By: Joshua Finley
With the ongoing drive toward digital change, the demand for implementing cloud technologies is increasing. Christophe Derdeyn, an eminent analyst specializing in ERP systems and digital business transformation, enlightens the current state of cloud adoption, specifically concerning large enterprises using SAP and the decisive action that organizations require to implement to meet the impending deadline by 2027.
The Shift to Cloud: A Necessary Evolution
Today, the principles of cloud computing play a significant role in defining the key aspects of the contemporary IT infrastructure as the backbone of contemporary IT infrastructure as an effective tool that represents a level of flexibility and is more efficient than the on-premise solutions. Derdeyn notes that in the contemporary business ecology, “if you’re not a cloud company, you don’t count, and your stock price doesn’t go up.” Due to their timelessness, ERP systems fall into this category; it is a change that cannot be chosen but must be embraced.
Many enterprises have been using traditional ERP platforms with roots in previous decades and very often rely on the on-premise offerings of SAP. This was powerful but created over-customized systems that brought forth problems with maintainability. Transitioning to the cloud creates several difficulties for such organizations. “It’s not an easy feat,” says Derdeyn. “Systems developed over the last 50 years suddenly need to reinvent themselves to become cloud-native, and that’s a complex task.”
Cloud is Not Always Cheaper: Debunking the Myth
Another myth depicting the use of cloud computing is that its implementation will positively impact cost. That said, Derdeyn notes that in most cases, cloud is not cheaper for enterprises, let alone when it comes to intricate setups such as SAP. “As a private individual, you might find that cloud services allow you to do things you couldn’t afford otherwise. But for enterprises, the cloud provider is offering added value services such as hosting, security, and troubleshooting, which come at a price.”
The risk, Derdeyn explains, is not simply taking legacy systems and moving them to the cloud but going through cloud-native processes. “If your application is designed to run in the cloud, it can evolve with the cloud. However, merely moving on-premise systems to a cloud environment without modernization leads to the same maintenance challenges as before,” he cautions.
Clean Core: SAP’s Strategy for Cloud Transformation
Keeping the core clean is another difficult task when moving from SAP’s on-premises system to the cloud. During the many years of their existence, the firms have introduced considerable adaptations to the forms and processes of the ERP systems developed for their requirements. Such adaptations typically become tough in updates and maintenance, which makes it difficult for the system to progress. “SAP’s clean core approach is designed to mitigate these challenges,” explains Derdeyn. “It ensures that the core of the ERP system remains untouched, allowing for easier upgrades and smoother operations.”
With a clean core, companies can create side-by-side add-ons, which function as part of the organization but are built outside the main system and only interact through authorized APIs. This is an effective approach for enterprises that demand application customization with the scalability and flexibility of the cloud.
The 2027 Deadline: A Looming Crunch for SAP Users
By the year 2027, SAP will no longer be offering support for its current on-premise system, known as ECC. Though the support is available till 2030, it will cost a pretty penny, and most companies will have to switch to SAP’s cloud offering, S/4HANA, before then. According to Derdeyn, there is going to be a massive crunch. “There’s going to be a massive crunch,” says Derdeyn. “Many companies are not yet prepared for this transition, and the amount of work that lies ahead is daunting.”
Reports indicate that SAP users will have to upgrade by 2027, but many are likely to miss the deadline. According to Derdeyn, we will see a spike in migration activity around 2027-2028. In his opinion, companies that wait for the last moment will have to overpay for skilled resources.
Managing the Migration: A Complex but Necessary Process
Based on the case studies of companies seeking to move to cloud-based ERPs, the process is not simple and occurs in various dimensions.
Data Management: Traditional ERP system data structures are complex as they reflect the changes that happened over the years. Many data structures cannot be moved or migrated to the cloud environment without proper planning and management.
Technical Extensions: There are many examples where, all these years, various companies have developed their custom extensions into ERP systems. These extensions must either be rewritten or refactored to be used within the context of a cloud-native application.
Integration: New ways of engaging systems in cloud environments are required. “Your existing integrations will also need to move to the cloud, which can be a significant undertaking,” says Derdeyn.
Process Optimization: Migration is a good chance to rethink and make necessary improvements to business operations. “In today’s world, we have tools that can map out every process in an organization based on the data in the system,” explains Derdeyn. “Identifying inefficiencies and compliance issues becomes easier, allowing businesses to improve operations as they migrate.”
In Christophe Derdeyn’s recent webinar, he focuses on the concept of Cleaning the Core for SAP systems. This session focuses on the real-life issues arising when moving from traditional ERP systems to new cloud-based systems. Instead of creating an extensive range of dependencies, core areas should be kept clean, enabling easier upgrades, reducing technical debt, and enhancing the extensibility necessary for an organization’s growth. Christophe also points out that while organizations often request various customizations to be built into SAP, this must be done in a way that does not take SAP away from what Christophe refers to as ‘clean.’ You can see his webinar here.
Conclusion: Avoid the Crunch
As companies operate in older system platforms like SAP ERP, the move to the cloud has now become not just desirable but essential. The year 2027 is not far from now, and the firms that take early action will be in a vantage place to ensure that the transition is easy. “The sooner you start, the better,” advises Derdeyn. “Those that wait will face higher costs, greater competition for resources, and potentially miss the deadline altogether.”
As Christophe Derdeyn has stated, this transition to a cloud environment is not easy but very much needed. Thus, following the example of a clean core strategy, the efficient use of side-by-side extensions, and the optimization of business processes, organizations can prepare for the next generations of ERP systems and succeed in the context of the growing dominance of cloud solutions.
Christophe’s extensive experience guiding organizations through complex ERP challenges is highlighted in MSN Money. For any further information, contact Christophe on LinkedIn.
Published by: Khy Talara
