With 35,000 companies currently buying, implementing, or running on SAP S/4HANA, there’s hardly any topic being discussed as intensively among CFOs and CIOs than the switch to SAP’s new cloud ERP.
Sure, with SAP putting an end-of-life support date on ECC, many SAP users won’t have much of a choice but to switch to S/4HANA. But that doesn’t mean you should go blindly into this adventure.
Because switching the backbone of your operations (be it from SAP ECC to S/4HANA or any other kind of system migration) is of course never as simple as it sounds. Without a bulletproof strategy in place, system migrations come with a myriad of challenges and potential pitfalls that can disrupt your business and put your value realization at risk.
Read 6 Strategy-Defining stats about System Migration to learn more about the risks, challenges, and benefits of system migrations.
That's why we’ve sifted through dozens of benchmark studies, SAP customer surveys, and independent vendor reports about migrating to S/4HANA so that you don’t have to. The result? 5 strategy-defining stats you should know when you’re considering migrating — or have already started to move — to SAP’s newest ERP in the cloud.
To drive digital transformation and better business outcomes, upgrading or replacing your legacy software will become inevitable at some point. After all, you can't support the business models of tomorrow — on-demand, digital, mobile-first, global — with yesterday's technology.
So will every company running on SAP move to SAP S/4HANA? Maybe not every company. But this is a watershed moment for SAP customers. Many of them are haunted by the same doubts and questions: Can they stay competitive with their current SAP ERP system? And if not, will the ROI outweigh the risks and efforts coming along with the move to S/4? If they decide to migrate, when is the best moment to start?
In a recent survey of nearly 150 companies using SAP, SAPinsider asked about their plans to migrate to SAP S/4HANA. This is where they stand.
No IT leader, CFO, or CIO will jump for joy when they embark on a system migration initiative. Complex projects like an S/4HANA migration come with a hefty price tag and serious risks. Some never get off the ground at all, like Lidl. The German retailer spent €500M ($580M) and seven years migrating to a new company-wide inventory management system, before giving up and reverting back to their old home-grown solution.
Since horror stories like these are not uncommon, it’s no wonder that 61% of IT leaders in a 2019 Frost & Sullivan Global Cloud User Survey said that they struggle to gain or retain management support for an SAP migration to the cloud. At the same time, 62% said that they don’t have sufficient budget to complete their cloud implementation plans.
The problem: These initiatives often arise out of necessity rather than strategy, be it new vendor requirements, changing business needs, or mergers and acquisitions. As a result, both IT and business leaders often treat them as a tactical IT project rather than an enterprise-wide strategic initiative, under-planning and then missing out on significant opportunities to deliver business value.
Building a quantitative business case for migration is therefore the first step to success — and the key to maintaining that executive support when the going gets tough.
There’s no doubt that migrating to S/4HANA comes with a host of IT- and process-related challenges. Since companies often lack the right migration expertise in-house, a large number of businesses will decide to engage with expert partners. They usually offer support at several stages throughout the migration, from workload assessment to putting together a migration plan, to process mapping, deployment, and ongoing management.
Getting support for your IT team is a great idea. But greater business value is not a given, even if you bring in a team of external consultants. Why? Because typical methods of process mapping — like workshops, surveys, or time studies — are often subjective and incomplete.
That’s why the most forward-thinking companies and consultants themselves often draw on additional technologies to get a data-driven picture of their processes. Only with 100% visibility across your process landscape, can you fully understand the downstream impact of changes and deprecations.
“There is no doubt we've embraced Process Mining as an essential part of our S/4HANA transformation approach. It has become an integrated fact-based navigator throughout the transformation journey,” confirms Marcus Messerschmidt, partner at PwC CIO Advisory. As he puts it, programs of this size and complexity require the best of both worlds – data and expert knowledge – to meet the high expectations of everyone involved. “In our experience, you have to combine being data-driven with established best practices to achieve the best results.”
When switching from ECC to S/4HANA, SAP-run businesses have to decide on their approach very early on. Should they rip and replace all their systems (greenfield)? Should they “lift and shift” their legacy system’s configuration onto the new system (brownfield)? Or should they cherry-pick what they migrate and where they stick to the standard (bluefield)?
