Exclusive: CIOs push back on SAP upgrade deadline amid cost fears
Leaders in IT are under growing pressure to upgrade their core enterprise systems, but many are digging in their heels.
With less than two years until SAP ends mainstream support for its traditional ERP platform, many businesses are still resisting the move to S/4HANA, citing cost, risk, and lack of a compelling business case.
"Two-thirds of SAP customers are still running ECC," explained Luiz Mariotto, who leads the global solution engineering team at Rimini Street.
"That's according to Gartner. After ten years, SAP still hasn't convinced the majority of its customer base to move," he said during a recent interview.
Mariotto, based in Miami and a 25-year veteran of the SAP ecosystem, recently completed a whirlwind tour of Australia and New Zealand, meeting customers and prospects across Perth, Melbourne, Sydney and Auckland.
He said while the region shares global concerns, some industries are "more aggressively focused on cost-cutting."
"IT leaders are under pressure to reduce cost, optimise their operations, and at the same time, find ways to innovate," he said. "But how do you fund innovation if you've got to reduce both capex and opex, and still run your mission-critical ERP?"
SAP announced in 2020 that it would end mainstream support for ECC by 2027. For many enterprises, the vendor's push to move customers to S/4HANA in the cloud feels less like a choice and more like a mandate. But Mariotto says the business case just isn't there for many.
"Some CIOs go to the board and say, 'There is a risk if we don't get SAP's support,' but the board is pushing back. They're asking: 'Do we really need to spend hundreds of millions and three years of effort just to change software that already works?'" he said.
Mariotto cited examples of global clients who have spent years and millions tailoring their ECC systems to complex processes like finance, logistics, or manufacturing.
"Now SAP is saying, 'Sorry, you have to upgrade,'" he said. "But IT leaders are asking themselves: should my roadmap be driven by a vendor's timeline, or by business priorities?"
Some clients who have started their S/4HANA projects are already pausing due to economic or geopolitical changes, such as trade wars or shifts in global supply chains. "The world is changing. The risks are shifting. And in that scenario, software upgrades drop in priority," he said.
According to Mariotto, customers are increasingly exploring third-party support options as a way to defer expensive upgrades. Rimini Street, which provides independent support for enterprise software, has built what it calls the "Rimini Smart Path" — a three-stage approach: support, optimise and innovate.
"First, we take over support of the ERP and deliver savings of 50 to 90 percent," he said. "Then we help clients optimise their landscape - no more forced upgrades. Finally, they can reinvest those savings into innovation."
That innovation doesn't need to come from SAP either. Mariotto said many customers are turning to vendors like ServiceNow, Microsoft or AWS for AI, automation, and analytics. "Who said your AI must come from SAP?" he asked. "Clients can innovate now, without waiting years for a complex ERP migration."
In a timely development, Rimini Street has also announced it will now offer full support for all SAP ECC 6.0 and S/4HANA releases through 2040 - without requiring customers to migrate to S/4HANA on RISE. This move is significant for businesses weighing whether to accept SAP's cloud roadmap or chart their own course.
The extension means organisations can maintain their current SAP systems, stay in full tax and legal compliance, and avoid the significant costs of vendor-mandated upgrades. "This gives customers a real choice," Mariotto said. "They can buy time, stay supported, and focus their budget on strategic innovation rather than software replatforming."
SAP has tried to soften its stance, announcing earlier this year a programme allowing customers to delay their migration if they commit to moving to S/4HANA Cloud by 2030 or 2033. But Mariotto called it "a ticket with strings attached" and said many customers remain unconvinced.
"The vendor says you can delay, but only if you commit to a cloud subscription now. Clients say, 'Wait a minute - I don't even know what I'll be doing in two years.'"
The complexity of moving to S/4HANA is also a deterrent. For large organisations, the change is not simply an upgrade - it involves changing data models, processes, licences, and infrastructure.
"Even for a simple ECC to S/4HANA migration, you have to convert your general ledger, adapt your customisations, and migrate data into HANA's new structure," he said. "That's not a patch. That's a transformation."
Mariotto added that some clients mistakenly believe third-party support limits future flexibility.
"One of the biggest misconceptions is that you can't move forward without SAP support. But we can handle security, custom code, integrations - everything. And if clients eventually decide to go to S/4HANA, we can help prepare them."
In fact, he said, some customers who delayed upgrading with Rimini Street's support have later chosen to migrate on their own terms.
"We have clients who stayed with us five or six years, and then said, 'Now I have a business case.' In some cases, we even supported their legacy ERP during the transition," he said.
In the era of hybrid IT, many enterprises are already managing a mix of legacy and cloud applications. Mariotto said this "composable ERP" approach - mixing a stable core with best-of-breed cloud tools - is now the norm, not a Frankenstein monster.
"The future of ERP won't be a big box. It'll be intelligent agents, automation layers, and flexible platforms," he said.
"Vendors like ServiceNow and Microsoft see that. They're building tools that integrate everything - not just one vendor's stack."
With CIOs expected to do more with less, Mariotto said the days of vendor-driven roadmaps are numbered.
