SAP, the Walldorf-based enterprise software giant with a market cap of 325 billion, is rapidly refocusing its business on cloud services and Artificial Intelligence, even as many customers struggle to keep pace with product changes and licensing shifts. Core offerings such as S/4HANA, the Business Data Cloud, and the expanding SAP Business Suite remain central to enterprise operations worldwide, while the company uses Artificial Intelligence to power tools including its Joule copilot, role-aware Joule Assistants, and a growing set of autonomous and collaborative agents. At the same time, SAP is restructuring its executive board, introducing new Artificial Intelligence-focused leadership roles, and undertaking a restructuring program that will impact about 7.4% of its total workforce as it seeks to position itself as an Artificial Intelligence-first, suite-first provider.
Cloud migration and S/4HANA adoption continue to be pain points for customers, with studies and user group surveys highlighting budget overruns, schedule slips, and lingering doubts about return on investment. At the end of 2024, only 39%, or about 14,000, of the 35,000 SAP ECC customers had migrated to S/4HANA, and Gartner projects there will still be 17,000 holdouts, or nearly half of the ECC customer base, by 2027. Licensing and maintenance policies, especially around the Rise with SAP program and expiring S/4HANA Compatibility Packs, are drawing criticism from user groups that want greater transparency and more flexibility across hybrid and sovereign cloud setups. SAP has been forced to offer short transition lifelines, big discounts to lure on-premises S/4HANA customers to Rise, and new ECC offerings to reduce risk for large organizations that cannot modernize quickly.
Artificial Intelligence is increasingly embedded across SAP’s portfolio, with initiatives such as the AI Foundation, AI agents throughout SAP Business Suite, and extended Joule capabilities in SAP Build, Datasphere, SuccessFactors, and developer tooling. Partnerships with Amazon Web Services, Microsoft, Nvidia, Snowflake, Alibaba and appliedAI target generative Artificial Intelligence co-innovation, data unification, and European data sovereignty, while services like SAP Sovereign Cloud On-Site are designed to let customers run cloud workloads in approved data centers. However, many customers remain wary of SAP’s policy of delivering key Artificial Intelligence innovations only in the cloud, complaining about opaque generative Artificial Intelligence pricing and uneven availability of Joule features despite Joule AI being made available to all Rise with SAP customers in unknown, varying amounts.
Security and compliance are another recurring theme as SAP systems become more visible targets. Researchers and security vendors have reported critical vulnerabilities in SAP GUI, NetWeaver, and Commerce applications, including flaws that scored 9.9 on the CVSS scale and issues that enable unrestricted file uploads and weak or no encryption of sensitive data. Threat intelligence presented at Black Hat highlights a spike in attacker interest in SAP ERP systems over the past four years, while missteps in large public-sector ERP projects, such as the Quebec auto insurance overhaul and an Air India contract worth 27 million, expose implementation and governance risks. SAP is responding with frequent security patch bundles, data governance enhancements in Datasphere and SAP Analytics Cloud, and a broader pitch that its platform can help customers meet sustainability reporting and partner oversight requirements by centralizing data collection and anomaly detection.
Regulators in multiple jurisdictions are scrutinizing SAP’s market behavior and contracting practices, creating legal and financial uncertainty alongside the company’s strategic pivot. In Europe, the European Commission has opened an antitrust investigation into SAP’s software support and maintenance services and is probing whether the company forces customers to buy services for longer, and for more licenses, than they need, while SAP has offered concessions intended to resolve or avert such probes. In the US, the Department of Justice is investigating whether SAP and reseller Carahsoft conspired to fix prices on sales to the US government, and the US Supreme Court has declined to hear SAP’s appeal in an antitrust case brought by Teradata, clearing the way for trial. Additional disputes, including a lawsuit from Celonis over alleged anti-competitive data access practices and a probe in India into public-sector ERP awards, underscore how SAP’s dominant position in enterprise applications is increasingly constrained by legal, regulatory, and customer trust challenges even as it reports strong financial results and a solid start to the year despite economic turbulence.
