Despite concerns about costs, integration and data protection, the acceptance of SAP S/4 Hana and SuccessFactors is growing. This is highlighted by a new market study published by the Information Services Group, a globally active, AI-centered technology research and consulting company. The study "2025 ISG Provider Lens SAP Ecosystem Report for Germany" concludes that more and more companies prefer scalable and subscription-based cloud software for reasons of cost efficiency, agility and rapid implementation. SAP's cloud-first strategy has helped to increase acceptance of its cloud solutions, particularly SAP S/4 Hana Cloud and SuccessFactors. However, despite the strong market momentum towards the cloud, German companies are still cautious when it comes to maintaining data sovereignty, complex integration with legacy systems and GDPR compliance.
Data protection as a brake
"Strict data protection laws make many German companies hesitant to store data in the cloud," says Dr Matthias Paletta, Director at ISG Research and responsible for the Technology Modernization division. "Gradual migrations that start with less critical systems are becoming increasingly popular. At the same time, some companies still prefer the on-premises solutions they are familiar with." The approaching end of support for on-premises SAP ERP Central Component (ECC) environments in 2027 has increased the urgency of cloud migration. However, a number of companies are still hesitating. The study sees important reasons for this in both cultural resistance and resource constraints, which are closely linked to the current low level of economic growth. German SMEs in particular are holding back on the changeover due to limited budgets and IT skills. SAP has introduced package offers such as Rise with SAP to the market in order to mitigate the cost issue by simplifying migration and consolidating licenses, hosting and support, ISG continues. However, many companies are still concerned about the high initial migration costs and the prospect of an expensive, time-consuming redesign of their often highly customized ECC systems.
Clean core acceptance
The implementation of SAP's Clean Core strategy has become an integral part of the German SAP services market. The "Clean Core" is about making only minimal adjustments and primarily using SAP standard functions in order to simplify ERP maintenance, upgrades and scalability. By maintaining a standardized ERP core and using so-called side-by-side extensions via SAP BTP, German companies have achieved improved system flexibility, stability and cloud suitability. Clean core practices enable easy upgrades, reduce technical debt and minimize system downtime during updates, significantly reducing long-term maintenance costs and operational risks. In particular, this strategy simplifies the adoption of advanced technologies such as AI, ML and predictive analytics and promotes rapid innovation without the legacy burden of extensive custom code. However, the transition from highly customized legacy ERP systems to a clean-core architecture comes with significant challenges. German companies need to significantly transform their business processes, which requires significant upfront investment in training, tools and cultural change.
SAP Joule as an AI driver
Artificial intelligence is playing an increasingly important role in SAP services in Germany. GenAI is having a significant impact on the German SAP service landscape, particularly through SAP's Joule Assistant, which is deeply integrated into applications such as S/4 Cloud. According to ISG, providers are using AI-based tools to automate transformation processes and optimize costs and schedules. The use of generative AI in the area of SAP services is also becoming increasingly important. This development is being driven in particular by SAP's Joule assistant. Joule was developed to automate complex workflows, facilitate interactions in natural language and improve decision-making in companies. "With customizable GenKI, German companies can tailor AI to solve specific industry problems," says Jan Erik Aase, Partner and Global Leader at ISG Provider Lens Research. "Interest in AI remains high despite concerns about compliance and scalability." (rk)
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