ERP service providers: under the investor lens
As the ERP market shifts from legacy on‑premise systems towards the cloud, investors evaluating ERP service providers must understand how product lifecycles, customer needs, and market maturity shape partner performance. Armstrong explores how these factors shape the assessment of attractive assets in this space.
SAP ECC: A case study on retirement and migration cycles
The retirement of long‑established systems clearly illustrates how revenue models, service demand, and competitive dynamics change once a product approaches end of life. This has created new and interesting opportunities for investors.
SAP ECC’s upcoming retirement has demonstrated the disruption and opportunity created when an ERP platform reaches end of life. With ECC support winding down and customers migrating to SAP S/4HANA, service providers face an unusually large replacement cycle. Several investment implications follow:
- A mandatory wave of migrations: Organisations running ECC cannot remain on the platform indefinitely, which drives strong demand for partners with SAP S/4HANA migration capability.
- Transformation of revenue mix: Providers that rely heavily on ECC support and maintenance are at risk unless they shift toward S/4HANA transformation programs. Partners already certified and experienced in S/4HANA delivery enjoy stronger pipelines and premium pricing.
- Skills drive competitive differentiation: S/4HANA migration requires specialised expertise, given its bespoke nature. Investors should prioritise providers with proven methodologies and credible delivery histories of migration.
- Opportunities for broader digital transformation: ECC to S/4HANA transitions often expand into cloud hosting, automation, analytics, and integration services. This increases cross‑sell potential and recurring revenue.
- A change of ecosystem: There was a portion of ECC customers that decided that S/4 HANA was not suitable for their needs, driven by the cost of the tool itself which was further compounded by a lengthy and complex multi-year migration. These customers migrated to other cloud-native providers, often going to market engaging in formal selection processes.
This pattern mirrors what is occurring or is about to occur in other vendor ecosystems over the next decade; product sunset readiness is a critical investment lens (e.g. Sage 1000 and Oracle’s JD Edwards). ERP service providers who have strong migration capabilities and align themselves with future-focussed products will be well placed to capitalise from this shift.
Service-centric vs. product-centric ERP: Why sector fit matters
ERP systems differ significantly in design philosophy. Some are built to support service‑based operating models such as professional services, consulting, and other asset‑light industries, while others are designed for product‑based models including manufacturing, distribution, and inventory‑driven supply chains.
Sector fit is critical, particularly during vendor retirements that force clients into high‑stakes migrations. ERP services firms whose expertise and vendor partnerships align with the customer’s operating model can deliver faster, with fewer customisations, lower implementation risk, stronger adoption, and more predictable margins as customers become increasingly selective.
Investors should therefore assess whether an ERP services provider can guide customers to the right target platform following a legacy product retirement, not just execute the migration. This is typically driven by the service provider having a strong track record across a broad product suite; this can be within one or multiple vendors.
Customer size dictates product fit and provider economics
ERP ecosystems are segmented by organisation size, and this has significant implications for investors.
Systems such as Sage Intacct, Acumatica, NetSuite, and Microsoft Business Central meet the needs of fast-growing SME and mid-market organisations. They offer usability, rapid implementation, and lower ownership cost. Providers benefit from high volume and recurring subscription revenue but usually operate at lower margins per project.
Platforms including SAP S/4HANA, Oracle ERP Cloud, and Workday support mid to large enterprises, which will likely have more complex and globalised needs. Providers in this segment achieve higher day rates and deliver multiyear transformation engagements but face longer sales cycles and specialised talent requirements.
Investors should assess how the partner’s target market aligns with their delivery model, pricing structure, and reference base.
Ecosystem maturity, training pathways, and talent availability
The maturity of an ERP ecosystem affects provider scalability. Large ecosystems offer global training resources, strong communities and extensive third-party integrations while smaller ecosystems limit available talent, increase hiring costs and slow scale up.
Investors should examine talent availability, career development pathways and offshore capability.
Localisation and market adaptation
Some ERP products require localisation for specific geographies. For example, certain US focused ERPs require UK tax, reporting, or compliance extensions. Providers with prebuilt IP, strong regional vendor relationships, and referenceable customers have a clear advantage.
In summary, leading ERP service providers distinguish themselves through future product focus, proven migration capability, sector‑aligned specialisation, clear customer‑size targeting with repeatable delivery models, strong vendor‑ecosystem alignment, and regional localisation IP.
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Anjali Obhrai
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