There is also a slight increase in the number of companies switching to S/4 Hana. However, companies are slightly more cautious with the investment forecasts for the next three years. The same can be said for licensing strategies for S/4 Hana; most companies are yet to come to a decision.
The immediate effects of the COVID-19 crisis on companies were blatantly obvious last year. Many businesses experienced the pandemic and its consequences directly, but they also quickly learned how the prospects for 2021 can be cast in a positive light. The DSAG Investment Report found that, in 2021, the budget for general IT is set to increase at 39 percent of surveyed companies in Germany, Austria, and Switzerland (compared to 46 percent in 2020). At nearly one-third of these companies, budgets are growing by 10 to 20 percent. 37 percent of companies expect their budgets to stay the same. Meanwhile, 18 percent of survey respondents said their budgets would be cut, with 44 percent seeing decreases of 10 to 20 percent.
“The numbers show that the pessimistic mood of the past year has since given way to cautious optimism. While budgets are increasing less than in the previous year, expectations of decreasing budgets have recovered slightly over the past few months. This gives us hope for the future,” notes DSAG Chairman Jens Hungershausen.
Companies press ahead with S/4 Hana investments
When it comes to SAP budgets, 43 percent of survey participants want to invest more, a slight decrease from the 2020 Investment Report (49 percent). SAP budgets are set to decrease at 18 percent of companies compared to 19 percent in 2020, and remain unchanged at 35 percent of companies (32 percent in 2020). Investments in SAP are set to increase at 47 percent of manufacturing companies (46 percent in 2020), and at 40 percent of service providers and retail companies (47 percent in 2020).
Meanwhile, investments in ERP solutions continue to rise. S/4 Hana is still making headway: 44 percent of respondents are planning large or medium-sized investments in S/4 on premises, while only 25 percent say the same for Business Suite. Compared to 2020, this represents a 10 percent decrease in large or medium-sized investments in Business Suite. For S/4 on premises, this figure remains the same as last year (44 percent). However, only 12 percent are planning large or medium-sized investments in S/4 cloud (compared to 8 percent in 2020). “This is likely the result of the reservations companies have about putting confidential enterprise data in the cloud. This is partly rooted in European mentality but is also influenced by the strict requirements of the European General Data Protection Regulation (GDPR),” explains Jens Hungershausen.
When it comes to the question of transitioning to S/4, 13 percent of respondents hadn’t yet made up their mind in 2020, and that remains the case this year. However, 14 percent are already using S/4 (up from 10 percent in 2020) and a further 10 percent (9 percent in 2020) are planning to make the switch this year. 39 percent are planning to switch to S/4 in the next three years (40 percent in 2020). “Companies are moving forward with the transition, but it requires a lot of planning. Consequently, some reluctance is understandable,” says Jens Hungershausen.
For the first time, this year’s Investment Report survey also asked about companies’ licensing strategies for switching to S/4. 22 percent of participants said they would opt to keep their current licensing model, i.e. follow a product conversion approach. A further 12 percent want to keep their current licensing model for now and then switch to the S/4 licensing model via contract conversion at a later time. 13 percent are making the switch directly. 39 percent of companies haven’t yet made a decision about the transition. “The high proportion of companies that haven’t yet made a decision could be due to uncertainty as to the right path forward. Switching to S/4 Hana involves changes in both the product and licensing metrics,” says Jens Hungershausen. A license conversion also brings with it multiple challenges for customers, so more flexibility in licensing (e.g. subscription models for cloud solutions) is needed.
Cloud solutions for more flexibility
Despite SAP’s ‘Cloud First’ strategy, investments in the relevant SAP solutions remain low. According to the report, the top three SAP cloud solutions in which companies plan to make large or medium-sized investments in 2021 are: SAP Analytics Cloud at 14 percent (13 percent in 2020), SuccessFactors at 15 percent (14 percent in 2020), and SAP Customer Experience at 8 percent (11 percent in 2020).
Following close behind are Ariba and SAP Integrated Business Planning with 8 percent each, and Concur with 6 percent. Trailing them slightly are Industry Cloud (2 percent), Qualtrics (2 percent), and Fieldglass (1 percent). “SAP Analytics Cloud’s top position is not surprising. Analytics capabilities that allow companies to quickly undertake meaningful analyses in all relevant areas are a valuable asset in times when flexibility is needed in processes and decision-making,” comments Jens Hungershausen.
The fact that 15 percent of respondents are planning large or medium-sized investments in SuccessFactors suggests that some companies are still waiting to make the switch. “Starting in 2022, businesses will be able to operate the HR solution SAP Human Capital Management (SAP HCM) integrated in S/4, and this is definitely playing a huge role for some firms that don’t want to switch directly to a cloud solution,” adds the DSAG Chairman.
There is also room for growth in the ranking of application platforms that companies use for platform-as-a-service (PaaS). When it comes to large or medium-sized investments, Microsoft Azure, with 27 percent (24 percent in 2020), is ranked ahead of the SAP Business Technology platform with 17 percent (14 percent in 2020), while other PaaS providers trail behind with 7 percent (7 percent in 2020). Amazon Web Services is in fourth place with 6 percent (8 percent in 2020).
In terms of the progress made by companies regarding digitalization – regardless of and without direct relation to SAP systems – 41 percent of companies see themselves as far along or very far along. This is 9 percent more than last year. When asked about investments in individual areas, 63 percent of survey participants said they plan large or medium-sized investments in increasing the efficiency of existing processes. “This clearly shows that, for two-thirds of companies, optimizing what they have right now takes priority over trying to innovate or anticipate new scenarios. It therefore comes as no surprise that big data and data intelligence as well as cloud computing remain companies’ top two priorities when it comes to innovation. Robotic process automation (RPA) has replaced artificial intelligence in third place,” concludes Jens Hungershausen.