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SAP and Azure – will it increase adoption of S-4HANA?

4th May 2020,  Daniel Jones

The announcement by SAP [1] that it is partnering with Microsoft “to simplify and modernise customers’ journeys to the cloud” raised some eyebrows. It’s no secret that SAP is struggling to migrate its on-premise customers to S/4HANA in the cloud, but partnering with one of its ERP competitors seems a risky approach.

While the partnership should simplify the cloud migration for SAP customers, it may signal the demise of SAP Cloud Platform Services. After all, Microsoft Azure Services offer largely the same functions. Customers may find it more straightforward to implement SAP ERP directly in Azure.

Here we take a look at the logic behind the partnership and what’s in it for Microsoft, SAP, its customers and SAP ERP jobs.

What’s in it for SAP?

SAP will hope to benefit from increased adoption of its flagship S/4HANA offering. SAP has made a huge investment in the platform, aiming to bring something unique to its business suite that moves away from transactional data recording towards real-time decision support.

SAP has had a hard time encouraging its on-premise customers to migrate from their legacy ERP application onto S/4HANA in the cloud. The technical complexity means customers are likely to have a good look at the competition as part of justifying the budget for the move. SAP runs the risk of them jumping ship.

SAP customers looking to move to S/4HANA in Azure should find the migration simpler and more streamlined, owing to:

–       Industry market bundles: a single reference architecture for customers in focused industries

–       Collaborative support: combined support for SAP Cloud Platform and Azure

–       Joint roadmaps: reference architectures and recommended solutions

What’s in it for Microsoft?

Microsoft stands to gain much from the arrangement. It will be the preferred Cloud provider (over Google and AWS) for SAP customers migrating to the cloud. This will drive new business for customers running SAP Cloud Platform on Azure.

Microsoft will build out-of-the-box architectures for customers running SAP ERP and S/4HANA. This will provide a sound base for the SAP ERP jobs required to help customers during migration and implementation. An SAP architect will find it straightforward to implement existing functions in the new platform, without having to re-invent the wheel.

However, Microsoft will also be rubbing its hands at the potential for increasing its share. Why implement SAP Cloud Platform on Azure when you can use Azure Services? Customers may look to implement SAP ERP directly in Azure Services.

Challenges

There are a number of challenges in the partnership approach:

–       Microsoft sales need an incentive to promote the combined offering and a strong directive not to position Dynamics 365 in competition

–       Consultants need cross-training in order to successfully demonstrate the business value. Fielding two consultants will present this as a lash-up

–       Cloud computing is largely based on open standards, for example, messaging and authentication. While plug-and-play Cloud is becoming more realistic, SAP still requires specific integration

–       SAP Cloud Platform has some unique service dependencies that Azure needs to deliver. These dependencies will need to be in place at each Azure data centre

Skills required

Customers will need to invest in cross-skilled consultants. Microsoft Azure is seen as a traditional IT province with a high availability of contract staff and well-understood qualifications. SAP is somewhat different, as each ERP implementation will have its own unique, almost bespoke, functions.

Coupled with the possible architectures: on-premise SAP ERP, S/4HANA and SAP Cloud Platform Services, the partnership could generate some specialised SAP ERP jobs.

Will the partnership increase the adoption of S/4HANA?

SAP stands a good chance of holding onto its ERP customers and increasing the take-up of S/4HANA. This will depend on cooperation from Microsoft sales and some talented consultants in the field. However, it will come at the expense of SAP Cloud Platform Services revenues.

[1] https://news.sap.com/2019/10/sap-microsoft-partnership-cloud-migration-offerings/

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