Transforming IT Organization to Manage the SAP Ecosystem in Hybrid Cloud Environments

• Failure to properly incorporate core packages -- like SAP -- into business transformation initiatives can derail mission-critical objectives.

• 54% of SAP customers indicated plans to deploy SAP S/4HANA within 3 years.

• Intelligent enterprise applications that enable digital business will open opportunities for organizations to grow, be more competitive, and be more profitable.

Lane Cooper, CIO.com

Enterprise resource planning software remains one of the most critical business applications of large organizations. Failure to properly incorporate core packages -- like SAP -- into business transformation initiatives can derail the achievement of mission-critical future-state objectives. This was the subject of a recent CIO.com virtual roundtable I moderated with Mike Ryan of IBM under the Chatham House Rule.

According to analysts at IDC, intelligent enterprise applications that enable digital business will open opportunities for organizations to grow, be more competitive, and be more profitable. In a survey of 300 SAP clients conducted in 2020, more than half (54%) of SAP customers indicated plans to deploy SAP S/4HANA within 3 years, as customer deployment models shift from on-premises to hybrid cloud. Almost three-quarters of respondents (72%) plan to move their SAP applications to cloud environments in one way or another. More than a third (36.3% ) are moving to SAP S/4HANA Cloud and 36% are moving to SAP partner cloud providers.

With this background presented, here are the notes on the conversation that ensued:

• From a strategic standpoint, it seemed fairly clear that most current SAP deployments will eventually have to move beyond their on-premises environments to operate in heterogeneous infrastructures that consist of data centers, private cloud and public cloud (sometimes more than one) resources. There are several drivers behind this trend. Some participants noted the need to achieve better levels of scalability, especially as the community of interest that stands to benefit from the insights generated by enterprise resource planning (ERP) output expands. More team-members within enterprises are learning how to leverage ERP to monetize data for their enterprises more efficiently.

• Harvesting insights and value from ERP investments is an issue that has risen in both importance and complexity in the wake of shelter-in-place arrangements that are likely to create a permanent work-from-home (WFH) segment of the workforce. Others pointed to the fact that some version -- or combination -- of cloud-based SAP will be necessary to support upticks in merger and acquisition activity in the months and years to come.

• Significant challenges, however, that need to be addressed. There was a broad consensus around the fact that SAP -- like other major ERP systems -- have not made a particularly graceful transition to supporting the move to cloud-based platforms (public or private). As one participant observed -- and others agreed -- “SAP is barely cloud tolerant.” That said, because SAP plays such a critical role in supporting mission-critical operations, it is important to figure out how it can best be managed in complex modern infrastructure architectures. A couple of approaches were suggested. Organizations can: 1) embrace the cloud-based offerings of SAP -- including SAP S/4HANA in a Software-as-a-Service (SaaS) arrangement; or 2) move on-premises versions of SAP ERP to Infrastructure-as-a-Service (IaaS) platforms.

• In the case of SaaS-based ERP, IT organizations will have to adapt to the regular updates and upgrades that will come (ready or not) on an ERP provider’s schedule. In the case of IaaS-based ERP systems, IT organizations will have to figure out how to allow monolith enterprise software suites to co-exist with cloud-native applications in a microservices world (which arranges an application as a collection of loosely coupled services). The key here, according to one participant, is to create an enterprise architecture that “brings data outside the system so that microservices can be created while keeping the SAP core clean.”

• Organizations represented in the roundtable spanned the spectrum of experience and maturity with cloud computing and SAP deployments. Several participants noted the long-term benefits of moving toward a cloud-based environment that is configurable enough to support tailored business operations without having to “touch the code.” For many, this remains an aspirational objective. That said, more than one participant noted that their organizations are embracing the principle of “commoditizing operations that do not contribute to differentiation.”

For more information about virtual roundtables and participation, please visit www.CIO.com.