Walldorf, Germany, 01.21.2021 – IT budgets are increasing at 39 percent of companies in the German-speaking SAP User Group (DSAG) in Germany, Austria, and Switzerland in 2021, despite the coronavirus crisis. The same goes for investments in SAP technology, with 43 percent of companies increasing budgets. These were among the findings of the 2021* DSAG Investment Report. There is also a slight rise in the number of companies switching to S/4HANA. However, companies are slightly more cautious with the investment forecasts for the next three years. The same can be said for licensing strategies for S/4HANA; lots of companies are still to come to a decision on this.
The immediate effects of the coronavirus crisis on companies were blatantly obvious last year. Many businesses experienced the pandemic and its consequences directly. But they also quickly learned how the prospects for 2021 can be cast in a positive light. The DSAG Investment Report found that, in 2021, the budget for general IT expenditure is increasing at 39 percent of surveyed companies in Germany, Austria, and Switzerland (this figure was 46 percent in 2020). At nearly one-third of these companies, budgets are growing by between 10 and 20 percent. 37 percent of companies expect their budgets to stay the same. Meanwhile, 18 percent of survey respondents said their budgets would fall, with 44 percent of this group seeing decreases of between 10 and 20 percent. In the DSAGLIVE survey carried out last summer, 22 percent indicated that they expect a decrease of more than 20 percent.
"The numbers show that the pessimistic mood of last summer has since given way to more cautious optimism. While budgets are climbing by less than the previous year, expectations of decreasing budgets have recovered slightly over the last few months. This gives us some hope for the future," notes DSAG Chairman Jens Hungershausen, reflecting on the findings.
Firms press ahead with S/4HANA investments
When it comes to SAP budgets, 43 percent of survey participants want to invest more – a slight decrease from the 2020 Investment Report, when this figure was 49 percent. SAP budgets are set to decrease at 18 percent of those surveyed, compared with 19 percent in 2020, and are staying the same at 35 percent of those surveyed (32 percent in 2020). Investments in SAP are set to increase at 47 percent of manufacturing companies surveyed (46 percent in 2020), and at 40 percent of service providers and retail companies (47 percent in 2020). "The decrease in services and retail reflects the direct impact of the coronavirus pandemic on these sectors," explains Jens Hungershausen.
Meanwhile, investments in ERP solutions continue to rise. S/4HANA is still making headway: 44 percent of survey respondents are planning large or medium-sized investments in S/4HANA on-premise, while only 25 percent say the same for Business Suite. Compared to 2020, this represents a further 10 percent decrease in large or medium-sized investments in Business Suite. For S/4HANA on-premise, this figure remains the same as last year (44 percent). However, only 12 percent are planning large or medium-sized investments in S/4HANA cloud (8 percent in 2020). "This is likely the result of the reservations companies have about putting confidential enterprise data in the cloud. This is partly rooted in European mentality, but also in the strict requirements of the EU's General Data Protection Regulation," explains Jens Hungershausen.
Further increase with S/4HANA
When it comes to the question of transitioning to S/4HANA, 13 percent of respondents hadn't yet made up their mind in 2020, and that remains the case this year. However, 14 percent are already using S/4HANA (10 percent in 2020) and a further 10 percent (9 percent in 2020) are planning to make the switch this year. 39 percent are planning to switch to S/4HANA in the next three years (40 percent in 2020). "Companies are moving forward with the transition, but it requires a lot of good planning. So some reluctance in these uncertain times is understandable," says Jens Hungershausen, addressing the findings. It's still important for us to remain in dialog with SAP about S/4HANA and to ensure that the solution continues to be developed and optimized. "There is still room for improvement, especially when it comes to the distinction between on-premise and the cloud and ensuring a smooth integration. At the same time, it's essential that the most important functions are mapped out, end-to-end," asserts Jens Hungershausen.
Licensing strategy still pending for some
For the first time, this year's Investment Report survey also inquired about companies' licensing strategies for switching to S/4HANA. 22 percent of participants said they were opting to keep their current licensing model, i.e. a product conversion. A further 12 percent want to keep their current licensing model for now and then switch to the S/4HANA licensing model via contract conversion at a later time. 13 percent are making the switch directly. However, 39 percent of companies haven't yet made a decision about the transition. "The high proportion of companies that haven't yet made a decision could be due to uncertainty as to the right path forward. Switching to S/4HANA involves changes in both the product and licensing metrics," says Jens Hungershausen. A license conversion also brings with it multiple challenges for customers, so more flexibility in licensing would be desirable.
