In an Expert Focus for WaterBriefing, Martin Biggs, Vice President & Managing Director, EMEA & Strategic Markets, Spinnaker Support, takes a look the pressure from software vendors for costly ERP system migration in the run-up to AMP8.

Martin Biggs:  Even as the UK continues to be buffeted by the choppy waters of the cost-of-living crisis, households are now bracing for yet another wave: a surge in water bills.

And as the calendar flips toward the Asset Management Period 8 (AMP8), spanning from 2025 to 2030, these financial pressures will only grow in scale and scope – both for water companies and consumers. This period is crucial for the water industry, as companies like yours must decide how to invest in improving services while trying to prevent consumer water bills from skyrocketing.

With water bills on course to increase by an average of £27.40 this year, the problem is that households are already feeling the pinch. And you’ll know all too well that water companies have a big role to play in controlling these costs.

This is where IT leaders within the water industry come into play. How will you drive innovation, transform service delivery, enhance system resilience, reduce environmental impact – all without blowing budgets out of the water?

That’s not all. In this landscape of opportunity and obligation, there’s an additional challenge: the pressure from software vendors, notably SAP, to undertake costly Enterprise Resource Planning (ERP) system migrations. This push towards new, often cloud-based systems comes at a time when many water companies are seeking to optimise their existing ERP systems, balancing the need for technological advancement with the imperative to manage costs effectively.

So, IT leaders in the water sector – this is where you find yourselves as AMP8 approaches. The decisions made today will shape the trajectory of water companies for years to come, influencing how you navigate the regulatory landscape, meet customer expectations, and address the environmental challenges that define our era.

Let’s start with a conversation about balancing value, innovation, and strategic investment.

SAP's sticking point

SAP, the major ERP software provider to many UK water companies, plays a central role in the operational infrastructure. They rely on SAP's ERP systems for critical functions, from financial management to customer service. However, SAP’s strategic push towards newer, cloud-based, systems adds pressure in an already challenging time for water companies.

A significant challenge here is the diminishing support and maintenance for older versions of SAP’s software, especially SAP ECC 6, with support ending in 2025 for Enhancement Pack 5 and earlier and 2027 for all other versions. SAP have also stated that there will be no innovation to their newer on-premise S/4HANA based software going forward.

This leaves you with a difficult and unappealing choice: undertake a costly and complex ERP migration or deal with the challenges of unsupported software, including potential cyber risks and operational inefficiencies.

This migration necessity from SAP is a financial and strategic challenge for water companies. Migrations of the magnitude that SAP expects will require a complete overhaul of your systems. You can expect business process reengineering, training, and potential disruptions to service delivery, with price tags running into the millions. When factored into the regulatory and investment frameworks governing the sector – such as the upcoming AMP8 – the implications are potentially severe. As you’ll know, this next critical regulatory phase emphasises innovation, environmental sustainability, and customer service improvement.

The financial burden of a SAP migration could divert essential funds from these strategic areas, inadvertently impacting service quality and environmental initiatives.

Exploring alternatives to traditional ERP upgrades

We believe it’s time for water companies to rethink their approach to ERP system support. The traditional tether to software vendors for maintenance and support, predicated on a cycle of upgrades and end-of-life announcements, isn't the only path forward.

By partnering with third-party support providers, water companies can break free from this cycle, maintaining stable and effective ERP systems without the compulsion to upgrade based on the vendor’s timeline.

This alternative route offers both cost savings but also strategic flexibility. It allows water companies to allocate their resources towards initiatives that align with AMP8's goals, such as enhancing infrastructure resilience, reducing environmental impact, and improving customer satisfaction. In essence, switching to third-party support empowers water companies to prioritise their operational needs and strategic objectives over the inflexible technological roadmap dictated by software vendors.

In short: you can maintain your current SAP systems with full support and maintenance from a third-party software support partner. This approach is at least 60% cheaper than vendor support, freeing more funds for real sector innovation and providing your consumers with peace of mind that their financial burden is being fairly and critically assessed.

Embracing innovation and flexibility

We know that water companies can balance immediate financial pressures with a long-term vision for a sustainable, customer-centric service delivery model, as one of the biggest water companies in the UK has successfully used our service for over 5 years. This allows a strategic re-evaluation of how technology supports these goals – and third party software support can help you.

SAP’s push towards newer systems, while innovative, only highlights the need for a more adaptable approach to software support – one that respects the unique challenges and priorities of the water sector.

Exploring third-party software support is about reclaiming control over your technological destiny, ensuring that every pound spent on software support is a pound invested in a sustainable, resilient future.