When legacy ERP systems become a cost trap, migration can become a restructuring measure. We analyse the risks of system changes during a crisis, contractual pitfalls in licence and implementation agreements, and show how a structured migration path succeeds even under budget pressure.
The Ticking Time Bomb in the Server Room
In many mid-sized companies, a time bomb lies dormant: legacy ERP systems whose maintenance costs are exploding, whose interfaces are reaching their limits and whose vendors are discontinuing support. The situation becomes particularly dramatic when a company is already in economic distress — and the inefficient IT landscape becomes an additional burden.
The most prominent example is the forced migration from SAP ECC to SAP S/4HANA. SAP has set the end of mainstream support for ECC at 31 December 2027. After that date, there will be no more security patches, compliance updates or bug fixes. A paid extension until 2030 is available — at considerable additional cost and without access to the innovative features of S/4HANA.
For companies in restructuring, the question arises with particular urgency: Is the ERP migration an unavoidable investment in future viability — or an unbearable risk in an already strained situation? This article provides a differentiated analysis.
The Cost Pressure of Legacy Systems
Total Cost of Ownership (TCO)
The true costs of a legacy ERP system extend far beyond visible licence and maintenance fees. A comprehensive TCO analysis typically reveals the following cost drivers:
- Rising maintenance costs: Older systems increasingly require specialised know-how that is becoming scarcer and more expensive on the market. Maintenance fees often rise by 3–5% annually.
- Customisation legacy: Individual customisations accumulated over years make updates complex and costly. Every upgrade becomes a migration project in its own right.
- Interface problems: Integration with modern cloud services, e-commerce platforms or AI-powered analytics tools is often only possible via costly middleware.
- Productivity losses: Slow response times, lack of mobile capability and cumbersome user interfaces cost working time and frustrate employees.
- Compliance risks: Legacy systems can only meet current regulatory requirements (e.g. GoBD, e-invoicing, ESG reporting) with considerable effort.
The SAP Forced Migration
The deadline set by SAP is creating a migration bottleneck that is driving costs even higher. Experts forecast that consulting fees will rise by 10–20% in the final years before the deadline, while demand for S/4HANA specialists could exceed supply threefold by 2027. A complete ECC-to-S/4HANA migration typically takes 18 to 36 months for large enterprises — making early action essential.
Companies that negotiate the commercial aspects of their migration before committing to a technical plan achieve 30–55% lower total migration costs according to market observers.
ERP Migration as a Restructuring Measure Under IDW S6
Classification in the Restructuring Context
Within a restructuring concept under IDW S6, an ERP migration can be classified as both an operational and a financial restructuring measure. IDW S6 requires that each measure be presented in terms of its concrete feasibility, timeline and financial impact.
Digitalisation is now explicitly anchored in IDW S6 as a relevant topic: the restructuring opinion must answer how digitalisation affects the business model and what IT investments are required for future viability. A legacy ERP landscape can thus be identified as a root cause of the crisis — and migration as a necessary measure to restore competitiveness.
Presentation in the Integrated Plan
In the integrated restructuring plan (projected P&L, balance sheet and cash flow), the ERP migration must be fully mapped:
- Projected P&L: Project costs (consulting, licences, training) as expenses or capitalisable investment, expected savings from process optimisation
- Projected Balance Sheet: Capitalisation of software licences and implementation costs, depreciation schedule
- Projected Cash Flow: Cash outflows by project phase, licence model (one-time purchase vs. subscription), savings from reduced operating costs
Risks of Migration During a Crisis
The Alarming Statistics
The numbers speak clearly: according to Gartner, more than 70% of all ERP implementations fail to achieve their original business case goals, with up to 25% failing catastrophically. Particularly alarming: 83% of all data migration projects either exceed their budget and timeline or fail completely.
The three most common causes — inadequate change management, poor data migration and inexperienced teams — account for over 75% of all project failures. In a crisis, these risks are amplified because budget, time and human resources are already scarce.
Operational Risks
A failed ERP migration project can be existentially threatening for a company in restructuring. Computerwoche documents twelve ERP catastrophes in which migration projects led to massive operational disruptions. In one case, ERP-related costs amounted to four million dollars, with additional revenue losses and a gross margin decline of 22.2 million dollars in the quarter following go-live.
