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COVID-19 forced a massive, disruptive change in the pace of business. A sudden and across-the-board shift to digital services hardened an IT culture around speed, efficiency, and rapid growth — capitalizing on trends that had already been at work for years and were given a sudden jolt of urgency. For example, digital transformation and the migration of applications to the cloud not only continued this year but practically exploded thanks to new paradigm shifts brought on by remote working and quarantining. A more digital-centric lifestyle — touching everything from virtual working and learning to shopping and socializing — that was thought to be years away from becoming mainstream, suddenly became everyone’s new normal.
There’s no going back from this change. In fact, we’ll continue to see this IT culture shift further come to life in 2021. We’ll see mergers and acquisitions take off in response to companies’ pent-up demands for growth. There will be more divestitures in a bid for organizations to become more efficient, and we can expect an uptick in internal transformation projects like cloud and SAP migrations.
1. A Surge in Mergers, Acquisitions, and Divestitures
While this year’s pandemic has wreaked havoc on the global economy, it’s had the opposite effect on a lot of larger organizations. A pullback in spending and activity among these enterprises has created a lot of bottled-up demand for growth and left many of these companies newly cash-rich. In 2021, both of these factors will collide to create a surge in mergers, acquisitions, and divestitures. Enterprises will ramp up plans to divest in businesses to eliminate redundancies and improve operational efficiencies while also acquiring others to broaden their footprint. As such, those businesses will need to ensure they have the right technology and processes in place to execute their M&As and divestitures seamlessly and quickly.
2. Moving Internal Transformation Projects from the Backburner to a Priority
One of the byproducts of the pandemic was that it forced organizations to accelerate internal transformation projects that had otherwise been on the backburner for years. Cloud migrations are just one example. A survey released earlier this year found that 87 percent of IT decision-makers around the world cited the pandemic as a factor that would accelerate their organization’s migration to the cloud.
Another transformation project that will rise up the list of priorities is the transition to SAP’s S/4HANA platform. SAP’s current deadline for migrating to S/4HANA is 2027, so it’s no surprise that this has not been top-of-mind for many businesses until now. But just as the pandemic has encouraged companies to rethink business as usual, that will also apply to the need for S/4HANA. And the reason is simple: SAP is so integral to how so many businesses operate that putting off S/4HANA migration for another five or six years will simply leave too much value on the table for too long.
With S/4HANA, companies can take advantage of the platform’s advanced predictive analytics, machine learning, and AI functionality to do more in real-time — from planning to the speed of delivery — so they can continue to operate and innovate at market speed. With the prospect of being able to do more in less time, we’ll see more companies migrate their SAP platforms to S/4HANA in 2021, compressing years’ worth of digital transformation planning into months.
3. Speed of Transformation and its Business-Critical Importance Will Further Accelerate
COVID-19 sparked a wave of business closures throughout 2020 — but the ones who have survived so far aren’t out of the woods yet. As companies scramble to accelerate their digital transformations, migrate their ERP platforms, move to the cloud, adopt AI, and acquire or divest in certain businesses, there are inevitably going to be winners and losers, and that was just as true before the pandemic as it will be after. What will determine the next few years’ worth of winners and losers will be the speed of their own transformations.
If companies are taking three years to transform, then by the time they’ve finished, they’ll already be out of date and will have missed their moment. To survive and thrive in 2021 and beyond, businesses will need to reduce the timeline of their digital transformation projects from years to just six to nine months. How?
As the speed of transformation becomes business-critical, these best practices will ensure you’re ahead of the curve:
- Taking a more selective approach to transformation — this might mean focusing on changing just 30-40 percent of the business, rather than everything at once. This ensures you’re not spending time, money, and effort on changing things that aren’t priorities and that the focus is only on those items that are mission-critical.
- Leveraging current investments for transformations, not ripping out and replacing them.
- Looking for partners with expertise in transformation projects who can help execute your process redesigns and ensure you’re reaping the most value from the end result.
As businesses turn the corner from a challenging 2020 to a more promising 2021, a renewed focus on cloud migration and digital transformation projects — including a move to SAP S/4HANA — paired with expanded or more efficient corporate footprints through M&As and divestitures, will become the biggest flashpoints that define who gets ahead, and who gets left behind, in the new year.