Known how

With this survey, Rimini Street aims to better understand the implications of S/4 Hana decisions and how they impact licensees' application strategies for 2015 and beyond.

The Rimini Street survey was conducted between March and April 2015. The results of the study provide an up-to-date assessment of the new S/4 applications by existing SAP customers.

More than 230 S/7 users from various industries and different company sizes took part in the global survey.

Confidence in ECC 6.0

Most SAP license holders use proven R/3 and ECC 6.0 applications for their business operations. The survey results make it clear that SAP license holders would rather keep their existing stable and mature SAP application platform than switch to S/4.

"No convincing presentation of the economic benefits" (68 percent) was the reason most frequently given by respondents for not yet committing to the use of S/4 Hana.

The main reason for not yet replacing the previous mature and proven platform was "the current version meets the company's requirements" indicated (43 percent).

Other important reasons were "an upgrade is out of the question due to the high costs" (37 percent) and "we want to switch to another application later" (23 percent).

According to previous studies, only five percent of survey participants consider moving their ERP system to the cloud within the next five years to be a realistic option.

In business, the pace remains relentless: the constant pressure to optimize business results is forcing license holders to add new functionality to their stable and mature ERP platforms - whether from SAP or not.

Mobile applications, HCM, order and expense management as well as business intelligence and analysis applications are among the innovation and growth factors.

License holders are trying to access these functions by adding corresponding high-value solutions to their existing ERP platforms as part of a hybrid IT approach.

In this way, special functionalities are available to them that are not necessarily tied to the provider's product roadmap and do not fall under the inflexible "all or nothing" approach of the application package model (EhP).

The survey results of the German-speaking SAP user group (DSAG e. V.) from last year predict the following approach: DSAG members are concerned with the current hot topics such as mobility, in-memory and cloud, but do not only use SAP products for implementation.

Customers analyze their initial situation very carefully and then look for the products that fit their corporate landscape.

SAP license holders are looking at these factors and weighing them carefully against what the business suite platforms they use to run their business today can offer them.

These SAP licensees understandably want to get the most out of every euro they spend on their IT. Ray Wang from Constellation Research comments:

"I would like to know which industries SAP will focus on in the future and how much I will have to pay. When SAP customers are about to upgrade, it takes a lot for them to find out what they have to pay because they don't receive an invoice with a breakdown of the individual items. This holds them back from upgrading."

Most SAP customers are currently looking at the latest product developments from afar. The lack of a convincing presentation of the economic benefits, the young product status and the high costs for migration and new implementations mean that existing customers are staying with their existing R/3 and ERP releases.

Many ERP licensees are reluctant to commit to a new product that is still in its early stages as part of their business requirements or SAP roadmap - especially as the proven releases and platforms they are still working with are working well and innovative add-on solutions are available from numerous vendors.

Licensees prefer to continue using their existing stable and mature SAP application platforms instead of replacing their business-critical systems without a convincing demonstration of the economic benefits and ROI.

Existing customers are striving to maintain their competitiveness by implementing hybrid IT strategies in which they gradually realize new functionalities using third-party solutions.

Three quarters of respondents are not using the latest Enhancement Package release: 75 percent of all respondents using the ECC 6.0 platform said they were still using Enhancement Package 6 or earlier and not EhP 7. The three most frequently cited reasons were:

"The current version meets the company's requirements" (72 percent), "An upgrade is out of the question due to the high costs" (35 percent) and "Not enough new and value-adding functionalities" (30 percent).

SAP presented its EhP strategy for ERP 2005 as a means of "Conflict between stability and innovation" by upgrading projects for entire versions with the help of "selective and non-disruptive" packages that could be implemented as part of routine maintenance.

License holders have the option of installing and implementing the Enhancement Package and selectively activating new business functions according to their needs.

The historical activation rates for enhancement packages are low. According to the figures from Panaya's EhP 6 fact sheet, the activation rate for new business functions ranges from single-digit percentages to the low tens of percentages.

In 2014, Panaya carried out a follow-up study, according to which 76 percent of license holders who decided to install EhP 7 did not activate any new business functions.

This confirms that the majority of license holders install the Enhancement Packages for maintenance purposes and not to be able to use new functionalities.

SAP analyst Vinnie Mirchandani provides a macro-level explanation as to why SAP products have become less innovative: "The bigger problem is that the Business Suite itself has been lagging for years in terms of expanding functionality. SAP has fallen behind when it comes to innovation in factory and supply chain applications."

All cloud - or what?

SAP has set itself the goal of becoming a cloud company and has slowed down the pace of innovation for its ECC 6.0 suite applications. This has not gone unnoticed by customers!

Members of DSAG have called on SAP not to neglect current license holders while driving innovation. Therefore, Business Suite 7 applications should also be supported and not just cloud products:

"DSAG expects SAP to put the customer at the forefront of its product development efforts"

said Dr. Marco Lenck, DSAG Chairman of the Board.

"We call on SAP to consistently align its products with the needs of its customers and to demonstrate concrete, tangible application scenarios. SAP [...] must not push innovation for innovation's sake"

said Andreas Giraud, former DSAG board member. The trend of low usage of enhancement packages is likely to intensify, as SAP license holders can assume that SAP will reserve most of the new, powerful functions and features for S/4.

SAP licensees struggle with the high cost of SAP support and the low value received in return: software support and maintenance play an important role in licensees' ability to innovate and grow their business.

According to analyst estimates, there is an 87:13 imbalance in IT budgets in favor of software maintenance over funding for business process improvement initiatives.

Although the survey participants stated that they wanted access to patches, upgrades, documentation, knowledge and expertise from SAP, they were also aware of the poor price-performance ratio.

The three biggest problems that license holders say they have with SAP support and maintenance are: Firstly, too expensive for the possible number of support requests (46 percent); secondly, too expensive for the new functionalities provided (37 percent); and thirdly, no support for special software customizations (35 percent).

A comment from a license holder (IT manager from the energy sector):

"Using SAP support is hard work for the customer because SAP seems to hide their experts behind a series of processes and procedures before you really get real support."

The most common responses to the question of why license holders prefer SAP support and maintenance over other alternatives were:

"I don't think I'll have the opportunity to upgrade" (33 percent); "I think if I return to SAP later, I will have to pay retroactive fees" (19 percent); "In my opinion, no one provides better support for my applications than SAP" (18 percent).

Interestingly, according to research from the Americas SAP User Group (ASUG), 60 percent of SAP licensees using current, proven SAP applications believe that SAP will continue to provide support for their current investments for at least five years or more, while 30 percent expect SAP to put increased pressure on them to move to Hana in the next two to three years.

And just under 10 percent felt they would be left in the lurch if they did not switch. The trend in the relationship between software maintenance and the improvement of business processes is likely to intensify.

SAP has continuously increased the prices for its maintenance contracts and, according to current projections, license holders will have to pay an average maintenance fee of 22% by the end of 2016.