Despite a substantial sales and marketing effort by SAP, new incentives such as RISE, and the intention to discontinue standard support of SAP ECC in 2027, many businesses still seem reluctant to move onto S4/HANA.
For many organizations, the pandemic has highlighted the fragility of their key business processes and their current technology platforms yet they are still struggling to justify the costs and the business disruption of a move to S4/HANA.
In addition, many boards remain skeptical that a move to S4/HANA is a strategic priority and will unlock their digital transformation agenda.
The virtual roundtable webinar, which was hosted by leading independent specialists Neil Lewis and John Carey, addressed these issues and gave the global participants the opportunity to discuss their S4/HANA challenges.
Neil and John provided some impartial insights to help demystify the approach to S4/HANA based on their experience and got to the heart of the matter answering some of the burning questions.
Board & CxO Considerations
The conversation began with an overview of Board and CxO key considerations for S/4HANA.
The journey to S/4 Hana and the cloud is driven by an organization’s strategy and objectives and its starting point. A proposal that essentially says we need to do it because it is “digital” seems unlikely to be approved. Boards and the CXO suite are likely to ask some tough questions such as:
- Is this really needed/strategic?
- Is this really ‘digital’? Is this really ‘disruptive’? Is this in line with market trends?
- What benefits will we really get as a Business? – Show me the ‘hard dollars’.
- What disruption will it cause us?
- How should we do it?
- Will it be as painful as getting onto SAP in the first place?
- What will it cost us now and going forward?
- What are the alternatives (e.g. NetSuite, IFS)? Are they realistic?
It is imperative that teams preparing business cases have a clear and coherent proposal identifying tangible and intangible benefits.
An interesting point of reference is the advice given by McKinsey to CEOs on the success factors needed to move to the cloud. These include:
- Establishing a sustainable funding model to support the investments required to get business value from the cloud.
- Developing a new business-technology operating model that exploits cloud for speed, agility, and efficient scalability.
- Putting in place HR, compensation, and location policies required to attract and retain the specialized engineering talent required to operate in the cloud.
Source: McKinsey Quarterly July 2020
Making the business case for S/4 HANA
The roundtable then discussed various points to be considered when making a Business Case and how, if done correctly, a move to S/4HANA can be a catalyst for disruptive transformation that unlocks new customer experiences enabled by new economic models.
A business case based on an obligatory need to upgrade the SAP technology because of the end of ECC6 support in 2027 was not expected to be compelling.
The recommended approach was to bring together the organization’s strategy/transformation agenda (e.g. growth, improved customer experience, process effectiveness, capital optimization) and fuse this with S4/Hana’s ‘step change’ capabilities (e.g. real time decision making, cloud technology, process simplification through adoption of standard processes, IT landscape simplification, AI/ML, accelerated delivery of new capabilities).
RISE with SAP
John and Neil then moved the conversation to SAP’s strategy for RISE. With SAP simplifying the model to a ‘one hand to shake’ technology contract, the SI’s are working out how to position themselves between SAP and their customers to commercially engage in a mutually sustainable and beneficial way.
SAP, through the RISE initiative, is offering multiple paths to S4/Hana such as Copy, Conversion, and Transition. While these paths seem attractive the table was unsure if they really allowed organizations to identify, embrace, and exploit the same transformation opportunities afforded to other clients going through new implementations. For example, real-time decision-making is comparatively easier to achieve in a new, best practice-based, vanilla implementation compared to a transition client. SAP claims that customers can achieve a 20% reduction in TCO to move to RISE standards, although Neil felt there is still too much confusion and too many variables around how they can achieve this out. John also highlighted that HANA is an opportunity to introduce new “Ways of Working” – it is not just a ‘traditional’ upgrade.
