Few at SAP are bet­ter-qual­i­fied to speak to the evo­lu­tion of the company’s cloud ERP port­fo­lio than Jan Gilg, Pres­i­dent and Chief Prod­uct Offi­cer, Cloud ERP.

An 18-year vet­er­an of SAP, Gilg has served as Glob­al Head of Enter­prise Archi­tec­ture, Glob­al Head of IT Busi­ness Ser­vices, and SVP & Head of SAP S/4HANA. That last posi­tion, which Gilg start­ed at the begin­ning of 2019, expand­ed a year lat­er to encom­pass SAP’s dig­i­tal sup­ply chain port­fo­lio, lead­ing to his cur­rent role, in which he’s respon­si­ble for dig­i­tal sup­ply chain and SAP’s cloud ERP.

As adop­tion of cloud ERP solu­tions con­tin­ues to accel­er­ate in the SAP com­mu­ni­ty, ahead of main­te­nance dead­lines that start to take effect at the end of next year, SAP is focused on pro­vid­ing its cus­tomers with tech­nol­o­gy and ser­vices to facil­i­tate mov­ing mis­sion-crit­i­cal ERP process­es to the cloud. In recog­ni­tion of this push, SAP was recent­ly named a leader in Gart­ner’s Mag­ic Quad­rant for Cloud ERP for Prod­uct-Cen­tric and Ser­vice-Cen­tric Enter­pris­es for the third con­sec­u­tive year.

In the first half of a wide-rang­ing con­ver­sa­tion, Gilg recent­ly dis­cussed key devel­op­ments he’s observed in SAP cus­tomers’ jour­neys toward cloud ERP, clar­i­fy­ing the clean-core approach, and what Gartner’s recog­ni­tion sig­ni­fies for SAP’s approach. 

This inter­view has been edit­ed and condensed.

When you reflect on 2024, what are the key devel­op­ments you’ve observed in terms of SAP cus­tomers’ jour­neys toward cloud ERP?

For years, we have been debat­ing the tran­si­tion from SAP ECC to SAP S/4HANA. In the ear­li­er years of that debate, it was all about, ​“What’s the busi­ness case? Why should I do this? What are the ben­e­fits of doing this?” That’s set­tled down. Every cus­tomer is clear: ​“If I want to stay with SAP, and look at SAP as my strate­gic part­ner to run my core busi­ness process­es, I will need to move to SAP S/4HANA.”

There are plen­ty of small­er ECC cus­tomers still out there, many of whom haven’t moved yet but are plan­ning to. For many of them, it will not be a huge move, which is why I believe there is still enough time for them; there are always lag­gards who come along at the end. But the major­i­ty has already answered that ques­tion by say­ing that they are mov­ing to SAP S/4HANA.

Of course, we’ve seen a lot of cus­tomers move for­ward on SAP S/4HANA on-premis­es, and we see sig­nif­i­cant growth there in terms of go-lives. Now, the dis­cus­sion on cloud and RISE has emerged; to a cer­tain extent, we’ve also course-cor­rect­ed here and said, ​“If you are mov­ing to the lat­est ERP ver­sion, which is SAP S/4HANA, then do it in the cloud with us. We do want to pro­vide ERP as a ser­vice, and we do believe this mar­ket cat­e­go­ry is ready to move to the cloud.” 

And why is that? It’s because we’ve seen that, even in indus­tries that tra­di­tion­al­ly would­n’t even talk about the cloud — pub­lic ser­vices, aero­space and defense, defense and secu­ri­ty — that atti­tude has changed. Those indus­tries are com­ing to us proac­tive­ly and say­ing that they want to go into the cloud, that they need to know what paths exist for them to do so and how they’ll get there.

That’s encour­aged us to say the mar­ket has decid­ed, and that our cus­tomers want to adopt a cloud mod­el. But it has become a very diver­si­fied mod­el in the cloud. It’s not one-size-fits-all. While SaaS is still a huge dri­ving force and for many cus­tomers prob­a­bly the right way to go, nuances exist — includ­ing one we cre­at­ed our­selves, which is the pri­vate cloud, espe­cial­ly for our largest cus­tomers. Con­sid­er also the sov­er­eign cloud; that’s become more impor­tant as cus­tomers ask ques­tions about where their data resides. In 2024, this was anoth­er big shift where every­body said, ​“It’s clear I need to adopt a cloud mod­el. This has many, many ben­e­fits. The ques­tion is, how do I do that?”

