SAP S/4HANA – 5 key considerations for CXOs

With over 35,000 companies currently buying, implementing, or running SAP S/4HANA, no other topic is being discussed so intensively among CFOs and CIOs. With SAP’s ECC end of life approaching in 2027, many users won’t have much choice, but to switch to S/4HANA.

But this doesn’t mean you should embark blindly on this adventure.

Because switching the backbone of your operations - be it from SAP ECC to S/4HANA or any other system migration - is 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 realisation at risk.

That's why we’ve sifted through dozens of benchmark studies, SAP customer surveys, and independent vendor reports about migrating to S/4HANA, so you don’t have to. Here’s five key considerations, when migrating to SAP’s newest ERP in the cloud.

1. S/4HANA: businesses embrace digital transformation — will your ERP follow?

To drive digital transformation and better business outcomes, upgrading or replacing your legacy software will become inevitable. 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? If not, will the ROI outweigh the risks and efforts with the move to S/4? If they decide to migrate, when is the best time 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.

“56% of SAP customers want to support digital transformation initiatives using S/4HANA and provide real-time insights to the business.” – Gartner

2. Get the entire business on board with your migration process

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.

“61% of IT decision-makers say that they struggle to gain or retain management support for an SAP migration on cloud.” – Frost & Sullivan, Global Cloud User Survey

The problem is that 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.

3. Most companies can’t (and shouldn’t) do it alone

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.

“77% of SAP customers will rely on a partner for their S/4HANA migration.” – IDC

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 — workshops, surveys, time studies — are often subjective and incomplete.

That’s why the most forward-thinking companies and consultants often draw on additional technologies for a more 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.

4. Most early adopters configure S/4HANA from scratch

When switching from ECC to S/4HANA, SAP-run businesses need to decide on their approach early on. Should they 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 to migrate and when to stick to the standard (bluefield)?

As found in an SAP study of nearly 200 customers in 2019, greenfield implementation is the approach of choice for business leaders. This includes early adopters who’ve implemented or are at some stage of the S/4HANA implementation process.

“70% of leaders are using ‘greenfield’ in some way for their SAP S/4HANA implementation.” – SAPinsider

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 customisation 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 organisational 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 organisation 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.

5. Top strategies to re-engineer processes in S/4HANA

Every company’s process landscape is unique. It may encompass everything from highly customised 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, 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 customisations you need, and which ones are inherited. Highly customised 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, they have four main priorities:

1. Adopting best practice business process models

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 custom code. A system migration is the perfect occasion to methodically analyse 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’.

2. Providing a single view of finance and accounting data

Many 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 optimising for business outcomes, instead of blindly throwing bots at your finance processes and hoping for improvement.

3. Modernising 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 modernising your reporting is a top objective. Luckily, there’s a 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.

4. Cleansing, deleting, and/or archiving data

Don’t go into an S/4HANA migration without preparing your systems and processes. Think of it as clearing your cellar before moving:

• Only pack the stuff (aka data) you really need.
• Sort it into the right boxes - harmonise your data buried in different systems.
• Get the bulky old furniture you hate ready for pick up - say goodbye to legacy applications you don’t need.

Get your SAP S/4HANA migration right

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 on the right foot is key to deliver real business outcomes. Our 6 step S/4HANA approach can give you the head start you need, click here to learn more.