The German-speaking SAP user group has released data showing the region's appetite for budget increases in spending is diminishing, casting a shadow over the prospects for cloud transformation projects.

The Investment Report 2024 for DSAG, which represents SAP users in Germany, Austria and Switzerland, has shown some IT and SAP investment budgets continue to rise in the latest survey, but at fewer companies than in 2023.

"The proportion of companies whose IT and SAP investment budgets remain the same or decrease has risen significantly. Market conditions are difficult and uncertain. It is therefore understandable that companies are taking a wait-and-see approach - but this is not recommended if they want to remain competitive in the long term," says Jens Hungershausen, DSAG Chairman of the Board in the report.

DSAG found overall IT budgets will increase at 43 percent of organizations, compared with 54 percent in 2023. Spending is set to stay the same at 36 percent, up from 26 last year, while it is set to decrease at 18 percent of respondents' orgs, compared with 15 percent a year ago. For SAP investments, 46 percent of organizations surveyed saw their budget increase (2023: 52 percent), 32 percent saw it remain unchanged (2023: 31 percent), and 19 percent saw it decrease (2023: 15 percent).

Clouds gather over cloud

While investment remains in S/4HANA, the latest in-memory enterprise application technology from SAP, convincing users to deploy in the cloud - as SAP would like to see - is still a struggle.

SAP's Business Suite software (the generation earlier than S/4HANA, sometimes also called ECC) remains dominant in terms of investment, despite the software vendor promoting the more recent platform for around nine years.

Business Suite is used by 68 percent of organizations surveyed, down from 79 percent of them last year, while S/4HANA on-premises stands at 44 percent, slightly up from 41 percent in 2023. S/4HANA in private cloud grew to 11 percent (up from eight percent) and public cloud increased to six percent (2023: three percent).

"The cloud operating models for S/4HANA continue to play a subordinate role. This is not surprising, as companies face numerous challenges when switching to the cloud. Strategic reasons, such as investments already made and security concerns for critical IT infrastructures, certainly also play a role here," Hungershausen said.

"Investments in S/4HANA are continuing to increase. The increase in high investments in particular suggests that the efforts of DSAG and SAP to support user companies during the transformation are bearing fruit. Nevertheless, I would have expected a higher willingness to invest in S/4HANA - especially in view of the end of maintenance in 2027 and the resulting very tight time window for migration," he said.

DSAG also asked about SAP's preferred cloud model, dubbed RISE with SAP, albeit before the vendor announced a time-limited 50 percent special offer.

"The DSAG members surveyed are critical of SAP's S/4HANA cloud strategy. Only 13 percent of those surveyed had a positive opinion, just under half had a negative one," said Hungershausen.

SAP might take heart in the steady, continuing move to the latest S/4HANA software and the cloud deployment environment among its user base - a significant part of Europe’s industrial heartlands rely on SAP including Siemens, VW Group, EADS and Airbus - but the rate of uptick may not be enough to placate SAP's investors, who want to see the 51-year-old German software firm as more of a high-growth, high-margin SaaS vendor. ®

https://www.theregister.com//2024/03/21/sap_users_reporting_investment_growth/