Espe­cial­ly for those cus­tomers that moved already to SAP S/4HANA on-premise, per­haps on a hyper­scale infra­struc­ture there are still dis­cus­sions ongo­ing as to what the ben­e­fits are for them to also shift over to RISE and give us the respon­si­bil­i­ty, so to speak, to man­age their estate. But we’ve cer­tain­ly seen accep­tance on the gen­er­al direc­tion of cloud. 

Sur­pris­ing­ly, I also saw a larg­er shift to pub­lic cloud. The small­er ECC cus­tomers are ask­ing, if they’re mov­ing to SAP S/4HANA, why shouldn’t they go to the pub­lic cloud? Though dis­rup­tive, they can look at this more as a trans­for­ma­tion than a tech­ni­cal step. If they have to retouch their process­es and see ben­e­fits in stan­dard­iza­tion, why not then adopt a SaaS mod­el? How do they get there? How is this dif­fer­ent than mov­ing to a SaaS com­peti­tor? Those are ques­tions we need to answer to help cus­tomers, because we know it’s not always a green­field imple­men­ta­tion. I pre­dict more of those long-term ECC cus­tomers will move to the pub­lic cloud direct­ly than to a pri­vate cloud. 

To your point of larg­er busi­ness trans­for­ma­tion, what SAP cus­tomers are also show­ing in the ASUG com­mu­ni­ty is a cre­ativ­i­ty and inno­va­tion around how to make cloud ERP func­tion­al for their busi­ness­es, with side­car sce­nar­ios or hub-and-spoke mod­els that allow, for exam­ple, a busi­ness to pur­sue RISE with lega­cy busi­ness units and have new acqui­si­tions come in through SAP S/4HANA Cloud, pub­lic edition. 

We see this as well, and I ful­ly agree. Espe­cial­ly with our larg­er cus­tomers, from Col­gate to Shell to BMW, it’s com­mon to have both pri­vate and pub­lic cloud edi­tions of SAP S/4HANA Cloud run­ning. There’s been a shift away from this push toward a glob­al sin­gle instance, which had been the direc­tion for years; it was always very rigid, that con­cept. And when you acquire com­pa­nies that becomes a part of the busi­ness dynam­ic you have to account for; mov­ing them into a cen­tral instance could feel like shack­ling them, espe­cial­ly if that process doesn’t move fast enough for them or account for how they approach cer­tain process­es. With acqui­si­tions, specif­i­cal­ly, we see cus­tomers opt to move them to the pub­lic cloud.

This is why we’re push­ing in the pri­vate equi­ty area to find port­fo­lio com­pa­nies and get them set up with SAP S/4HANA Cloud, pub­lic edi­tion, because the like­li­hood that they’ll get acquired by a larg­er com­pa­ny that is an SAP cus­tomer is very high, and get­ting ready for that increas­es the val­ue propo­si­tion, giv­en that inte­gra­tion is the first step that fol­lows merg­ers and acqui­si­tions (M&A). That’s cur­rent­ly a big motion for us, to look at help­ing fast-grow­ing com­pa­nies get to the pub­lic cloud.

And that process has changed, as well. Now, we’re think­ing, ​“What are your com­mod­i­ty process­es that need to be imple­ment­ed fast, to be up and run­ning, for which you can apply best prac­tices with­out spend­ing much mon­ey, to have reli­able oper­a­tions? And what are the added inno­va­tions you can take advan­tage of, from dis­tinct line-of-busi­ness exten­sions to dis­tinct indus­try capa­bil­i­ties, part­ner capa­bil­i­ties, even cus­tom-built process­es that inte­grate with­out dis­rupt­ing the life cycle of the soft­ware and that work well in the pub­lic cloud?” This sep­a­ra­tion between the core and its exten­si­bil­i­ty has nev­er been made so clear in the past, between the com­mod­i­ty back­bone and the dif­fer­en­ti­a­tion on top. 

One nuance of this dis­cus­sion that’s emerged this past year has been around the idea of exten­si­bil­i­ty for the pub­lic cloud, which had pre­vi­ous­ly been so linked to the clean-core method­ol­o­gy and move toward stan­dard­iza­tion. We’re now see­ing SAP embrace this nuance of not ask­ing cus­tomers to sac­ri­fice dif­fer­en­ti­at­ing cus­tomiza­tions but instead shift­ing them out of the core ERP and gain­ing more devel­op­ment capa­bil­i­ties through SAP BTP. 

