The Rising Cost of Contractors: A Key Consideration for SAP S/4HANA Migration Planning

As we look toward the SAP S/4HANA 2027 end-of-support deadline, companies planning their migrations should be aware of a critical aspect that could significantly affect their budgets: the rising cost of skilled contractors. Just as in the late 1990s, when Y2K preparedness caused contractor costs to skyrocket, we’re now seeing similar market dynamics as organizations work to complete SAP S/4HANA transformations. Modeling these increasing contractor costs into your business case is essential for accurate budgeting and strategic planning.

Lessons from Y2K: Contractor Costs in High-Demand Scenarios

To fully appreciate what’s at stake, we can look back 25 years. In the late 1990s, the looming Y2K crisis created a frenzy of activity as companies scrambled to ensure their systems wouldn’t fail when the clock struck midnight on January 1, 2000. This deadline-driven demand for IT professionals caused a significant increase in contractor rates as companies faced a limited supply of skilled workers.

Fast-forward to today: while the Y2K problem may seem like a distant memory, SAP’s decision to end support for ECC systems in 2027 has created a similar situation. With thousands of businesses facing the same deadline, the demand for experienced SAP professionals—especially those with S/4HANA migration expertise—is rising sharply. As this deadline approaches, companies that wait to begin their migrations risk facing higher contractor rates and scarce resources, which can add unanticipated costs and complexity to their projects.

Why Modeling Contractor Costs Is Critical for Your SAP S/4HANA Migration Business Case

Accurately forecasting project costs is a cornerstone of any effective SAP S/4HANA migration plan. Given that labor often represents a large portion of implementation expenses, modeling projected contractor costs into your business case is crucial. Here are a few key reasons why factoring in rising contractor costs now will benefit your organization later:

1. Realistic Budgeting and Resource Allocation Underestimating labor costs can cause significant budget overruns, leading to project delays and potential disruptions. Factoring in an increase in contractor costs—based on historical data from Y2K or other large-scale tech transitions—provides a more realistic view of the resources your project will require.
2. Risk Mitigation Projects that kick off close to SAP’s end-of-support deadline will be competing in a supply-constrained contractor market. By proactively building increased contractor costs into your business case, your company can avoid the risk of needing to secure emergency funding or make drastic project cuts.
3. Strategic Planning and Resource Lock-In Understanding the potential cost increases also helps in planning contractor engagement timelines. Locking in talent sooner rather than later can mitigate some cost escalation and ensure continuity in project staffing.
4. Executive Buy-In and Stakeholder Alignment Including projected contractor cost increases in your business case makes the cost implications of delaying clear to senior leadership. This visibility helps secure executive support, as stakeholders are better informed about the financial risks associated with waiting.

How to Model Contractor Costs Effectively

To effectively account for rising contractor costs, companies should consider the following strategies:

• Market Analysis and Benchmarking Gather data on current SAP contractor rates and look for trends in similar markets. Organizations like Gartner or ASUG often publish relevant data and can provide insights into contractor demand. Additionally, consider surveying industry peers or engaging a consulting partner to get a sense of contractor price trajectories.
• Scenario Planning Build several scenarios into your business case that factor in different contractor cost increases over time. This approach allows for more dynamic planning and gives decision-makers a clearer view of the potential impact of delays.
• Early Resource Commitments Where possible, consider beginning to source key contractors earlier, particularly those with niche skills like SAP ABAP or S/4HANA process expertise. Securing contractors early can help mitigate some of the cost increases as competition grows over the next few years.

The Cost of Delay Is Real: Act Now to Avoid Budget Surprises

While 2027 may seem a few years away, companies that wait to start their S/4HANA migrations will face an increasingly tight contractor market with escalating costs. Just as Y2K drove a spike in IT contractor rates in the late 90s, the 2027 deadline for SAP ECC support will likely push contractor costs higher in the coming years.

Integrating these costs into your SAP S/4HANA business case will provide a more accurate forecast, reduce your risk exposure, and allow your team to make well-informed decisions. Start planning now to lock in resources, align executive support, and stay on budget—because the sooner you begin, the more control you’ll have over both costs and outcomes.