Act Now! Strategic Considerations for Private Equity as ECC Support Ends This Year!

This is the first in a series of blogs by West Monroe and NTT DATA Business Solutions designed to help Private Equity and their portfolio companies manage their SAP ECC systems as we approach the withdrawal of standard support at the end of 2025.

The ECC Support Problem

In 2025, private equity firms must address the fast-approaching support deadlines for their portfolio companies' SAP ECC systems. When SAP extended ECC support to the end of 2027, many SAP customers may have assumed that no upgrade was necessary to maintain support. However, we have observed numerous ECC systems that have not been upgraded to Enhancement Pack 6-8 (EHP6-8). These ECC systems on Enhancement Packs below 6 will be out of support at the end of this year (2025).

With these critical deadlines approaching, it is essential to evaluate the options available to portfolio companies and make informed decisions that maximize value, enhance operational efficiency, and positively impact exit valuations.

Understanding the SAP ECC Support Deadlines

For portfolio companies running SAP ECC 6, the timelines are as follows:

• Enhancement Pack 0 to 5: Support ends on December 31, 2025.
• Enhancement Pack 6 to 8: Support extends to December 31, 2027, with further extended support available until December 31, 2030. This also requires migration to the SAP HANA DB.

These deadlines necessitate a strategic approach to ensure continuity and capitalize on new technological opportunities.

Strategic Considerations for Companies Running EHP6-8

For companies on EHP6-8, there is a slightly longer timeline, but we think it is important to, at a minimum, assess their options and have a plan. Now is the time to develop a strategic plan, evaluating various upgrade paths while considering business, technical, and operational constraints. As more companies transition, the market will become increasingly competitive, making early action beneficial.

Strategic Considerations for Companies Running EHP0-5

For companies operating on Enhancement Packs 0 to 5, the decision is whether to upgrade to EHP6-8 or transition directly to SAP S/4HANA.

What About Support Past 2025?

SAP will not provide standard support beyond 2025 for these versions, making it essential to either upgrade or explore third-party support options. Third-party providers can offer a temporary solution, granting time to plan a comprehensive upgrade strategy, but we see this as buying time at best and for some companies, being out of support directly with SAP may not be a valid option.

What does it mean to be “Out of Standard Support”?

As we approach the end of 2025, it is possible that SAP will offer to extend standard support, but we do not see this as likely. In our opinion, it is more likely that SAP will still provide support on a “best endeavors” basis. It is likely that SAP will not make any announcements that “take off the pressure” on customers to either go to EHP8 or to SAP S/4HANA.

What Are My Upgrade Options?

There are 3 main options for companies running ECC with Enhancement Pack less than 6:

1.?????? Upgrade to S/4HANA. Most likely a brownfield upgrade. Upgrading directly to SAP S/4HANA will cost more than an upgrade to EHP6-8, but much less than an EHP6-8 upgrade, followed by an S/4HANA upgrade a few years later.

2.?????? Upgrade to Enhancement Pack6-8.

3.?????? Investigate Third-Party Support or just accept SAP’s best endeavors (we don’t see this as a good option in most cases).

Summarizing Your Key Options

Key Factors to Consider, When Selecting an Approach

• Value Alignment: Ensure the upgrade aligns with strategic business objectives and maximizes investment value.
• Business Constraints: Evaluate the readiness and capacity of portfolio companies to manage the transition. This may rule out some approaches depending on available funds, management bandwidth etc.

Brownfield, Greenfield and Hybrid Approaches

In most cases, we expect to see ECC upgrades using the brownfield approach, managed as a mostly technical upgrade with no significant change in system footprint or functionality. In short, if the ECC system is a good fit and supports the existing business and its strategic needs, then a brownfield approach may be best.

If the existing system does not support the business well, either due to technical debt or for a multitude of other potential reasons, then it may be better to implement a new, clean, greenfield SAP S/4HANA system.

Brownfield and greenfield define the extremes of the spectrum, however, there are many “hybrid” options. In fact, most approaches are a hybrid between greenfield and brownfield, with some more towards the greenfield end and some towards the brownfield end. In some cases, it is beneficial to use special tools such as Natuvion, which can manage selective copies from ECC to S/4HANA. This can be useful if you want to migrate a subset of companies, to phase a migration.

A future blog will specifically describe these different approaches and when they make most sense.

SAP S/4HANA Cloud Public Edition

SAP is investing heavily in its Public Cloud Edition of S/4HANA. While there will still be customers who need the Private Cloud Version, the Public Cloud Version offers significant benefits in terms of total cost of ownership (TCO) and implementation effort. We have observed very fast and successful implementations, making this a compelling option worth considering for smaller and less complex operations. The reduced implementation timelines and costs make this option viable where a greenfield private cloud version would be too expensive or take too long.

Impact on Exit Valuations

The choice of upgrade path can significantly affect exit valuations for portfolio companies. Here are some considerations:

• Future-Proofing: Transitioning to SAP S/4HANA can enhance the attractiveness of a company to potential buyers by ensuring it is equipped with the latest technology that supports future growth.
• Operational Efficiency: Improved systems can lead to operational efficiencies, which can boost profitability and, consequently, valuation multiples.
• Risk Mitigation: Addressing the end of support proactively reduces operational risks, which can be a red flag during due diligence.
• Market Positioning: Companies that have successfully navigated the transition may be perceived as more innovative and adaptable, positively impacting their market valuation.

Next Steps and Recommendations

Engaging with a System Integrator (SI) can provide critical support during this transition. However, be cautious of SI preferences for greenfield implementations, which may not always align with portfolio companies’ needs. Our teams can offer tailored advice and support, helping you navigate these decisions with confidence and clarity.

The end of SAP ECC maintenance is not just a deadline but an opportunity to align IT strategies with future business goals. By taking a strategic approach and leveraging available resources, private equity portfolio companies can turn this transition into a catalyst for value creation, ultimately enhancing exit valuations.

Authors: Chris Perry and Brandon Evans, CPIM

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