Clean core is an inter­est­ing top­ic, because I feel some­times it’s mis­un­der­stood quite a bit. This idea comes from the pub­lic-cloud world, where the core is clean by default, because SAP is man­ag­ing it 100% and cus­tomers can only extend, in a way, how we allow them to, through pre-defined inter­faces that have become increas­ing­ly sophis­ti­cat­ed. In trans­fer­ring that con­cept to the pri­vate cloud, we asked, ​“Why are we not doing this there as well?” 

There’s always a ques­tion of what you do with process­es you had in the past and what you do going for­ward. When you then extend, you should do it in a way that’s clean-core com­pli­ant, like you would in a SaaS envi­ron­ment; for all that came from the past, you have to decide, because it’s not cheap to refac­tor. We’ve seen, with many exten­sions, that on aver­age 60% of RISE cus­tomers’ cus­tom code is not even in use. So, why keep it? It’s a dead weight, so to speak. Of course, what do you do with the rest, and where is your real dif­fer­en­ti­a­tion? Clean core doesn’t mean you should­n’t extend. I think every ERP cus­tomer has to have cer­tain exten­sions, because that’s where dif­fer­en­ti­a­tion is. And the clos­er you come to oper­a­tional process­es — man­u­fac­tur­ing, enter­prise asset man­age­ment, and so on — the more that hap­pens. But that’s why I think exten­si­bil­i­ty in the way of clean core, also in the pri­vate cloud, is very powerful.

What are you hear­ing from the on-premis­es cus­tomer base, includ­ing those on ear­li­er ver­sions of SAP ECC, about their readi­ness to migrate to the cloud ahead of the ear­li­est main­te­nance deadlines?

There are many ele­ments to this dis­cus­sion of the main­te­nance strat­e­gy, specif­i­cal­ly. Many SAP ECC cus­tomers out there are small­er and sim­pler; the larg­er multi­na­tion­al cus­tomers are large­ly decid­ing for SAP S/4HANA via RISE, but the chal­lenge there is that they have so many ECC sys­tems, and it takes time to con­vert them. Through RISE, SAP is grant­i­ng a ser­vice that allows cus­tomers to car­ry for­ward old­er SAP S/4HANA and ECC releas­es that risked run­ning out of main­te­nance; there­fore, with RISE, we’re pro­vid­ing bet­ter options for those cus­tomers, through ser­vices that we pro­vide rather than what they own as a license.

ECC cus­tomers are get­ting ready, I think. The major­i­ty want to move and will move, but the ques­tion is what the best strat­e­gy is for each of them to do so. Is it more of a tech­ni­cal move, for exam­ple? What we see quite a lot is a selec­tive data trans­for­ma­tion method, where you take cer­tain pieces as they are and start fresh with oth­ers. That we see more often, togeth­er with our part­ners who pro­vide the nec­es­sary tool­ing to either do that or take a green­field approach. The clos­er it gets to the end of main­stream main­te­nance, the less like­ly it is for a cus­tomer to go green­field, because it typ­i­cal­ly takes more time, but it’s also shown from a val­ue real­iza­tion per­spec­tive to be more effec­tive and yield more return on invest­ment in the imme­di­ate term. 

If com­pa­nies are very dis­ci­plined with a brown­field approach, and they con­tin­ue to ren­o­vate that after the imple­men­ta­tion, they can of course yield those ben­e­fits as well, but it takes work to have dis­ci­pline. But we do see that cus­tomers are get­ting ready. We also see that knowl­edge­able resources and con­sult­ing resources are start­ing to get stretched thin, which we always pre­dict­ed; there will be a big wave of projects com­ing soon. 

We’ve also tak­en more mea­sures, in the con­text of RISE, to steer our sys­tem-inte­gra­tor part­ners to do this right, not to build up all this cus­tom code and car­ry it for­ward but to tru­ly fol­low the RISE method­ol­o­gy. We are mea­sur­ing that. We have dash­boards we look at that through, and we hold our part­ners account­able, because we do want our cus­tomers not to move from an SAP ECC sys­tem to SAP S/4HANA and get stuck there again. Most of them are get­ting ready. They will move. We have to accept that some will stay with ECC, and they will then pick up third-par­ty main­te­nance; those cus­tomers are usu­al­ly the ones we haven’t had much rela­tion­ship to in the past. I’m pret­ty opti­mistic that, with the time­lines that we set, we will be real­ly able to move the major­i­ty of our cus­tomers over.

