By Robert Holland, VP Research and Publishing, SAPinsider
In SAPinsider’s recently published research report on “SAP S/4HANA in the Cloud,” we explored the ERP cloud strategy of members of the SAPinsider community to gain insights into what they were doing. We were particularly interested in determining what was driving their strategy towards the cloud, how far they had progressed with that strategy, and whether that strategy was connected to the performance of their ERP systems.
Looking at where the respondents to the survey were located, we found that 42% were from corporations headquartered in Europe, while another 34% were based in North America. This article examines the differences in what is driving ERP cloud strategies for survey respondents in these two regions. We also compare the actions they are taking to address those drivers, and how that is reflected in their strategies.
Europeans Are Adopting the Cloud More Slowly
To understand the existing ERP landscape we asked survey respondents whether their ERP systems were deployed on-premise or in a hybrid, cloud, or hyperscale environment. We found that European customers were almost twice as likely to be running their existing ERP systems in an on-premise environment when compared to those located in North America (65% vs. 36%, respectively). European customers were also much less likely to be using a hybrid environment as compared to North Americans (8% versus 31%). Although not as pronounced, we found a significant difference in the number of Europeans operating in a hybrid model with a hyperscale environment compared to North Americans (10% vs. 18%), as shown in Figure 1.
Figure 1: Current ERP deployment in Europe vs. North America
Part of this difference is explained by the fact that some Europeans had not moved to the cloud for historical reasons or were not yet able to budget for additional infrastructure investments. In another case, an architect from a Financial Services organization said that: “The current architecture was established in 2006 with the implementation of industry specific modules (re-insurance) and not changed in the meantime because there was no business reason for doing so. This correlates with conversations we have had with other SAP experts who reflected that even though SAP S/4HANA has been available for several years, some industry-specific modules have only recently been released or may not be available yet, delaying these organizations’ adoption.
Europeans Focus on Centralizing Their ERP Systems
Given that a much greater proportion of European customers were running their existing ERP systems in an on-premise environment, a look at the drivers impacting that decision was revealing. European customers were a third more likely to indicate that they faced a need to centralize and harmonize their ERP systems when compared with organizations located in North America (see Figure 2). This likely reflects a need to centralize distributed ERP instances and data marts as they move towards a cloud-based infrastructure.
Figure 2: Drivers impacting ERP cloud strategy in Europe vs. North America
On the other hand, North American customers are under a different pressure – that of needing to deploy their SAP instances more quickly. This aligns with data we saw in our report which showed that those who reported excellent or exceptional performance from their existing ERP systems had a much greater need for agility in deploying their SAP instances. This connects directly with the fact that they are running fewer existing systems on-premise and are more invested in hybrid environments.
Having some systems running on-premise while being able to leverage the cloud for a quickly deployed instance to support a specific need or short-term requirement—such as deploying an SAP S/4HANA module in a hybrid environment while keeping associated data on-premise—can offer great advantages.
In comparing strategies that organizations in Europe and North America are utilizing, the ability to quickly and securely deploy more SAP instances very much supports the demand for a faster deployment of SAP instances. What was more surprising was that while organizations in North America were more focused on being agile with the deployment of their SAP instances in order to meet specific business needs, they were also focused on ensuring that their longer-term plans to upgrade their ERP systems to SAP S/4HANA had as little risk as possible (as shown in Figure 3).
Figure 3: Actions taken for ERP cloud strategy in Europe vs. North America
Europeans differed from those in North America because they were more focused on reducing their private data center and IT hardware spend. Combined with the driver to centralize their ERP systems, this would allow European customers to eliminate some on-premise data centers used by the systems that were centralized, providing an overall reduction in IT hardware spend.
What Does This Mean for SAPinsiders?
Based on our research, the following considerations can help SAP customers in Europe and North America understand what they do well and what they can use to strengthen their ERP cloud strategy:
- Evaluate hybrid cloud systems for centralization and cost reduction. With their focus on reducing private data center and IT hardware spend along with the need to centralize and harmonize ERP systems, Europeans are currently leveraging their on-premise systems to fulfill their needs. However, using a hybrid infrastructure model with or without a public cloud provider can offer additional flexibility in deploying systems and will provide reductions in private data center spend.
- Leverage cloud environments to provide agility. While there are advantages to deploying an entire ERP instance in the cloud, such as leveraging the capabilities of SAP’s project “Embrace,” this isn’t required to derive the benefits that the cloud can
provide. Any implementation with a cloud-based component can allow customers to gain the performance benefits and flexibility that the cloud can offer without the need to migrate an entire system. These opportunities should be investigated to see whether they can help improve ERP performance.
- Use SAP tools to mitigate the risk of an SAP S/4HANA upgrade. SAP offers multiple tools that allow a customer evaluating a migration or upgrade to SAP S/4HANA to ensure that their process is as smooth as possible. These include the SAP S/4HANA Migration Cockpit, SAP Transformation Navigator, and SAP Readiness Check for SAP S/4HANA. Utilizing these tools will provide customers with detailed information on their existing ERP system and environment, and then give recommendations for their future SAP landscape, allowing for less variables in the upgrade process.
Make sure to download and read our full report, “SAP S/4HANA in the Cloud.”.