The impending end of support for the popular SAP ECC 6.0 enterprise resource planning (ERP) system in 2027 presents a significant challenge for companies undergoing divestiture. These organizations must not only manage the complexities of separating their systems but also align their SAP upgrade strategies to transition to SAP S/4HANA. This dual challenge requires careful planning and strategic decision-making to ensure business continuity and future readiness.

In this article, we highlight some of the common risks and challenges divested companies face when managing this transition and key recommendations to ensure success.

Critical multi-tasking

For companies being carved out, the need to separate their IT systems from the parent company is a critical process that involves creating a standalone IT environment for the new entity. Now, with SAP no longer offering free support for ECC 6.0 after 2027, companies being divested before this deadline must also simultaneously upgrade to SAP S/4HANA. Managing both transitions and ensuring completion within the same timeframe can be a daunting task.

Clone and go: A double-edged sword

One common approach to system separation is the "clone and go" strategy, where the existing SAP environment is duplicated for the new entity. While this method can expedite the separation process, it requires both the parent and the new entity to manage separate SAP upgrade projects. This duplication can lead to increased costs, resource allocation challenges and the burden of maintaining heavily customized legacy systems. The new standalone entity may find itself struggling with an upgrade project or, worse, stuck with an unsupported, heavily customized system post-2027.

Challenges for sellers

Sellers, or parent companies, also face significant challenges. They must support the divestment process and manage Transitional Service Agreements (TSAs) while making progress on their own SAP upgrade roadmaps. TSAs - temporary agreements in which the parent company continues to provide certain services to the divested entity - add another layer of complexity to the separation and upgrade process. Balancing these demands can strain resources and delay strategic initiatives.

Limited System Integrator Availability

As the 2027 deadline approaches, the demand for system integrators — experts who assist with SAP upgrades — is expected to surge. This increased demand could lead to a scarcity of available resources, making it difficult for companies to secure the necessary expertise for their upgrade projects. The risk of limited availability underscores the importance of early planning and engagement with system integrators.

Strategic Recommendations

To navigate these challenges effectively, companies should consider the following strategic recommendations:

1. Early Planning: Begin planning system separation and SAP upgrade processes as early as possible. This will allow for a more comprehensive assessment of needs and the development of a detailed roadmap.
 

2. Cost Considerations: Factor in the cost of extended support for SAP ECC 6.0 in your financial planning. This includes evaluating the potential need for extended support contracts if the upgrade cannot be completed by 2027.
 

3. Resource Allocation: Define and plan for both internal and third-party resource requirements. This includes identifying key personnel within the organization and securing external expertise from system integrators.
 

4. Risk Management: Develop a risk management strategy to address potential challenges such as resource scarcity and project delays. This strategy should include contingency plans and flexible timelines.
 

5. Stakeholder Engagement: Engage all relevant stakeholders, including IT, finance and business units, to ensure alignment and support for the transition process.
 

By addressing these considerations, companies can mitigate the risks associated with the end of support for SAP ECC 6.0 and position themselves for a successful transition to SAP S/4HANA. Early and strategic planning will be crucial in navigating the complexities of system separation and SAP upgrades, ensuring that both the parent company and the new entity are well-prepared for the future.

How can A&M help?

A&M’s Business Technology team supports companies in defining and operationalising their growth agendas, conceptualising new digital businesses, products, or services, and delivering the near-term gains required to reinvest and fuel future growth. Our team, which includes many experienced CIOs and Technical Experts, brings leadership and expertise to help turn strategy into execution and to overcome roadblocks to success.

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• ERP and application landscape strategy, design, and implementation review to ensure meeting evolving business needs, alignment with current technology standards, and delivery of improved performance
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