Gartner says hold onto your wallets as SAP's cloud pitch trades control for convenience

Updated One of SAP's preferred methods for migrating systems to the cloud risks IT departments losing control of operational running costs, Gartner has warned.

The global IT research and advisory firm said that to mitigate the risks, user organizations need to understand the different variants of RISE with SAP, the German software giant's lift-shift-and-transform program designed to move their implementations to the cloud.

Users of legacy applications such as the common ECC platform can at the same time migrate to SAP's latest S/4HANA. As part of the deal, SAP promises to be "one hand to shake," avoiding users having to directly manage systems integrators and cloud infrastructure providers themselves. But the downside can be a loss of control in IT spending, Gartner said.

The enterprise tech soothsayer pointed out that although launched as one program, RISE with SAP contained variants in the public cloud, private cloud, and a way to "bring your own model."

Addressing the risks within the private cloud variant in a research note, Gartner said the way organizations account for and report their IT spending is set to change with the RISE subscription model.

"The total cost of ownership of an ERP system becomes the total cost of operation with RISE services," it said. "Several cost components previously under the user's control will move to SAP, reducing client influence on running costs from an IT operations perspective.

"This can have an impact on the IT department and affect future budgets, control and ultimately IT influence as spend shifts from a traditional capital expenditure (capex) model to an operating expenditure (opex) one."

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In this scenario, the private edition system is fully managed by SAP, but "users have more control of their applications, customization, and the testing and scheduling of system updates" compared within the public cloud, where infrastructure is shared between users.

Gartner advised that users considering the option should estimate RISE with SAP subscription fees by getting the choices within the program in line with the total cost of operation expectations as well as service operational needs. "Given no landscape ownership, there are no residual rights on contract exit so consider viable options, should an organization no longer require RISE with SAP," Gartner said.

RISE with SAP was launched in 2021, and has since gone through several changes "including new SKUs, product variants and license entitlements," Gartner said.

With its Q2 results in July, SAP said customers around the globe continued to choose RISE with SAP to "drive their end-to-end business transformations." New customers included Bacardi-Martini, Bayer, and UK retailer McBride.

However, German-speaking user group DSAG has complained that SAP's focus on the cloud leaves behind users who upgraded to S/4HANA on-prem after receiving assurances of the platform's longevity. ®

Updated at 15.41 UTC on September 5 2023 to add:

In a statement, an SAP spokesperson said: "Cloud is the future, and adoption is essential for delivering ongoing innovation to customers. Our cloud-first approach is consistent with industry trends worldwide and is the clear preference of a growing number of SAP customers across our suite of enterprise solutions. There are many advantages of this model including financial flexibility, moving from capex to opex, which have been well documented.

"SAP's figures show that our customers have appetite for our cloud offerings including RISE with SAP. In 2022, cloud has become our most important revenue stream, and RISE with SAP with S/4HANA Cloud at the centre continues to see high growth rates. S/4HANA Cloud revenue was up 79 percent at constant currencies in Q2/2023."