Cloud migration is a dominant trend in the software world and is widely expected to become the standard. However, does this mean every organization must migrate its SAP ERP to the cloud? Not necessarily. Let’s explore alternative options available to SAP customers who want to retain some or all of their ERP software on-premise.
SAP ECC Support Ends in 2027 – What’s Next?
As the 2027 deadline for the end of SAP ECC support approaches, many businesses are evaluating their next steps. The designated successor to ECC is SAP S/4HANA, which can be deployed on-premise or in the cloud. However, SAP has heavily promoted cloud-based migration options through RISE with SAP and GROW with SAP (for mid-sized companies).
Despite SAP’s marketing push, migration has been slow. By the end of 2023, Gartner reported that fewer than one-third of SAP ECC customers had moved to S/4HANA, and only about 50% are expected to do so by 2027. While many enterprises opt for RISE with SAP Private Cloud, a significant number of businesses are still undecided.
Why Do Some Businesses Avoid Cloud Migration?
Some SAP customers prefer to remain on-premise due to several factors:
1. Data Security & Compliance
Certain industries have stringent data security and regulatory requirements. Keeping data within on-premise infrastructure ensures greater control over sensitive information.
2. Customization & Flexibility
On-premise deployments allow for deeper customization of the SAP environment at a potentially lower cost than cloud-based configurations, where flexible options often come with significantly higher costs.
3. Control Over Deployment & Maintenance
Businesses that prefer complete control over their IT environment may find on-premise solutions more suitable, as cloud migrations often involve vendor-imposed updates and changes.
4. Cost Considerations
For mid-sized companies, maintaining an on-premise SAP system may still be more cost-effective than a cloud subscription model, where recurring costs can escalate over time.
What Are the Alternatives to Cloud Migration?
For businesses still running SAP Business Suite 7 (ECC), there are several on-premise options to consider before 2027:
1. Migrate to S/4HANA On-Premise
Companies that want to remain on-premise while modernizing their ERP can migrate to S/4HANA before 2027 to avoid increased ECC maintenance costs.
2. Remain on ECC with Extended Support (Until 2030)
SAP offers extended support for ECC at an additional 2% cost on top of current maintenance fees until 2030. After that, businesses may transition to third-party support providers.
3. Move to Third-Party Support Immediately
Some organizations may choose to avoid SAP’s extended support fees by transitioning to a third-party support provider before 2027.
Key Recommendations for SAP ERP Decision-Makers
Choosing the best migration path requires careful consideration. Here are essential steps businesses should take:
1. Evaluate Technical Implications
If migrating to S/4HANA on-premise, determine whether a greenfield (new implementation), brownfield (system conversion), or hybrid migration approach is best suited for your organization.
2. Assess Cost Impact
• Transitioning to S/4HANA requires a new licensing model, which may lead to cost increases. • If staying on ECC, compare the cost of SAP extended support vs. third-party support providers to identify the most cost-effective solution.
3. Review Contractual Terms
• Migrating to S/4HANA involves renegotiating SAP contracts. Understand how to optimize your Total Cost of Ownership (TCO) and leverage any potential credits. • Explore ways to reduce your maintenance base and lower support costs over time.
Making the Right Decision for Your SAP ERP
Cloud migration is not the only option for SAP customers, and businesses should weigh their choices carefully. Whether transitioning to S/4HANA on-premise, extending ECC support, or moving to third-party support, each decision comes with financial and operational implications.
Navigating SAP’s complex migration landscape can be challenging. If you’re unsure about the best path forward for your business, our team of SAP licensing and migration experts can help. Contact us here to schedule a consultation and gain clarity on the most cost-effective and strategic solution for your ERP future!
