Fry, who alongside manager Darren Ferguson helped Posh reach the Championship last season, told BBC Radio Five Live: "It's a fantastic coup.
"You've got to congratulate Sven for going in and having the challenge, not many ex-England managers would go to a League Two club and fancy the challenge of running the club from top to bottom and getting it into the Championship in five years.
"It is a tremendous challenge.
"The most important thing is they keep the manager, Ian McParland, because no disrespect to Sven, he won't know what League Two players he needs to get them out of that league.
"No disrespect to Sven, he wouldn't have a clue what it takes to get somebody out of League Two so I think it is very, very important he takes notice of his manager and backs him."