Show Me the Value: The Choreography of an SAP S/4HANA Transformation (Part 1)

According to a report by market researcher Gartner, the replacement of SAP ECC is sluggishly progressing. Despite the impending end of maintenance support for the software suite by 2027, extendable at a cost until 2030, the pace of migrations to SAP S/4HANA falls short of SAP's objectives. Quoting from the report, The Register highlights the scarcity of "migrations to SAP S/4HANA taking place at the pace required to achieve SAP's goal."

Recent data from Q2 2023 reveals a stark reality: only a mere fifth of users have transitioned to the latest version of the ERP platform. Shockingly, 33% of ECC users still lack an S/4HANA license.

If the decision-makers had recognised the competitive advantages to be achieved through the intelligent use of S/4HANA, this situation would not have occurred. Instead, it would simply be a battle for the remaining consulting capacity on the market. As it is, however, the discussion is characterised by the compulsion to switch to S/4HANA without, though, considering the business benefits, but rather often only the risks.

A three-part breakdown and added value consideration....

Key Considerations

So, no doubt, just from an SAP software perspective there is more than one compelling event to take a serious decision towards your company's future in SAP business.

1. License Conversion Timing: Determine when to convert existing SAP licenses to on-premises S/4HANA licenses, considering that crediting rates of existing licenses deteriorate over time (currently at 70%).

2. RISEwithSAP Option: Evaluate the option of moving to RISEwithSAP, understanding that this impacts both ERP licenses (converted to RISE subscriptions) and SAP Operations (migrated to hyperscalers and managed by SAP).

3. Migration Approach: Consider the approach to migrating from SAP ECC to SAP S/4HANA, recognizing that a "brownfield" approach may result in significant rework and frustration. Selective data migration approaches in particular are a very attractive alternative.

Nevertheless, as a decision-maker, you should not dwell on these points (what to do, but not what to avoid) for long. Rather, a quick turn to the "WHY" of the transformation and thus a value-added analysis would be helpful in order to turn the expensive SAP S/4HANA transformation project into a countable competitive advantage for your company.

General Recommendations

When undertaking a project of significant magnitude with numerous key stakeholders involved, it is imperative for your organization to pursue any feasible improvements in both technical and functional aspects.

In saying so, you also have to weigh up what the company can expect during the SAP S/4HANA transformation in terms of obligations to cooperate. Two design principles have made their mark in this context:

• Ambition Balance: Find the right balance between ambition and risk, ensuring that the transformation aligns with both technical capabilities and strategic goals.

• Transformation Scope: Understand the mandatory tasks involved in the SAP S/4HANA transformation, gradually progressing to address higher-level objectives.

Over the past few years, it has become apparent in the design of transformations that business representatives want to introduce a great deal of innovation, while stability is the main focus for a company's IT. This supposed contradiction needs to be resolved. After all, both sides have a legitimate interest, but also an obligation to make your company more successful with their work. It is helpful to differentiate between the different decision layers when it comes to S/4HANA transformation program. According to the RENEWALIST Layer Model six layers have to be considered either mandatorily or optionally.

RENEWALIST Layer Model on S/4HANA Impact Analysis

Consider refraining from turning an S/4HANA transformation into a broader business transformation, especially for companies with a CMMI maturity level below 4, as this could pose a significant risk of failure. Instead, prioritize addressing mandatory tasks before progressing to higher-level objectives. This approach involves climbing the transformation ladder methodically, starting with fundamental tasks and progressing gradually to more complex challenges.

SAP Infrastructure (mandatory) - Core Questions:

• Remaining in the old operating model (in-house operation or provider cloud) or switch to RISEwithSAP?

• What are the scalability requirements of the SAP infrastructure to support the program, future growth and evolving business needs as well as to minimize downtimes?

SAP Data (mandatory) - Core Questions:

• Which migration strategy shall be applied when considering the degree of innovation the organisation can cope with (brownfield, greenfield, selective data migration)?

• What criteria should be used to leave data behind (time slice; organisational changes like carve outs or mergers of organisational units et. al.) or even harmonise data and how to proceed with ECC decommissioning and data/document archiving to cover regulatory requirements?

SAP Integration (mandatory) - Core Questions:

• How can a dependency map be created to get a better understanding on the mandatory changes in 3rd party systems and end2end testing preparation?

• What integration tools and technologies will be utilized to facilitate real-time data exchange, minimize latency, and maintain data integrity across the SAP landscape?

SAP application (mandatory) - Core Questions:

• How to consider the work packages of implementing NewGL, Business Partner etc., 3rd party AddOns and work through the simplification items to be implemented?

• How to get a better understanding on what S/4HANA contains as innovations, which could be a) additionally used b) replace 3rd party or custom code features?

Business Capability / Process Layer (optional) - Core Questions:

• Will there be any bottom-up changes, which impact our processes, so that business representatives have to considered in preparing and running the transformation (capacities to meet the obligations to collaborate to be planned)?

• To what extent do we trust ourselves to consider new requirements from the process for the purpose of optimisation or even partial reintroduction in the transformation?

Business Model / Strategy Layer (optional) - Core Questions:

• How does the proposed program touch the overall business model and strategy of the company?

• Are there any parts of the existing or the future business model, which has strategically has to be considered during the initial transformation by cascading the requirement from strategy to business capabilities to processes and application?

In Part 2 of the Choreography an S/4HANA program will be designed and the actual benefits discussed.

To be continued....

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*SAP must migrate users off ECC quicker before support ends • The Register

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Michael Philipzen