New ISG research finds many SAP migrations avoid the process and data re-engineering necessary for automation and operational AI

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Enterprises migrating to SAP S/4HANA are trading long-term transformation potential for near-term stability, speed and cost predictability, bypassing the deep process re-engineering needed to unlock the benefits of automation, analytics and AI, according to a new research report from Information Services Group (ISG) (Nasdaq: III), a global AI-focused technology research and advisory firm.

The ISG State of SAP Migrations report, published today, draws on a survey of more than 200 senior decision-makers along with execution patterns observed in ISG advisory engagements to reveal a significant disconnect between companies’ transformation ambitions and the way they adopt S/4HANA in practice.

Fewer than one in five organizations re-implements SAP processes and technology when they move to S/4HANA, the research finds. Nearly half (49 percent) carry out little or no re-engineering, choosing instead to preserve legacy processes and data.

“By focusing on risk avoidance over transformation to guide their SAP strategies, enterprises can lose out on long-term benefits,” said Stanton Jones, ISG distinguished analyst and co-author of the report. “To unlock the full potential of automation, analytics and AI, enterprises will need to commit to fundamental changes around governance, data quality and process standardization.”

The study says enterprise decisions around planning and sequencing, governance and the cost of the transition are shaping outcomes more than platform choice or how organizations are deploying the tools. Often, those with the highest aspirations for transformation are the most likely to limit future value by prioritizing short-term stability.

The decisions companies make about SAP migration can significantly affect their future competitiveness, especially given the growing impact of AI on all aspects of business, ISG says. Enterprises are far more likely to realize operational gains from AI if they standardize processes and establish strong governance during the transition. Those that keep fragmented processes and legacy data structures in place are likely to find that AI cannot deliver as much benefit after the work is completed.

Companies may embark on less strategically valuable SAP migrations due to time pressure, the research finds. Enterprises frequently cite the end of SAP ERP Central Component (ECC) support as a reason for moving to S/4HANA. In these cases, they may sequence their transitions around maintenance and support deadlines and use limited cloud migration to extend their support runway rather than to transform their IT environments.

Cost overruns and missed deadlines are common in S/4HANA transitions, ISG finds. Nearly 60 percent of SAP migrations are behind schedule and over budget, most often due to underestimated complexity, expansion of scope and internal capacity constraints. Delays are most often caused by weak governance rather than technical challenges, so they can be a symptom of bigger problems.

“Many migration programs include multiple systems integrators, SAP professional services providers and niche specialists, but lack clear decision rights, acceptance criteria and ownership across vendors,” said Stacey Cadigan, ISG partner and co-author of the report.

“Fragmented accountability and misaligned incentives lead to scope creep and delays,” Cadigan said. “To effectively govern SAP migration, enterprises need to explicitly define delivery ownership and maintain independent oversight of critical activities such as data readiness, integration testing and change management.”

Additional information on the ISG State of SAP report is available here.

About ISG

ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data, in-depth knowledge of provider ecosystems, and the expertise of its 1,600 professionals worldwide working together to help clients maximize the value of their technology investments.

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Contacts:

Press Contacts:

Laura Hupprich, ISG
+1 203 517 3132
laura.hupprich@isg-one.com

Julianna Sheridan, Matter Communications for ISG
+1 978 518 4520
isg@matternow.com

Source: Information Services Group, Inc.