Migros has launched the ambitious “Eiger” project, its largest IT initiative, to upgrade to SAP’s S/4 Hana over five to seven years. This move addresses the urgent need for cloud migration before support for older software ends by 2030. Despite widespread dissatisfaction among SAP customers, organizations like Migros remain dependent on SAP due to high switching costs. Alternatives exist, but few companies are willing to transition from SAP, highlighting the complexities of vendor lock-in and customer loyalty challenges.
The Ambitious “Eiger” Project at Migros
Migros has embarked on what it describes as its most significant IT initiative ever, named “Eiger.” The choice of name is likely symbolic: the transition to the new SAP version, S/4 Hana, is akin to an inexperienced hiker attempting to climb a challenging peak. This monumental project is projected to span five to seven years. Currently, according to project manager Franziska Reist, “Eiger” is making steady progress and is “on schedule,” positioned at the midway point of its timeline. However, Migros is not alone in its technological endeavors.
As one of the world’s premier enterprise software providers, the German SAP corporation serves several hundred Swiss clients, including federal agencies. These organizations rely on SAP solutions for essential operations such as financial accounting, logistics, and human resources management.
The specifics regarding the financial investment Migros is making in this upgrade remain undisclosed by Reist. While the update aims to standardize processes and enhance operational efficiency, she describes it as a “replacement investment,” which is fundamentally about maintaining current performance levels rather than generating additional returns. This indicates that Migros is investing more in the SAP update than it anticipates saving in the long run by implementing the new version.
The Urgency for Cloud Migration
Why, then, does Migros undertake such a significant project? The answer lies in the necessity of adapting to a cloud-based environment. By 2030, support, innovations, and security updates for older software versions will no longer be available, a scenario that few companies can afford to face.
Franziska Reist asserts that SAP has a firm grasp of the situation, recognizing that many businesses depend heavily on its solutions for critical processes, making a switch to another provider impractical. As Reist puts it, Migros is “married” to SAP, a situation known as vendor lock-in, where changing providers would often incur higher costs and complexities than simply accepting the required updates. Consequently, Migros did not explore alternative options, as that would have been a futile exercise given the historical dependencies on SAP’s systems, which encompass finance, HR, and inventory management.
Many organizations, including the University Hospital Zurich (USZ), find themselves in similar predicaments. USZ’s technology manager, Guru Sivaraman, confirms that the institution has concluded SAP remains the optimal solution for its current applications. When asked about dependency on the provider, Sivaraman states, “Our operation depends on every important IT system.” The costs and risks associated with the update are deemed more manageable than migrating to a different system.
As Yves Dennler from Accenture highlights, numerous SAP customers face the same struggles, and very few companies choose to switch providers once they have committed to a software solution. Large corporations in Switzerland, as well as medium-sized companies with revenues exceeding 500 million francs and a workforce of at least 1,000, predominantly utilize SAP software.
The Customer Dilemma and Alternatives
The dissatisfaction among SAP customers is evident, as illustrated by a recent survey conducted by the interest group IG SAP Switzerland. In 2023, a staggering 97 percent of respondents expressed critical views regarding SAP’s product strategy. Over the past two years, customer trust has plummeted by 42 percent, with only 51 percent rating their satisfaction with SAP services as “poor or just okay.” Furthermore, nearly a third of customers voiced dissatisfaction with aspects such as conditions, licenses, and maintenance services.
Remo Schneider, head of IG SAP Switzerland, emphasizes that SAP’s push towards cloud solutions is not without merit, as it further entrenches customer dependency. Once logistics software is selected, transitioning to another provider becomes exceptionally challenging, often incurring costs in the millions. SAP can exert price control, as evidenced by annual contract increases of 3.3 percent, which disproportionately affect customers without strong negotiating leverage.
Despite the challenges, few companies are willing to shift away from SAP, with numbers likely remaining in the low single digits. Among the exceptions is chip manufacturer Zweifel, which, after evaluating its options, chose Swiss provider Abacus for its “flexibility, openness, and proximity.” Similarly, the Zurich-based media house TX Group transitioned to American provider Workday, prioritizing factors such as “future viability, flexibility, scalability, and long-term ERP costs.” Their new system has proven to be significantly more cost-effective, although exact figures remain undisclosed.
In contrast, Lidl has opted for a different strategy. For over thirty years, the retailer has relied on its proprietary system, Wawi, but initiated a transition to SAP in 2012. However, after five years and around 500 million euros in costs, the project was abandoned, reverting to Wawi, which is tailored to Lidl’s specific needs. Nonetheless, Lidl aims to harness cloud technology benefits while maintaining its own data center, with Schwarz Digits adapting the Wawi system accordingly.
In response to criticisms regarding customer dependency, SAP’s co-managing director, Sabrina Storck, notes that the lines between customers, partners, and competitors are becoming increasingly blurred, emphasizing the importance of ecosystems that foster complementary capabilities. However, she acknowledges that maintaining strong customer loyalty is a priority for SAP, with new initiatives aimed at ensuring that customers can swiftly adopt and leverage innovations.