Cloud solutions for more flexibility
Despite SAP's "cloud first" strategy, investments in the relevant SAP solutions remain restrained. According to the report, the top three SAP cloud solutions where companies plan to make large or medium-sized investments in 2021 are:
- SAP Analytics Cloud: 14 percent (13 percent in 2020)
- SuccessFactors: 15 percent (14 percent in 2020)
- SAP Customer Experience: 8 percent (11 percent in 2020)
These are followed by Ariba and SAP Integrated Business Planning with 8 percent each, and Concur with 6 percent. Trailing them slightly are Industry Cloud (2 percent), Qualtrics (2 percent), and Fieldglass (1 percent). "SAP Analytics Cloud's top position is not surprising. Analytics capabilities that allow companies to quickly undertake meaningful analyses in all relevant areas are a valuable asset in times when flexibility is needed in processes and decision-making," comments Jens Hungershausen. The fact that 15 percent of respondents are planning large or medium-sized investments in SuccessFactors suggests that some companies are still waiting to make the switch. "Starting in 2022, businesses will be able to operate the HR solution SAP Human Capital Management (SAP HCM) integrated in S/4HANA, and this is definitely playing a huge role for some firms that don't want to switch directly to a cloud solution," continues the DSAG Chairman.
There is also room for growth in the ranking of application platforms that companies use for platform-as-a-service (PaaS). When it comes to large or medium-sized investments, Microsoft Azure, with 27 percent (24 percent in 2020), is ranked ahead of the SAP Business Technology platform with 17 percent (14 percent in 2020), while other PaaS providers trail behind with 7 percent (7 percent in 2020). Amazon Web Services is in fourth place with 6 percent (8 percent in 2020).
Digitalization picks up speed
In terms of the progress made by companies in digitalization – regardless of and without direct relation to SAP – 41 percent of companies see themselves as "far/very far along". This is 9 percent more than last year. When asked about investments in individual areas, 63 percent of survey participants said they plan large or medium-sized investments in increasing the efficiency of existing processes. In the DSAGLIVE survey last summer, 72 percent of respondents saw a need for more investment in this area. This was followed in the ranking by the need for creating information transparency, cited by 47 percent of respondents (DSAGLIVE: 28 percent). Meanwhile, 26 percent said they see the flexibilization of relationships with customers and partners as requiring large or medium-sized investments (DSAGLIVE: 24 percent). And 34 percent of respondents (DSAGLIVE: 36 percent) want to arrange large or medium-sized investments in developing new digital business models and services. "This clearly shows that, for two-thirds of the companies, optimizing what they have right now takes priority over always trying to innovate or anticipate new scenarios. It therefore comes as no surprise that Big Data/data intelligence and cloud computing remain companies' top two priorities when it comes to innovation. Robotic process automation (RPA) has replaced artificial intelligence in third place," says Jens Hungershausen.
There is no doubt that the coronavirus pandemic had a profound and lasting impact in 2020. But cautious optimism is taking hold, and this is also reflected in rising investments in IT and SAP, which also show how the pandemic has opened companies' eyes to how essential investments are. Digitalization is forging ahead, and with it the trend of switching to S/4HANA – even if companies are doing so cautiously. And the issue of licensing strategy is now coming to the forefront. Clearly, a lot of clarification and information is still needed in this area. Here at DSAG, we will do everything we can – on behalf of user companies – to work together with SAP to find suitable licensing solutions for the transition from the "old" to the "new" world. There is also room for growth in acceptance of cloud solutions. And platform strategies are also suffering from the fact that, in many places, efficiency increases in existing processes are still being prioritized over the development of innovative digital business models and services.
*Scope of survey
From November 2020 to January 2021, DSAG conducted an online survey on planned investments for 2021, exclusively among SAP user companies in Germany, Austria, and Switzerland. Only one individual was questioned per company. Overall, 244 CIOs, heads of competence centers, and other representatives from DSAG member companies participated in the survey. Almost half of participants were from companies with between 500 and 2,500 employees. To ensure transparency, and in a slight change from previous years, the response options "Not specified" and "I don't know" were also included in some places.