recently UiPath Automation, which joins the SAP Build Process Automation solution in providing the ability to automate business processes.

Addressing concerns around support, SAP has created a centralized online support platform (bringing together multiple support portals) called “SAP for Me” which is the successor to “SAP Support”. The two will run in parallel for some weeks to ensure a smooth transition between them for SAP customers. As part of the new support strategy SAP has created the “Get Support” app, which can be accessed from any device. The app uses AI to direct customers to the most appropriate support channel to get expert support for SAP services.

Other innovations are constantly being developed to leverage the benefits of cloud deployment of SAP systems. A new prototype being developed in the area of analytics is called SAP “Business Decision Simulator” which seeks to create a model of an entire enterprise and simulate the effects of internal and external events on a company and present the user with potential future scenarios and recommended courses of action.

The Future of the SAP Services Market

These changes to SAP’s own business strategy, along with new additions to the portfolio of products and services, are now having several effects on the SAP services market.

The impending deadline to upgrade legacy software, a lack of skilled SAP practitioners and a restructuring of the way that customers access existing and new services from SAP, all stack up to an almost complete overhaul of the SAP ecosystem.

Partners of SAP and independent system integrators are creating their own products to complement SAP offerings like Rise, and Grow with SAP. The market itself is expanding as SME’s are given access to what was previously territory occupied mainly by large global corporations. The applications of SAP technologies in the area of AI and analytics are multiplying as SAP continues to develop and innovate.

Consequently there will be a “Cloud Rush” as companies hurry to implement new platforms, products and services in the next few years, aside from the expected legacy products deadline.

The companies that successfully implement SAP systems ahead of their competitors will have a material advantage over the next five years and beyond. A result of this increasing demand for SAP services will be a corresponding rise in the earning potential of those consultants who can, through acquisition of the relevant skills and certifications, position themselves at the forefront of this wave of SAP projects.

If you are looking for expert SAP talent for your current or future projects, contact one of our SAP specialists today.