Good news! As expected, SAP has extended its support for ECC for at least another 6 years. As with all things SAP - buyers are well advised to beware. SAP plans to offer...
- SAP ERP - Private Edition - Transition Option
The new offering, which won’t be available for purchase until 2028, entails moving the hosting of legacy ECC deployments to SAP hosting. Setting aside the complexities associated with changing hosting providers and SAP’s prior failures as a hosting provider for its software for customers, SAP’s option will undoubtedly be a premium cost for an inferior product based upon its customers’ prior experience.
What the above referenced change shows is that SAP understands that customers leveraging ECC will be required to spend a fortune to “upgrade” to S4, and by forcing customers to do so because they have no other option, they may prompt those customers to evaluate non-SAP alternatives. So, SAP is providing a path to keep its customers writing checks to SAP. This path will almost certainly cost more and given that SAP uses the existing fees paid to it as the basis for pricing its new subscriptions, taking this route will cost companies who follow SAP’s prescribed path more, in perpetuity.
Given the size of the expense to upgrade and SAP’s anti-customer pricing practices, customers would be well served to evaluate the benefits of upgrading versus continuing to use their existing software. While SAP is discontinuing support of ECC, several alternative providers exist, and they promise to reduce the cost of support on those legacy software deployments by 50% (our experience is that the third-party costs can be as much as 75% less than what is being paid to SAP). This alternative approach enables near-term savings which can be banked to later fund an eventual upgrade.
The added benefit of breaking free of paying SAP is that it will enable companies to reenter the ERP market on their timetable, not SAP’s. Choosing a non-SAP path to extending the useful life of existing assets will also clear the deck from prior purchasing and enable lower costs from either SAP or a competing ERP provider through a market reset, which can often times be lower than the cost paid to third parties (which were already a fraction, 50-75% less, than what you are paying to SAP today).
Thank you, SAP, for acknowledging that their support time horizon for ECC is impossible for most companies to comply with.
But don’t mistake this as altruism. SAP’s path provides it with an ability to extend its lock in of customers while adding a new revenue stream which will result in any customer who takes this path paying SAP an even higher premium….in perpetuity.
Caveat Emptor! Call NET(net) to assess your options.
SAP by the numbers:
For the full year 2024:
- Cloud Revenue: Reached €17.14 billion, up 25% (26% at constant currencies) from the previous year, aligning with the company’s reaffirmed outlook range of €17.0–17.3 billion.
- Cloud and Software Revenue: Totaled €29.83 billion, reflecting a 10% increase (10% at constant currencies), exceeding the company’s expectations.
- Non-IFRS Operating Profit: Grew to €8.15 billion, up 26% (30% at constant currencies), surpassing the initial outlook.
- Free Cash Flow: Amounted to €4.22 billion, a significant rise from 2023’s €4.4 billion, though impacted by restructuring costs, and exceeding the forecasted €4.9 billion due to an updated definition.
- Current Cloud Backlog: Stood at €18.1 billion, up 29% (29% at constant currencies), indicating strong future revenue potential.
- Total Cloud Backlog: Hit €63.3 billion, up 40% (40% at constant currencies), showcasing robust growth in committed cloud revenue.
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