SAP partners primed for growth as companies set to migrate to cloud

03 May 2023 2 min. read
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Revenue growth in the SAP partner ecosystem is expected to accelerate in the coming years as companies with legacy systems migrate to the cloud, according to Equiteq’s annual SAP Ecosystem M&A Report.

The investment bank estimates only 15% of on-premises SAP ECC users have completed their cloud migration to S/4HANA. With the Germany-based software giant ending maintenance support for ECC in 2027-2030, consulting and implementation partners can look forward to a rush of business.

Partners can also anticipate increased cross-selling as 45% of SAP cloud customers use multiple solutions across the firm’s software suite of enterprise resource planning (ERP), procurement, supply chain management (SCM), data management, customer relationship management (CRM), and human capital management (HCM).

SAP is the leading ERP software firm, with a 30% market share and a leading position in every category listed above except for CRM, where it is second to Salesforce. More than 430,000 companies in 180 countries use SAP’s solutions, including 99 of the 100 largest enterprises.

SAP partners primed for growth as companies set to migrate to cloud

Equiteq estimates SAP will expand its total addressable market from $420 billion in 2021 to $670 billion in 2025 – driven by partnerships, cross-category offerings, and innovation.

The SAP partner ecosystem comprises more than 22,000 companies with over 1 million consultants globally. Partner companies offer services in systems integration, managed services, cloud services, and consulting. Equiteq tags Accenture and Deloitte as the leaders in the SAP space among major global consultancies.

Strategic consolidation has continued in the SAP market, with strong interest in ERP implementation firms, specialized boutiques, and SAP consultancies with unique value propositions. M&A activity in 2022 and early 2023 was focused on the lower-middle-market, with strategic buyers being the most prevalent.

The largest deals were Advent International’s October 2022 acquisition of US-based Neoris (4,000 employees), Wipro’s May 2022 acquisition of US-based Rizing (1,000 employees), and Accenture’s July 2022 acquisition of Canada-based Solvera (400 employees).

Deal volume in the SAP ecosystem increased by a CAGR of 21% from 2018 to 2022, with sponsor-backed bolt-ons (61 deals) and emerging IT services firms (51 deals) representing the majority of buyers.

Valuation multiples were healthy over the same period, at a mean 2.4x of revenue and a median 2.3x of revenue.