Typical operational risks include:
- Business interruption: During the changeover, order processing, production and logistics may be impaired
- Data loss: Faulty data migration can lead to loss of historical data, incorrect balances and inconsistent master data
- Employee overload: The dual burden of restructuring measures and the ERP project can overwhelm key employees
- Supplier relationships: Errors in procurement processing can further strain already burdened relationships with critical suppliers
Financial Risks
- Budget overruns: Given the statistics cited, significant budget overruns are likely — in a crisis, this can jeopardise liquidity
- Opportunity costs: Management capacity tied up in the ERP migration is unavailable for other restructuring measures
- Sunk costs: If the project is abandoned, investments already made are lost
Big Bang vs. Phased Migration
Big Bang Approach
In the big bang approach, the entire legacy system is shut down on a fixed date and replaced by the new one. This approach offers:
Advantages:
- Clean break — no parallel structures
- Shorter overall project duration
- No complex data synchronisation between legacy and new system
Risks:
- No fallback scenario in case of serious problems
- Maximum operational risk on go-live day
- Often untenable for companies in crisis, as there is no buffer for errors
Phased Migration
In a phased migration, individual modules or business units are migrated one after another:
Advantages:
- Risk limitation through step-by-step approach
- Lessons from early phases feed into later ones
- Lower strain on the organisation at any single point in time
- Investments can be spread over a longer period
Risks:
- Longer overall project duration
- Complex data synchronisation between legacy and new system
- Higher total costs due to parallel operation
Recommendation for Crisis Situations
For companies in restructuring, a phased migration is generally the safer path. Investments can be better aligned with liquidity planning, operational risk is more manageable, and the organisation is not additionally overwhelmed. The first phase should encompass the modules with the greatest quick-win potential — typically finance and controlling, where immediate savings and improved data transparency make the greatest contribution to restructuring.
Contractual Pitfalls
Classification of ERP Implementation Contracts
The legal classification of ERP implementation contracts has significant practical implications. The Frankfurt Higher Regional Court has clarified that contracts for implementing an ERP system based on standard software are typically mixed contracts with elements of both service and works contract law.
This classification has far-reaching consequences:
- Works contract elements (Sections 631 ff. German Civil Code): Where a specific result is owed (e.g. a functioning system per specifications), works contract warranty rights apply, including subsequent performance, reduction, withdrawal and damages.
- Service contract elements (Sections 611 ff. German Civil Code): Where only the performance of services is owed (e.g. consulting, training), service contract law applies — with considerably weaker rights for the client.
Critical Contract Clauses
When concluding ERP implementation contracts in a crisis, the following points deserve particular attention:
- Specification and acceptance: A precise specification of services fixed in a requirements document is essential. Vague wording inevitably leads to disputes over the scope of services owed.
- Fixed price vs. time and material: In a crisis, a fixed-price model with a clear scope is preferable to ensure budget certainty. Time and material contracts carry the risk of uncontrollable cost explosions.
- Milestones and payment schedule: Remuneration should be tied to clearly defined milestones, not merely the passage of time.
- Termination rights and exit strategies: Particularly in a crisis, a contract must contain clear termination and withdrawal rights, including provisions for insolvency of either the client or the implementation partner.
- Escrow agreements: For critical software components, source code escrow should be agreed to ensure continued operability even if the vendor fails.
Licence Law Challenges
Switching from an on-premise licence model to a cloud/subscription model (as with SAP S/4HANA Cloud) fundamentally changes the cost structure:
- One-time licence costs become ongoing subscription fees — a problem for liquidity planning in a crisis
- Existing licences may in some cases be credited — careful review of contract terms is required
- User-based licence models must be adjusted to the potentially reduced headcount after restructuring
Success Factors for Migration During a Crisis
1. Clear Prioritisation
Not everything at once. Identify the modules and processes that make the greatest contribution to restructuring — typically finance, controlling and procurement. Other modules can follow in later phases.
2. Strong Project Management
In a crisis, an experienced, dedicated project manager is indispensable. Project management must coordinate both the technical migration and alignment with the restructuring process.
3. Data Quality as a Prerequisite
A data migration is only as good as the quality of the source data. Before migration, invest in thorough data cleansing — incorrect master data, outdated conditions and inconsistent inventories must be corrected before transfer.
4. Change Management
Switching to a new ERP system requires significant adjustments to workflows. In an already unsettled workforce, professional change management is crucial to overcome resistance and ensure acceptance.
5. Realistic Budget with Risk Buffer
Plan a risk buffer of at least 20–30% of the project budget. Given the statistically documented budget overruns, this is not a precaution but a realistic calculation.
6. Contract Design with Prudence
Have all IT contracts reviewed by specialised lawyers. Pay attention to a clear works contract classification of success-critical services, fixed-price agreements, milestone-based remuneration and appropriate termination rights.
Conclusion: Migration as Opportunity — With Due Caution
An ERP migration during a crisis is no foregone success. It carries significant risks that, if inadequately planned, can jeopardise the restructuring. At the same time, a legacy IT landscape can block the restructuring from within: without reliable financial data, without efficient processes and without the transparency that stakeholders — particularly banks and investors — rightfully demand.
The key lies in realistic, phased planning embedded in the integrated restructuring plan, careful contract design that distributes risks, and professional project management that maintains the balance between restructuring pressure and migration complexity.
At compleneo, we advise companies in restructuring on all legal, contractual and strategic aspects of ERP migrations — from assessment in the restructuring opinion through contract negotiations with implementation partners to integration into liquidity planning. Get in touch with us.
