Former Gartner analyst and founder of Deal Architect Vinnie Mirchandani is an author, blogger and thought leader in software and sourcing. His years of experience in the tech industry give him a clear and unique view on the hot topics of the digital age. We’ve spoken to him to give us his opinion on the strategic options regarding S/4 for SAP licensees.
E-3: How much longer will SAP customers use Business Suite before considering alternatives?
Vinnie Mirchandani (VM): One positive feedback we get from SAP customers is how robust the software is. It’s lasted for them 20-25 years like a plane that keeps on going. Their complaint is it should be going down in cost – robust is fine, but over time it should depreciate and cost less.
Given that S/4 Hana isn’t that mature today, it could take anywhere between 15 and 20 years to completely move over. Do you want to be an early adopter? If not, you should be looking out somewhere in the 2020s as a definite moving point.
E-3: What business cases or proof points have you heard from SAP to justify moving to S/4 today?
VM: You look at some of the things SAP is promising with S/4: In-memory, sure you’re going to get speedier results. It’s uncertain whether you get efficiencies from an S/4 cloud model. Most early S/4 implementations happened on existing infrastructure or in a private cloud – there’s very little public cloud. New functionality in this context means uncertainty.
So the question is: What exactly, for hundreds of millions of dollars, are customers going to get?
So the question is: What exactly, for hundreds of millions of dollars, are customers going to get? When you compare it to the risks of being an early adopter, the payback is even more nebulous.
There’s a cost to S/4 licenses, which SAP hasn’t been very clear about – trade in credits for what you’ve already paid, not very likely if you ask me. That’s just the tip of the iceberg. You’ve got massive migration costs and given that it’s so premature to know what the end game looks like, all this is speculation.
E-3: You often refer to “coping strategies” that SAP customers should consider if they aren’t ready to move to S/4. Can you elaborate?
VM: We’re seeing a big macro trend in IT where people are building more and integrating more and moving back to “best of breed.” You’re preserving the SAP core as the transaction processing backbone and innovating around the edges.
More people are saying, “I’m looking at modern solutions, more nimble start-up solutions, or I’m going to custom build.” A common strategy is ring fencing with new cloud solutions for processes like CRM, HR and logistics, around the SAP core.
Customers are getting lots of savings from their third-party maintenance, their private clouds. They’re rethinking application management and so on. It’s the best of both worlds – they’re chiseling down the cost of SAP and freeing up funds to put into newer technologies and modern solutions that make a difference in competitive areas.
E-3: So in your opinion, should SAP customers move to S/4 today?
VM: I tell them to wait because the product is immature – you’re going to be an early adopter and there’s a lot of risk in that. A better way to look at S/4 is as a five- to 10-year strategy.
You may find that down the road, you don’t want to buy the complete suite from SAP. The world is going to be very different in the next few years. Take advantage of third-party maintenance for Business Suite to buy yourself flexibility without having to pay 100% of the cost while you size up what makes sense for the future.