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It's no secret that SAP is struggling to convince its vast customer base to move from the tried-and-true -- but increasingly outdated -- ECC ERP system to the new frontier of SAP S/4HANA.
Although there have been some impressive customer implementations, most SAP customers still appear unwilling to undergo a costly and complicated S/4HANA implementation project, even with the 2025 deadline hanging over their heads. That's the date SAP set for ending support for ECC.
SAP competitors appear to sense vulnerability and are eager to make the case that their applications are a good fit for a company that has cold feet about a move to S/4HANA, SAP's "next-generation" ERP suite. SAP S/4HANA entirely rewrites ECC's core ERP functionality on the SAP HANA in-memory database, allowing companies to perform transactions and analyze business data in real time.
But any move from one ERP to another will require heavy lifting, according to observers. Just because a potential S/4HANA move causes anxiety doesn't mean SAP competitors will automatically fit the bill.
SAP competitors sense vulnerability
Some SAP competitors are setting their sights on large enterprises they hadn't targeted in the past, said Chris Devault, director of industry relations for Panorama Consulting Group, a Denver-based firm that advises clients on ERP implementations.
ERP vendors IFS and Infor have brought on executives who formerly worked at SAP, including IFS CEO Darren Roos, who assumed his current role early in 2018 after working four years at SAP. Devault said the hires may have been a strategic decision to help them compete for S/4HANA business.
"Companies like Infor and IFS see a clear path of targeting more enterprise-sized clients, and that does mean targeting S/4HANA clients and prospects," he said. "Organizations are trying to reduce risk and duration [of implementations], so they may be leaning toward Infor or IFS, because the typical SAP customer is now looking downstream to curb risk and cost."
Other ERP vendors including QAD Inc., Deacom Inc., and Plex Systems can make a play for SAP customers because they offer ERP systems that approach the next-generation nature of S/4HANA and are targeted for specific industry verticals like manufacturing, Devault said.
"QAD plays very well in chemicals and pharmaceuticals with deep functionality for chemical process-type manufacturing," he said. "Plex plays very well in the automotive market and has these out-of-box EDI [electronic data interchange] configurations that are standard and that allow them to implement applications for these niche industries very quickly."
QAD is one of the SAP competitors that believes it may be able to persuade the S/4HANA averse to look its way. The Santa Barbara-based firm offers QAD Adaptive ERP, a cloud ERP suite of products specifically for manufacturing industry verticals, including automotive, life sciences, and food and beverages.
QAD Adaptive ERP is easier to implement than S/4HANA, according to Evan Quinn, QAD principal director of product marketing. SAP customers may be willing to look at ERP alternatives once they have determined that an S/4HANA implementation is more of a replacement than a migration, he said.
"It's a whole new ERP, a different data model, different database, different front end. It's a different ERP," Quinn said. "Our position is there are a lot of companies that are looking at this and saying, 'If SAP is going to force me to change ERPs anyway, and I need to make that decision over the next 12 to 24 months, I might as well take a look at some of the other ERPs.' So we see this is as a pretty big opportunity and our implementations are quicker, they tend to be more effective, nobody is suing us, we're not suing anybody and the thing is designed to not fall into the trap of the death cycle of ERP."
Not just SAP's problem
The migration issue is not only SAP's problem, however, and all the legacy ERP vendors are vulnerable as they try to move their installed customer bases to more modern ERP software, said analyst Jon Reed, co-founder of Diginomica, a news and analysis site that focuses on ERP and enterprise applications.
Jon ReedCo-founder, Diginomica
"Until their customers are on modern SAP software, they are vulnerable and SAP may have some big challenges there with the 2025 ECC sunset, which will divide customers between faster adopters and those not sure if they want to press on," Reed said. "Many vendors have had success in SAP's install base, but mostly in cloud-related areas like CRM or HCM [human capital management]. Workday could be the most worrisome to SAP as they start with HR, but their cloud financials are maturing rapidly."
Workday has been ramping up its ERP credentials in order to challenge SAP and Oracle in the ERP space more seriously. In November 2019, the company acquired Scout RFP, a sourcing and procurement platform, and in 2018 it bought up Adaptive Insights, a corporate performance management platform.
Vinnie Mirchandani, president of Deal Architect, echoed Reed's observation. He said almost every major ERP vendor is facing similar problems in the effort to move customers from legacy systems to modern ERP systems, which may mean that SAP competitors need to focus on their own customers before targeting SAP's base.
"By my estimate there are over a million SAP, Oracle, Infor, Unit4, IFS and other vertical industry customers that have not moved to modern cloud, in-memory solutions," Mirchandani said. "Few competitors can show they have poached SAP customers as of yet: To start with, few have the full functional reach; next, the cost of migration to a very different application would be even higher than a move from ECC since the conversion is more likely to be one-off, and higher cost of user retraining and so on."
For its part, SAP is satisfied with the pace of S/4HANA implementations. There is "strong demand and interest from the market," according to Oliver Betz, SAP senior vice president and head of product management for SAP S/4HANA, and more than 12,000 customers of all sizes and industries have selected S/4HANA to date.
SAP is helping customers make the transition to S/4HANA with the SAP S/4HANA Movement program, which was begun in 2018 to provide customers with technical resources and advice on an S/4HANA implementation, Betz said.
"Like any journey, each customer's move to SAP S/4HANA will be unique to the needs of its industry, environment and client base," he said. "SAP's goal is to help customers understand that they can do this clearly and efficiently as well as receive the best possible services and support along every step of the way. The SAP S/4HANA Movement program was created to support customers with best practices, services, tools and guidance to help them confidently make the move to SAP S/4HANA with minimal disruption, risk and time.