The Shifting Landscape of ERP Investment

The reluctance to embrace S/4HANA Cloud isn’t necessarily a reflection of dissatisfaction with SAP’s software quality. Many customers acknowledge the robust capabilities of SAP’s ERP systems, even considering them indispensable in certain scenarios. Instead, the core issue revolves around a fundamental shift in ownership and control. The move to subscription models, while common across the software industry, represents a departure from the traditional model where companies owned their software outright.

“There’s a widespread belief that relinquishing perpetual licenses and adopting a subscription model restricts future options and cedes control,” explains Scott Hays, Senior Director of Portfolio Marketing at Rimini Street. “Customers are questioning the long-term value proposition and the potential for vendor lock-in.”

Nearly half of those surveyed do not anticipate utilizing S/4HANA Cloud within the next five years, and almost a quarter plan to continue running ECC on-premises. This demonstrates a strong preference for maintaining existing infrastructure and avoiding the complexities and costs of migration. Many believe the lifetime value of their current software investments outweighs the benefits offered by SAP’s cloud-based solution.

SAP’s Cloud Revenue Growth Masks Underlying Concerns

Despite the resistance, SAP reports positive momentum in its cloud ERP business. The company announced a 31% increase in cloud ERP revenue between the third quarter of 2024 and the third quarter of 2025, signaling a growing adoption of offerings like S/4HANA. SAP attributes this growth to strong customer acceptance of its cloud solutions.

However, the shift towards modular ERP systems is gaining traction. Nearly eight out of ten SAP customers surveyed anticipate adopting a modular ERP approach, leveraging solutions from multiple vendors to address specific business needs. This trend suggests a growing desire for flexibility and a rejection of the “all-in-one” ERP concept. Innovation is rapidly occurring outside of traditional software giants, with new players emerging in areas like IT services, software development, and artificial intelligence.

“Limiting your options to a single vendor like SAP could hinder your ability to capitalize on these emerging technologies,” Hays cautions.

The Role of S/4HANA and the Future of ERP

While the modular ERP approach is gaining momentum, Gartner analyst Mike Tucciarone notes that a significant shift hasn’t yet materialized. Although customers harbor reservations about licensing, relatively few have actively abandoned SAP. SAP ERP remains a trusted solution for many organizations.

“SAP ERP continues to be a reliable solution, and while a more modular or fragmented approach is possible as technology evolves, it’s still uncommon among organizations and CIOs today,” Tucciarone states. “We haven’t observed a widespread movement in that direction.”

Concerns about subscription licensing costs aren’t unique to SAP, with many organizations experiencing price increases of 10-20% from major SaaS providers. This broader trend is creating significant challenges for CIOs. However, many SAP customers remain satisfied with their existing ECC deployments.

“In many ways, SAP’s biggest competitor for S/4HANA is its legacy ERP, ECC,” Tucciarone explains. “SAP is working with customers to build business cases and is particularly focusing on its AI capabilities as an incentive for migration. The challenge with that incentive is that our data shows adoption of SAP’s AI offerings remains modest.”

The variety of migration options offered by SAP can also contribute to confusion and hinder confident planning. As a result, many customers are evaluating a range of options, with only a minority considering alternative ERP vendors. Some are exploring ways to continue supporting SAP ECC, while others are investigating newer SAP ERP solutions. Many are adopting a “wait-and-see” approach, hoping for an extension of the general support deadline.

What impact will the increasing cost of cloud subscriptions have on smaller businesses reliant on SAP solutions? And how will SAP address the concerns of customers hesitant to embrace AI-driven ERP systems?

Frequently Asked Questions About SAP’s ERP Transition

• What is S/4HANA Cloud?

  S/4HANA Cloud is SAP’s next-generation ERP system, delivered as a subscription service in the cloud. It offers advanced features and capabilities compared to the legacy ECC solution.

• Why are SAP customers hesitant to move to S/4HANA Cloud?

  Customers are primarily concerned about the increased and unpredictable costs of subscription licensing, as well as the potential loss of control over their IT infrastructure.

• What is the future of SAP ECC?

  SAP is ending mainstream support for ECC at the end of 2025, although extended maintenance options are available until 2030. Many customers are evaluating their options for migrating to S/4HANA or exploring alternative solutions.

• Is a modular ERP approach a viable alternative to S/4HANA?

  Increasingly, businesses are considering a modular ERP strategy, integrating best-of-breed solutions from multiple vendors to address specific business needs.

• What role does AI play in SAP’s ERP strategy?

  SAP is heavily promoting its AI capabilities as an incentive for customers to migrate to S/4HANA, but adoption rates remain relatively low.