SAP Customer Evolution

SAP Business Suite 7 decelerates ERP modernization

IT modernization has been a top priority for CIOs for years. However, according to a recent study by market observer Lünendonk, progress is often slow due to the high level of complexity. Enter the old IT adage: never change a running system!

Several factors are decelerating the digital S/4 conversion in the SAP community. First and foremost is the high level of maturity of a well-customized SAP Business Suite. In recent years, considerable effort has been devoted to maintaining the technical stability and commercial innovation of this SAP ERP generation. In most cases, this project has been very successful, so persistence is high.

IT management and ERP departments are increasingly recognizing the need for modernization measures. The cloud is becoming increasingly important. According to Lünendonk, nine out of ten companies intend to operate more than 40 percent of their applications in the cloud by 2028; currently, the figure is four out of ten. IT landscapes are becoming increasingly hybrid due to the combination of different operator models. To implement these changes, 83 percent of companies plan to increase their IT modernization budget in 2026, with nearly one-quarter planning to increase it by more than 5 percent. These findings are presented in the Lünendonk study, "IT Modernization Between Legacy, Cloud, and AI," available at luenendonk.com free of charge.

SAP Cloud ERP

SAP's "new" Business Suite is a cloud system. This step aligns with the current market trend, as well as the general customer evolution. These customers will ultimately move in the direction of the cloud, as stated in the Lünendonk study.

However, SAP Cloud ERP and S/4 are not cloud-native products because they have the successful ECC 6.0 as their fundamental code base. With "lift and shift," any software can be transitioned to the cloud. However, RISE, GROW, and Cloud ERP carry the stigma of being on-prem systems, and SAP customers are skeptical about whether they will receive a lift-and-shift system or a cloud system with SAP Customer Evolution.

SAP was ahead of its time with S/4 Hana, introducing the next generation of ERP systems when neither customers, technology, nor the market were ready for it. At the initial presentation of S/4 in New York City, there was no mention of cloud computing. At that time, no one focused on the new operating and architecture model. It was only through the dedicated work of SAP CEO Christian Klein that SAP slowly began to pivot in the direction of cloud computing.

An SAP revolution in an evolutionary ERP market

SAP opened a new chapter in ERP with S/4 and Hana. This step was absolutely necessary, but the conditions were poor. Most SAP customers had stable, functional ERP systems, as well as a host of other problems: a global economic crisis, a currency crisis, and a logistics and trade crisis.

However, in the IT study, Lünendonk writes: "Sixty-two percent of the companies surveyed state that parts of their business-critical applications are so outdated that they no longer meet today's requirements and need to be replaced. Additionally, the operation, maintenance, and further development of legacy systems are no longer guaranteed in every second company surveyed in the medium to long term. Seventy-six percent of companies therefore expect that at least 20% of all business-critical core applications will require modernization within the next five years."

SAP was ahead of its time with S/4, which has had a lasting impact on the ERP market. Currently, however, customer evolution with Rise, Grow, and Cloud ERP is a possible step toward modern, composable ERP. "IT modernization is not a short-term project, but rather a long-term transformational undertaking. Companies need clear objectives, coordinated strategies, and an interplay between technology, organization, and culture. This is the only way to create IT architectures that will meet tomorrow's requirements," comments Tobias Ganowski, consultant at Lünendonk and author of the study.

SAP Customer Evolution 2.0

Based on recent experience, SAP should refine and focus the tasks and objectives of "Customer Evolution," adapting them to current needs such as hybrid landscapes, AI agents, and composable ERP. Lünendonk has high hopes for the use of generative AI: seventy-four percent expect AI to detect security gaps in legacy systems and future and at least partially rectify them independently. Sixty-nine percent also hope for a better understanding of programming and code structures. Despite these high expectations, practical experience remains limited: only 8 percent of companies have advanced approaches to automated code analysis using AI, and 22 percent are using AI for documentation.

Orchestrating digital conversion and transformation will be the key issue for the SAP community. SAP must take an agile approach to this challenge with "Customer Evolution." A final end to the S/4 release change in 2033, restrictive license models and and the lack of discussion about a composable ERP are counterproductive to customer evolution. SAP should return to the SolMan (SAP Solution Manager) and CCC (Customer Competence Center) service concepts.

Lünendonk also knows that companies are pursuing different approaches when implementing modernization: 79 percent rely on flexible, modular composable architectures. Seventy-four percent are considering replatforming to migrate existing applications to the cloud. Refactoring and switching to on-prem or private cloud-based standard solutions are also popular measures. Only 47 percent of respondents see a complete rebuild as a viable option. This should give RISE and GROW proponents at SAP pause for thought.