Brazilian firms have been slow to upgrade their SAP installations to S/4HANA or Business Suite on HANA and are waiting for incentives from the vendor as well as an extension to the support deadline for old products, according to a report.
Local organizations have been dragging their heels to upgrade even though older installations will not be supported after 2025, according to a study on the country's SAP HANA and Leonardo ecosystem carried out by technology analyst firm Information Services Group (ISG).
Brazilian organizations are buying new HANA licenses to stay compliant with licensing terms but don't upgrade their old systems, the report notes, adding that local firms tend to go for the brownfield model when it comes to SAP products, whereby old software coexists with new platforms.
According to the ISG study, use of conversion tools to transfer configurations and customizations to Business Warehouse (BW) on HANA is often seen in Brazilian businesses.
About 1,300 SAP systems in Brazil should be converted to S/4HANA or BW on HANA before 2025, the report notes, adding that large Brazilian user organizations are waiting for SAP incentives to update to the in-memory offering, or they are quietly betting on an extension to the 2025 end-of-support date.
"SAP partners are enthusiastic about the revenue stream that would come from widespread upgrades, but they worry that by waiting, enterprises will cause a logjam that opens the market up to competitors," warns Esteban Herrera, partner and global leader of ISG Research.
While large organizations in Brazil tend to go for brownfield upgrades, medium-sized companies often adopt S/4HANA as a greenfield project, where the SAP platform is rolled out as a new product, replacing in-house or legacy systems.
According to SAP itself, SAP's cloud-based systems such as Commerce Cloud and C/4HANA were the main strategic focus for the company in the Brazilian market for 2018 and delivered three-digit revenue growth, with significant adoption within retailers nationwide.
One such retailer is Brazilian cosmetics giant Natura&Co, the highlight for the firm in terms of new contracts last year. The company acquired a series of products including S/4HANA, C/4HANA, Ariba and Concur, to be rolled out across its brand The Body Shop.
Despite the slow upgrade trend observed in the ISG report, the analyst firm notes opportunities in the managed services space abound in Brazil, adding that many local companies focused on that space field teams of 150 to 1,000 consultants. Overall, the report estimates the partner ecosystem employs over 13,000 SAP consultants nationwide.