As SAP found out in a study among nearly 200 SAP customers in 2019, greenfield implementation is the approach of choice for “leaders” — meaning early adopters who have implemented or are at some stage of the process of implementing S/4HANA.
However, when the view is widened to all respondents (which SAP divided into “leaders”, “industry average”, and “laggards”), the data shows that most companies (31%) are planning a brownfield approach, compared to 16% who have decided for a greenfield approach.
It seems only logical that companies want to preserve their existing investment and the customization of their processes. And sure, it looks like the easiest, least disruptive path forward. But a net-new S/4HANA implementation gives you the opportunity to free your existing systems and processes from the baggage accumulated over the years (or even decades). It’s a complex operation, yes, but it can boost your business efficiency and flexibility in the future. On the other hand, those kinds of implementations require bigger organizational and structural changes, since you’ll have to work without internal best practices and might struggle with slow user adoption.
Every strategy has its pros and cons, and what works for your organization heavily depends on what your processes look like today. That’s why data-driven insight into your as-is process performance is so crucial for revealing the complexities and best practices that will inform your roll-out strategy.
Every company’s process landscape is unique. It may encompass everything from highly-customized applications essential to your business to decades-old processes and a bunch of homegrown, disparate systems that don’t play well together. Some of them you need, some of them you don’t.
Indiscriminately heaving all of your processes into your new IT landscape is like moving into a new house without decluttering your attic and cellar first. Especially when moving to S/4HANA, you should think about which customizations you actually need and which are just inherited. Highly customized processes and code can hinder adoption and your ability to take advantage of the latest SAP functionalities.
But which strategies do companies follow when re-engineering their processes? According to a recent SAPinsider survey among 200 SAP customers, they have four main priorities:
Adopting best practice business process models
Hand on heart: How do your processes stack up to best practice process models? Chances are they’ve grown over the years to a wild, impenetrable jungle of Z-codes. A system migration is the perfect occasion to methodically analyze your processes one by one and replace outdated workflows with industry best practices. Use the opportunity to assess what’s truly essential to your business and where you can go ‘back to standard.
Providing a single view of finance and accounting data
A lot of finance issues arise because your systems aren’t in sync, causing problems like double payments or lost cash discounts. Getting all of your finance processes working in harmony on one global ERP can not only help you consolidate data in one place, but also accelerate the global roll-out of system updates, and steer your operations in a more agile way. Knowing what your processes really look like will also help you identify the right opportunities for automation. That way, you can make sure you’re optimizing for business outcomes, instead of blindly throwing bots at your finance processes and hoping for improvement.
Modernizing reporting and business intelligence
Tired of reports that are already out of date by the time they land on your desk? This is more common than you think, which is why modernizing your reporting is a top objective. Luckily, there is a wide range of tools out there that offer real-time data capabilities and can be configured to every level of the business. Rather than having your analysts crawling through your excel sheets to collect the information you need, modern reporting dashboards get you the right data at the right time so you can make better decisions.
Cleansing, deleting, and/or archiving data
Don’t go into a S/4HANA migration without preparing your systems and processes. Think of it as clearing your cellar before moving:
Only pack the stuff (aka your data) you really need
Sort it into the right boxes (aka harmonize your data buried in different systems)
Get the bulky old furniture you hate ready for pick up (aka say goodbye to legacy applications you no longer need).
System migrations offer huge opportunities for IT to drive the business forward, to facilitate game-changing innovation, and to act as a strategic force in the enterprise.
Whether you’re considering migrating or are already moving to S/4HANA, starting your migration on the right foot is key to deliver real business outcomes. Our S/4HANA Lunch & Learn sessions can give you the headstart you need. Learn from seasoned IT professionals and discuss how they strategize for and execute their system migrations.
Every 2nd and 4th Tuesday at 12pm CEST, we dive into a specific topic related to S/4HANA migration (e.g. smarter ways to map your processes, how a good fit-gap analysis looks like) with a 20-minute presentation and 10 minutes’ Q&A.
Ready to join the conversation? Register for the next Lunch & Learn.