SAP S/4HANA Cloud is a leader in Gart­ner’s Mag­ic Quad­rant for Cloud ERP for Prod­uct-Cen­tric Enter­pris­es for the third con­sec­u­tive year. What does this achieve­ment sig­ni­fy for SAP, and what does it say about SAP S/4HANA’s suc­cess as a com­pos­able ERP solution?

Cur­rent­ly, Gart­ner has two ERP Mag­ic Quad­rants: ser­vice-cen­tric and prod­uct-cen­tric. And both of them are look­ing at a lot of capa­bil­i­ties that go beyond a sin­gle prod­uct, which is in line with their view on com­pos­able ERP but also rep­re­sen­ta­tive of how we think about our software’s suite capabilities.

Next year, we will talk even more about our suite; as we tran­si­tioned the port­fo­lio into the cloud, I believe this focus was dilut­ed, because we had so many addi­tion­al cloud ser­vices required that wouldn’t fit tech­ni­cal­ly togeth­er. We’ve spent quite a lot of time bring­ing that suite back togeth­er. Now, we’re look­ing beyond the capa­bil­i­ties that you would have only as a cus­tomer of SAP S/4HANA Cloud. It’s great to be in there, giv­en that com­pe­ti­tion is strong in this area. 

In terms of our prod­uct-cen­tric recog­ni­tion, we have been push­ing quite heav­i­ly into the man­u­fac­tur­ing space. The last mar­ket seg­ment mov­ing to a SaaS mod­el is pro­duc­tion, and we see a sig­nif­i­cant por­tion of our installed base in our pub­lic cloud offer­ing that is in pro­duc­tion, so it is catch­ing on — the major­i­ty, of course, being in dis­crete man­u­fac­tur­ing, but we see more process man­u­fac­tur­ing com­ing in as well. 

At SAP Sap­phire, we brought SAP Sales Cloud and SAP Con­cur expense man­age­ment into GROW with SAP; it’s become an enti­tle­ment, not an addi­tion­al sub­scrip­tion. For that to work, it needs to feel like it is just a mod­ule of SAP S/4HANA Cloud, and that’s what we are work­ing on: as cus­tomers put them togeth­er in a much more flex­i­ble way, to ensure they work seam­less­ly togeth­er. That’s how I look at the com­pos­able archi­tec­ture and so-called suite qual­i­ties. Those are tech­ni­cal attrib­ut­es and ser­vices that each of the appli­ca­tions have to build in in order to make sure we have har­mo­niza­tion on the UI lev­el, and all the way down to the tech­ni­cal attrib­ut­es like pro­vi­sion­ing, down­time main­te­nance win­dows, and so on. Cloud exists as a ser­vice, and cus­tomers basi­cal­ly buy enti­tle­ments to pieces of the ser­vice. That’s the vision and where we are head­ed, and that’s why I think this is a great achieve­ment to be there in the lead­ers’ quad­rant. But of course, we do work hard to become that leader, which we are not yet, but that is cer­tain­ly some­thing we are focused on. 

Look­ing ahead to 2025, what does SAP need to pri­or­i­tize for cus­tomers, based on feed­back received this year? 

It’s all about help­ing cus­tomers to get into the cloud as eas­i­ly as pos­si­ble and to look holis­ti­cal­ly into their land­scapes. AI will con­tin­ue to play an extreme­ly impor­tant role, because it can be an accel­er­a­tor for many of those areas. Exten­si­bil­i­ty will remain a crit­i­cal top­ic. In the age of AI, data becomes even more crit­i­cal; if the data is not reli­able, then the results are not reli­able. We need to help cus­tomers get to reli­able data, then to as much data as pos­si­ble, in order to improve the qual­i­ty of what­ev­er mod­els they run to dri­ve gen­er­a­tive AI out­put. We will help cus­tomers with SAP Data­s­phere to extract the data that’s most valu­able in their sys­tem, bring­ing it togeth­er with all kinds of oth­er data they have in the enter­prise. We’ll look fur­ther into the data that we have received from our cus­tomers that have giv­en us con­sent, that we are using to pro­vide a foun­da­tion­al mod­el our­selves on tab­u­lar data. Next year, we’ll start to pilot that. At the end of the day, it is all about help­ing our cus­tomers to move to the cloud as quick­ly as pos­si­ble, then to start cap­tur­ing ben­e­fits, adopt­ing, and stay­ing current.