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Major security risk for companies: SAP platform to be phased out in 2027

The SAP system is at the core of your business which is increasingly digital and more agile. Understand why it is business critical to consider modernizing your ERP system as soon as possible.

12. October 2022Peter Hecht

SAP modernization is business critical

From an IT perspective, 2027 is not far away - and this is important to bear in mind as a company and user of the SAP ECC-platform. Because if you are not finished with a fully integrated update of this before the deadline, it can have critical business consequences.

SAP transformation should be considered as a business transformation

In the worst case, you can lose market share if you are not on time when your business needs to switch IT platforms. However, a survey shows that 40 per cent of larger Nordic companies have not yet put a plan in place to upgrade their SAP platform, on which their core business depends.

If you're thinking it's 'just' another IT project when you think of the software that coordinates your company's tasks, think again. Ilva and Idémøbler, two Danish retail companies, felt that back in 2015 when their new core administrative system went down. Sofas, TV tables and beds were stranded in containers in Aarhus harbour, and furious customers were greeted on the website with: "The cause is very big IT challenges with a new system."

Because of the crash, they had to close their web shop and lost millions in turnover. This example shows why an administrative system like an ERP system is not just 'another IT system', but something that is critical to the business.

Enterprise Resource Planning

Finance strategy success concept

ERP stands for Enterprise Resource Planning, and it manages the entire supply chain from production, warehousing, purchasing, finance, and customer communication. An ERP system supports the entire value chain of the company and puts it into system, from the moment you receive sub-elements until they are assembled into a product and all the way to logistics when the final product goes out. That's why the system is an essential tool for many companies, because in the worst case it can stop production or delivery altogether. In life science companies, for example, the worst-case scenario is that medicines don't reach the end user. This illustrates the magnitude ERP systems have on a company’s operation. Consequently, updating your ERP is not just about pressing a button and leaving it overnight. Often, it requires months of attention and work.

40% of companies are not up to speed

Although the SAP system supports the core business of many Nordic companies, a new study from International Data Corporation (IDC) shows that many companies are experiencing challenges when upgrading their SAP platform. In the IDC survey, 40 percent of Nordic companies using SAP say they have not yet planned to upgrade to the new S/4HANA platform when support for the current ECC-platform phases out in 2027, and that's a problem.

As with any software update, companies without the latest version of SAP are not just running a security risk because the platform won’t be further developed. They also risk losing market share.

Peter Hecht, Marketing Director T-Systems Northern Europe

The risk in not updating your ECC-platform

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The IDC survey shows that companies believe the current ECC-platform does not support the needs of their business and is therefore affecting their time-to-market. For example, an underlying SAP platform needs to talk to the user interface of a company's web shop. If the web shop interface is modified with new features, the implementation of these features can be significantly delayed, as the current SAP ECC-platform cannot be modified at the same pace. The risk is that customers choose to shop elsewhere where they can get better services.

The existing ECC-platform may well be working in five years' time, but as a business you are also exposing yourself to risks as the software is no longer updated. This leaves them vulnerable to cyber-attacks and without help in the event of technical problems.

Many companies fail

The study also shows that many companies make mistakes when upgrading their SAP platform. This is largely due to a lack of understanding of the task at hand. Many see this as an IT project, and therefore many Nordic companies measure their success solely on classic IT objectives. But to succeed, the task must be seen as a thorough transformation of the way you run your business. You need to look at it from a value perspective and ask: How does the new SAP platform create value for the business?

Communiation is key

people standing on network lines

This increases the complexity of the project and therefore the time aspect. There is a huge complexity when the complete value chain of the company needs to learn a new system. It's everything from building the underlying technical structures to Anna in the finance department having to do everything in a new way, and then there's also the interim period when both platforms are running in parallel.

Therefore, there must be a plan for an 'as is', and 'to be' setup. Hence, it is important to develop a strategy for the transition between the two versions. Due to the modernisation of the SAP platform affects large parts of the organisation, it is important to think communication, stakeholder mapping and change management into the plan from start. This is often an overlooked challenge and a source of many failures or delays.  

Why there's no time to waste

stack of hands

The hunt for the right IT skills for the process can also take time. ATP, the public Danish pension fund, for example, is facing that challenge right now. They had to cancel their DKK 240 million tender for an SAP-based debit system because there hasn't been enough interest from suppliers.

In an interview in Computerworld from 14 September 2022, Hans Christian Jelstrup, deputy director for public infrastructure at ATP, makes no secret of the fact that they are surprised by the lack of interest and are therefore opening the possibility of using foreign labour.

The lack of IT skills in complex SAP systems, however, is not at all surprising: The competition for digital talents has never been tougher and we are seeing companies clamouring for digital skills. The IDC survey also shows that the biggest challenge companies face is precisely the lack of skills. So, if you're a company or public sector institution and you need to recruit the right profiles, now is the time to find a partner who can help.

In other words, there is no shortage of good reasons to get started with the new version. And yet several large companies are hesitating to get started. But what are they waiting for?

Kicked to the curb even though 2027 is close

The sore point for many is that a sweeping IT transformation will undoubtedly require both finance and resources, but either way, 2027 is only getting closer.

It's a big and complex task, and many people might lose their breath just thinking about it. Anyone with an SAP system knows that you don't just sketch out a master plan over your morning coffee. It requires lots of analysis and preliminary workshops across the whole organisation, so it's probably not unlikely that the task has been kicked to the curb in a busy day with lots of other pressing tasks. But it's business critical and the sheer complexity means it's never been more important to get started than it is now.

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About the author
Marketing Director Northern Europe

Peter Hecht

Marketing Director T-Systems Northern Europe

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