Click to learn more about author David Binny.
Talk of the imminent move to SAP’s S/4HANA is nothing new. The clock is ticking and by 2025, they will stop supporting the current SAP ERP Central Component (ECC) solutions.
Companies can expect to see real-time data access that will help significantly cut reaction time to market and business changes, simplified business functions and data structure, and much more. Even with the changes coming, IT directors are struggling to get buy-in from the rest of their teams, which makes this an even bigger challenge when trying to convince the C-suite.
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The result remains clear: All ECC roads lead to S/4HANA, but making the case to get there can be a struggle. Here’s what companies need to know and how to make the case to move to S4/HANA.
Steps Toward Digital Transformation
There are a couple of different ways to approach the move. The greenfield approach means a completely new implementation, including both re-engineering and process simplification. This approach allows organizations to pre-define best practices, while improving time-to-value, lowering TCO, and facilitating faster adoption of innovation.
And while this can be a lengthy project, especially on the change management side, it allows companies to start from scratch. This means that there’s now an opportunity to redefine and simplify business processes and take full advantage of S/4HANA capabilities.
Going through this re-implementation route can be unnerving because there will be radical changes made to systems along the way. If a business does decide to go down this road, it’s important to ready the whole company for the larger re-engineering process that lies ahead. As with any new approach that requires you to start from scratch, this does come with risk since companies are building anew. That said, there always will be time left to fine-tune processes.
For existing customers operating on ECC that want to migrate to S/4HANA but maintain their investment in the current system, there’s the brownfield method. This enables migration to SAP S/4HANA without a full re-implementation, and without a complete upheaval to existing business processes.
It’s a calculated process that allows internal change managers the ability to re-evaluate customization and existing process flows without actually breaking down everything and starting from scratch. However, it also means that those looking to adopt the new technology aren’t always taking the time to simplify existing processes, nor are they always taking advantage of all the innovations that S/4HANA has to offer. Ultimately, it could mean that they get left behind.
There’s also a landscape transformation method that’s a loose combination of the green- and brownfield methods. This starts with a target shell system with no data. Using various SAP service provider tools companies, the company can perform any transformation activities to upgrade the target system. While this approach is meant to be non-disruptive, there is not enough data yet to provide a cost, risk, and efficiency analysis as the approach is fairly new.
Because the migration to S/4HANA touches every business unit, it’s understandable that many companies would be less inclined to go with the greenfield approach. Organizations are daunted by the difficulty in identifying the dimensions of potential change caused by a radical reconstruction of the entire SAP environment.
In picking any one of these methods, businesses can better identify their pain points and the hurdles they truly need to overcome in order to make the transition to S/4HANA. What’s clear is that regardless of the part of the business to which a person belongs, there are bound to be real benefits that come from the migration.
Creating ROI and Focusing on Innovation
ASUG’s CEO Geoff Scott was recently quoted as saying:
“Organizations are spending a lot on marketing innovation, such as front-office technology, where there’s a lot of buzz, but the front office and the back office [will] have to be in sync at some point.”
He has a point. After all, the front office can hardly function if the bones of the operation are in disarray. And as organizations grow, they often try to expand existing operations locally or into the global market. As they make this move, technical infrastructure plays a vital role in supporting operations.
Because of this increased role for IT, many organizations are looking for an ERP system to support operations across entire regions or countries. That’s all the more reason for businesses to start building a viable business case well ahead of the move to S/4HANA. Waiting until the last-minute means paying the priceof indecision, technical debt, market share loss to competition and eventually, a rushed, insufficiently-resourced migration project.
With a focus on innovation, here are a few pointers that every IT director should keep in mind as they create the business case for the move to S/4HANA. By clearly understanding and identifying your team’s pain points, it’s much easier to match the opportunities where a move to S/4HANA could make a difference.
- Choose Cloud or On-premise Deployment: SAP offers two different options for deployment: cloud and on-premise. Several considerations need to be made ahead of time in order to present the best option. Licensing models, infrastructure needs, maintenance, customization needs and cost are just a few of the key considerations. Ultimately, it boils down to what might be best for your business. On-premise is good for any enterprise looking for the full spectrum and functionality of S/4HANA, especially if compliance with industry-specific requirements and flexibility to customize the system are top concerns. For those looking for a more scalable ERP solution that can grow as company needs expand, the cloud option might be a better fit.
- Quantify the Financial Loss: Moving isn’t just about following the newest trend in ERP technology. This is a move that can bring real competitive advantages with its simplified architecture, real-time analysis, and performance improvements. S/4HANA is helping businesses achieve faster ROI. Outlining the potential loss of revenue that a company stands to experience by not making the move can help change minds faster, regardless of which approach it ultimately takes. And while the cost to transition is a very important part of any decision, the ROI benefits far outweigh the initial investment.
- Define the Scope: Defining the scope of a project is critical. In order to properly plan a project and estimate a timeframe and budget, organizations need to have a clear breakdown of what solutions should be developed, which processes should be standardized, and which processes can be tailored to local needs. If a specific customization is needed (e.g. a certain form should be designed to fulfill local tax regulations), make sure that this additional need is included as part of the project scope and addressed early.
- Organize a Diverse Team: Choosing the right people for the team is essential for achieving your project’s objectives. An SAP rollout project requires a diverse team of people, from those who have deep skills and an understanding of the whole process across all business units to those who can collaborate with different stakeholders such as key users and developers.
Making the Move
After speaking to people on-the-ground at SAPPHIRE this year, we learned that a major pain point is the evaluation (business case) phase; the project scope, resources, and timeline are difficult to evaluate for something so new. Getting teams aligned on the opportunity that S/4HANA presents, as well as gaining a better understanding of the financial gains a company could see, will go a long way in creating a strong business case.
Migrating to S/4HANA is inevitable for current SAP customers. And while that process may be sound daunting, the likelihood of success can go up considerably if preparations on the approach to take are made early enough to present a strong business case. In making the business case for S/4HANA, focus not only on where you are heading, but remember to highlight what you stand to gain. It will be easier for companies to continue to expand and grow globally with the right technical infrastructure to support their growth.
And if you’re still worried? Rest easy knowing that there are automated tools available to facilitate precise scoping for migration projects and their individual components.
This technology can reveal, for example, which code lines will be affected by migration and what the overall impact on SAP-related business processes will be. It also can find unused or useless code fragments and interfaces, enabling you to eliminate technical debt before the project starts and further streamline costs and overhead.
If every road leads to S/4HANA, let’s be sure they’re all as smooth as possible!