When will SAP S/4HANA break big, and how long will we be able to ride the wave?

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In my daily work I get asked lots of questions about how big SAP S/4HANA will be, about how many people we will need, about the skills they will need, about how much we will need to pay them, etc. I have to answer these questions convincingly and with a degree of consistency. And I may be wrong, but I’ve learned to have a point of view.

My current thinking:

SAP has over 13,000 clients in Europe, ranging from very small to very large global firms with very complex SAP footprints. I assume that at least two-thirds of them will move to SAP S/4HANA before 2025, and I think they will do this because it is the best thing they can do at present, not because they are worried about the end of support.

The current situation:

 I think clients who are migrating now fit into the following groups:

  • The largest SAP users with the most complex environments are moving because it would be unwise not to be planning now. A business case can take a year, the planning and procurement can take another year, and the migration from one platform to another can take three to four  more years.
  • Some are moving now because they have a compelling need or they want to be ahead.
  • There are also new business clients who are going straight to SAP S/4HANA.

There is also a certain amount of steady-state ECC work going on, (less than 50% for us in 2018) and the same customers using the SCP platform to go digital on top of ECC, and waiting for the big migration. The total percentage migrating so far is not high but even this has increased the volume of SAP S/4HANA work by 80% in our case and has driven 20% growth in overall SAP orders in the past 12 months.

What will happen?

The large companies that start the process of moving to SAP S/4HANA  will do so with relatively small, highly skilled teams (i.e. business case, road maps, and architecture, etc.) so the huge wave of volume design and deployment work is still to come. The volume of work from the mega S4 programs may multiply fourfold by the time they start to build and deploy and the growth offshore will be far larger – up to tenfold.

The wave will continue

The large client wave will continue to grow steadily for the next three or so years, at which point it will remain at a consistently high level until at least 2025. We find that the smaller, less complex clients are easier to upgrade, take less than 12 months, and are delivered with good offshore leverage. There are around 12,000 clients in Europe, amongst which approximately two thirds could probably choose when to move to SAP S/4HANA at any point up to January 1, 2024. If they are sensible enough to avoid a mad rush at the end, they will space themselves out between 2021 and 2025 – so say 2,000 per year starting and finishing, probably along with re-platforming to the cloud and doing some transformation. There will also be a steady run rate of the smaller clients who need to change in the years up to 2021 due to business changes and compelling need and the same level of new business greenfield sites as we have now. Some ECC work will continue, but this is likely to decline (as this is a much smaller market) at the speed that SAP S/4HANA ramps up.

And what will happen after the move to SAP S/4HANA?

The work does not stop once a client has made that move to SAP S/4HANA. Most are moving to reap the benefits of the SAP Cloud Platform and not to get the core done – and most of the benefits will be delivered once the core is live, rolling out Industry 4.0, new business scenarios, IoT, customer engagement, UI, and RPA. AI will not stop with the first drop, so I believe that the projects will not ramp down immediately as in a traditional technical upgrade. In fact, they will have a long tail and will slowly move to a steady pace of innovation after a couple of years in large clients.

What I am guessing at?

My guess is that the SAP project services market will grow at a rate of 30–40% for the next three years, at which point it will settle down to a more stable model with lots of the smaller clients migrating and the larger clients completing their business cases. So roughly, it will triple between now and the end of 2021 and then stabilize, declining gracefully after 2025 but not falling off a cliff.

Why Wait ? Please reach out to me today if you want to start a discussion on how to enhance your Digital Core by leveraging SAP S/4HANA.

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