As SAP looks to drive future growth by investing aggressively in ChatGPT and other modern technologies, CEO Christian Klein says there is no chance the company will extend standard maintenance for all on-premises ERP systems by the end of 2027.
Over the years, as the cloud was becoming the preferred IT architecture, SAP has at various times set and later extended support deadlines for its many thousands of on-premises customers, many of whom were not yet convinced to jump into the cloud.
But as SAP executives shared very impressive Q1 results in their April 21 earnings call, Klein made it clear that the end-of-2027 timetable is not going to be changed. And the foundation for that resolute outlook, according to Klein, is that if SAP is going to invest appropriately in powerful and transformative new technologies such as ChatGPT, then it has to pull back on investments in other areas.
During the Q&A portion of the earnings call, an analyst, noting that SAP still has huge numbers of on-premises customers, asked how Klein is balancing the company’s investments across the on-prem systems those customers are still using against the cloud products and services that are unquestionably SAP’s future.
I was intrigued by the question because Klein’s answer would reveal a great deal about his confidence in SAP’s commitment to the cloud and the sweeping transformation to that destination launched by Klein 2-1/2 years ago. To his everlasting credit, Klein didn’t waver a bit.
“Look, we have a huge installed base which is, first of all, a great gift to have,” Klein said.
“And then second, we have already communicated that we’ll be ending standard maintenance for all ERP releases lower than S/4HANA by the end of 2027. And today I really would like to also say that there will be no extension of this timeline.
“Because why? Because we want to use our R&D capacity and investments in the most effective way, and there are so many new technologies which we really want to embark on and that we’re really eager to deploy in the cloud,” Klein said.
“And by the way, our customers will get the most value out of [those investments] — just look at the announcements we are doing for Sapphire around ChatGPT.”
Following up on Klein’s earnings-call comments about the inevitable move by customers to the cloud, SAP executive board member and head of global sales and customer success Scott Russell said that while the final destination is the same, customers need to follow their own paths and timetables.
“So a bit of a reminder: when we introduced RISE [SAP’s hugely successful new fully integrated go-to-market plan], it wasn’t just about an architecture for the cloud, but it was helping customers on a transformation journey that fit their landscape,” Russell said.
“All customers are moving to a cloud-based architecture — and they’re doing that because they want the innovation, they want the ability for us to deliver a region-specific regulatory framework, but also they want the innovation and adoption at speed,” he said.
“Most other cloud companies will offer an outcome, but they don’t give too much in the way of guidance about how to get there. What SAP does is really leans into the journey, and that makes it much easier for customers to navigate the way forward and still benefit from where we’re investing and innovating.”
Leaders must make tough choices, and they must recognize — particularly in today’s times — that while their resources are considerable, they are nevertheless finite.
Klein is exercising precisely the type of leadership SAP needs at this juncture: On the one hand, he’s giving his approximately 20,000 on-prem customers a clear roadmap for what the on-prem future holds; and on the other hand, he’s driving a forward-looking innovation agenda that will be open for all customers that have moved to the SAP cloud.
In so doing, he’s giving SAP’s customers exactly what they need most in today’s times: a foundation of clarity and certainty on which to build their own plans for the future. And I would expect that Klein’s comments in last week’s earnings call will push a lot of those on-premises customers toward the cloud.
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