SAP has announced that beyond 2025 (update: this date has changed to 2027), they will no longer provide support for their existing ERP systems. Clients are expected to migrate to S/4HANA, and the industry is gearing up to prepare for this huge shift. IT Consultancies are upskilling their workforce and advising their clients to start planning for S/4HANA – not doing so leaves companies at risk to outdated systems, and falling behind in a fast-paced economy where efficiency is key for effective service delivery.
Considerations for a S/4HANA implementation
As an SAP client, it is important to note that a system migration to S/4HANA is not a simple upgrade but rather a full implementation.
The challenges of an S/4 implementation will not only be operational but also financial. As in any IT project, a transformation of this scale involves people, budgets and executive sign-off. This sign-off could be the reason that many businesses have not yet made a move – organisations seem slow to take up S/4 and it remains to be seen if there will be a rush in the final years and months of the SAP countdown.
Dr Derek Prior, Director of Resulting IT and former Gartner Research Director, recently published a study titled “Don’t migrate to S/4HANA until you have read this research” in which he recommends that each firm creates its own case study according to its needs, business goals and benefits they would like to get from S/4HANA.
According to Dr Prior’s study: “Assuming an optimistic 9 month S/4 migration, with an optimistic 15 SAP consultants… Equates to 108m days of consulting effort across 40,000 SAP customers… At a rate of £925 per day (which is an average), that equates to £100 Billion of consultancy costs – in addition to the software licences.”
S/4HANA platform options
SAP offers a few S/4HANA platform variants:
- For maximum control, S/4HANA can be run in a business-owned data centre and maintained in-house with upgrades implemented following yearly releases and tested by your own team. This edition is usually recommended for large enterprises that require in-depth and flexible customization.
- For fast time-to-value, S/4HANA can be run in the cloud, in which case it will be maintained quarterly by SAP either on a public or private cloud, depending on the customers’ needs. This edition is usually recommended for mid-sized or fast-growing companies that require agility and flexibility. This is the version that SAP hopes most clients will go for.
- Additionally, there is also a hybrid option that supports both on-premise and on-cloud scenarios and it is typically preferred by those businesses that require rapid transformation but want to reduce the initial cost.
The drivers for change
Capgemini is already preparing for the change. In their S/4HANA whitepaper they have highlighted two key drivers for the transformation: “First, a need to ‘digitise’ customer interactions and journeys, recognising that customers’ expectations are changing. Second, the need to ingest new technologies and platforms into the organisation to allow faster change cycles.”
In a presentation at SAPPHIRENOW 2019, Accenture emphasised the different trends influencing digital transformation in customer service:
- The lines between sales and marketing are blurring
- There are new business models with different sectors moving into subscription services
- Competitors have more access to other businesses’ information, leading to new disruptors
Accenture also highlighted that everything on the CX Cloud is industry specific, and in partnership with SAP they are focusing on setting up programs from customer initiatives rather than product initiatives. “You can surprise your customers or create better products, but the key is making it easy for them. It comes with change.”
SAP’s vision for S/4HANA
Although there is a debate in regard to the different challenges for SAP clients, SAP is very positive about digital transformation.
Bill McDermott, CEO of SAP, stated at SAPPHIRENOW: “We are transforming companies on an end-to-end basis with S/4HANA and C/4HANA through innovation in HR, marketing, finance and every possible area of their business to make our customers the best-run businesses in the world. “
Hasso Plattner, co-founder of SAP and present at the conference, highlighted some figures regarding S/4HANA benefits. According to Plattner, customer feedback reports:
- Up to 40% increase in productivity
- 7x reduction in database size
- 20x faster in material planning
SAP is very confident with the change; they are transforming SAP into an intelligent enterprise by running their business on SAP software. They claim to have over 11,000 S/4HANA customers and have issued over 50,000 HANA Cloud licenses. “The public cloud is the way to go”, states Plattner.
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