"Clients are telling SAP: If you're not flexible, I'll find someone else to support me - and someone else to help me innovate," he said.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
1News
15 hours ago
- 1News
What is going on with Briscoes shares?
Briscoes shares have had a boost in recent days, ahead of the company moving into the top 50 stocks on the NZX share market tomorrow. Falling share prices pushed The Warehouse out of the NZX50, and Briscoes will take its place. That means that passive managed funds that benchmark their funds to the NZX50 will snap up stocks in the company too. Its share price has lifted from less than $5 at the start of the month to $6.19 on Thursday. Greg Smith, head of retail at Devon Funds, said there had been a lot of pre-buying ahead of Briscoes moving up on Monday morning. He said that meant the bump in share price was unlikely to be so significant. ADVERTISEMENT "Going into the 50 means it is a lot more relevant to institutional managers although with Rod Duke owning nearly 80% of the stock, getting liquidity will be an issue." Greg Bunkall, data director at Morningstar, said the number of passive funds benchmarked to the NZX50 would not be large. "Maybe 10 or so share classes, both traditional managed funds and ETFs. "There may also be some of the ESG tilted options, which, depending on the screen might be impacted - then there is also the multi asset funds which have the index fund as a part of the overall portfolio." 'Self-cleansing mechanism' Dean Anderson, founder of Kernel KiwiSaver, said it was relatively unusual for stocks to move in and out of the top 50. "Every quarter, major benchmarks like the S&P/NZX 50 undergo a rebalance, testing each company's eligibility for the index and where underperforming companies can be dropped and stronger ones added. ADVERTISEMENT "This self-cleansing mechanism ensures indices stay relevant-poor performers are replaced by those that have grown in value, often overtaking the bottom-ranked company in the index. "In a small market like New Zealand, though, such changes are rare, often one or two changes in a year, making them all the more noteworthy when they happen, with the last change to the S&P/NZX 50 index rebalance occurred in December 2023." He said the Briscoes share price had already lifted 28% since it was announced it was going into the top 50. Some investors had sold shares in The Warehouse. "Globally, this isn't unusual. Studies show that stocks added to major indices like the S&P 500 often see short-term price spikes of 3% to 8% in the days leading up to inclusion, driven by speculative buying and index fund rebalancing. "However, the scale in these spikes is falling and these gains frequently fade within weeks as the initial hype subsides - which can leave some speculative investors out of pocket." He said some active manager might be trying to game the rebalance by betting on short term movements but the risks could outweigh the rewards. Sam Stubbs, founder of Simplicity KiwiSaver, said his funds were benchmarked against the top 30. He said beyond the top 30, it could be hard to buy and sell shares. He said Briscoes' presence in the index was likely to be weighted so that only 20% of the company's value was reflected because of Duke's significant holding.
Scoop
4 days ago
- Scoop
Largest Maritime Navigation System Upgrade In Decades
Associate Minister for Transport The Government is making New Zealand more attractive to international shipping lines with the first major investment in navigation services in more than 30 years. Land Information Minister Chris Penk says the $28.6 million Budget 2025 funding secures the future of shipping, tourism and the maritime economy – highlighting the Government's commitment to back economic growth. "The investment enables safer and faster access to New Zealand's ports, keeping trade flowing smoothly and reliably and provides confidence in shipping. This is key as more than 99 percent of our imports and exports move by sea. "Land Information New Zealand (LINZ) and Maritime New Zealand are working together to create high-tech digital navigation tools based on the global S-100 standard. These tools will make navigation more precise, helping ships save fuel and cut costs while operating in our waters. 'The initiative will transform how mariners access and use data such as electronic charts, water levels, ocean surface currents and navigational warnings.' Associate Transport Minister James Meager says the investment benefits both economic growth and maritime safety. 'Modern digital maritime data and services will enable freight-efficient, environmentally responsible shipping routes that boost trade and investment across the Pacific. 'The investment in high-tech infrastructure ensures our maritime and tourism sectors are ready to thrive, while enhancing safety and efficiency. 'Importantly, it positions New Zealand at the forefront of the shift to digital navigation technology, and signals to the world that we're serious about supporting innovation, sustainabilitty and welfare at sea. 'Beyond New Zealand's coastline, this initiative supports safer, more efficient shipping across our wider maritime region – including Antarctica and South-West Pacific nations such as the Cook Islands, Samoa, Tonga, Niue, and Tokelau. 'As we celebrate Matariki and reflect on New Zealand's rich cultural history of navigating by the stars, now is the perfect time to look ahead toward building a resilient maritime economy for future generations.'
NZ Herald
5 days ago
- NZ Herald
Geopolitical tensions keep NZ sharemarket steady, oil prices rise
The New Zealand sharemarket was flat today as international markets remain wary of growing geopolitical tensions between the United States and Iran, impacting oil prices. The S&P/NZX 50 Index closed down 0.10% or 12.25 points, falling to 12,627.32, with 33,203,962 shares changing hands to the value of $138.49 million. The