The group then discussed SAP’s strategy of encouraging companies to adopt standardized business processes to access the benefits of the Cloud. Neil pointed out that many companies have invested substantial amounts of time and money in building sophisticated processes to achieve competitive advantage. Therefore, any move to standardized processes, while desirable, needs to carefully consider the business/competitive consequences. Conversely staying with customized processes because ‘that is the way we have always done it’ should be challenged.
A question from the table was around the pros and cons of greenfield implementations. John felt these could be very attractive, especially if you want to adopt an ‘out of the box’ predefined business process on a new cloud environment but it really depends on the business drivers. Also, the level of business change and solution adoption support required in a greenfield implementation is very substantial and it is crucial that these activities are adequately funded.
The other big consideration for current SAP customers is what they need to do before they migrate. For example, conducting an analysis to assess the gap between ‘as is’ and the standard ‘to be’ processes and challenging your organization as to ‘why can’t we do it this way?’. An example was discussed around a client redesigning core finance processes such as AR, AP & G/L. The advice was to clearly define and agree with the Business strategy, ensure strong governance (especially in regard to design decisions) and have a clear framework for agreeing on modifications and customizations.
Another question from the table was how aligned SAP is globally as they seem to be offering different advice across different countries. The panel discussed the challenge of aligning global processes against local needs and the importance of fundamental design decisions, adherence to governance framework, and ensuring that you avoid the technology tail wagging the business process dog?
The conversation also included the challenges of adopting SAP’s ‘best process practices’ as some roundtable participants are finding that SAP is giving different guidance in different geographies.
It was recognized that SAP’s strengths are around software development and support. So while SAP’s thinking is a point of reference, the view was that companies should also consider partnering with suitable advisors (e.g. specialist consultancies, Big 4, or selected SIs) to help determine the optimal mix of process design and SAP solution. Neil emphasised the need for a ‘back to basics’ strategy and the need for correct governance from the start, otherwise complexities will cause problems downstream.
John and Neil agreed that there is not a ‘one size fits all’ approach and it depends on where customers are in their transformation journey.
It was recognized that SAP is working hard to create and produce content to help organizations chart their path to the cloud. There is substantial collateral available to help CxOs shape their thinking. They also offer a free process discovery service as an incentive to help with RISE migration from ECC6.
Other Discussion Topics
The roundtable also reflected on some key topics:
- Roadmap – What problem are you trying to solve? How/Why adopt new functionality?
- Architecture – Design an architecture that can meet the business case objectives and exploit the HANA capabilities e.g. analytics/insights/real-time decision-making.
- Licensing Models – Consider the TCO, not just the project costs.
- People – Programs don’t fail because the technology doesn’t work. They often fail because of lack of the right resources. Finding the right resources to drive technology-based transformation is a challenge. Don’t underestimate the business change effort.
Roundtable Survey Questions
We then conducted an online poll and gave the table an opportunity to answer the following survey question:
In terms of transforming your organization using S4/Hana what are the key risks/barriers to success? (select top 2 options).
A – executive sponsorship
B – the amount of business change required
C – lack of a compelling reason(s) to make a major change (e.g. insufficient market pressure/opportunity, not a strong enough business case)
D – business capacity (e.g. key resources can’t be released to focus on the transformation program)
E – not in line with our business strategy
F – the SAP product set doesn’t offer the technology innovation we need
G – the complexity of our existing technology landscape and the transition/migration challenge
H – other (please describe)
The results were consistent with the key messages already discussed. Option D “Lack of business capacity” was the highest scoring factor as a barrier to success. This was followed by Option B “the amount of business change required” and then Option C “lack of a compelling reason”. Interestingly no one from the table voted for Option F “the SAP product set doesn’t offer the technology innovation we need”.
The table agreed that the risks and barriers to success aren’t based on the technology – it’s the people, change, sponsorship & governance. The level of business participation needed to support the change is often substantially underestimated.
In closing the hosts summarized some of the questions and topics the table had posed and debated.
- How can we engage customers in the program?
- How should we approach a “greenfield” roll-out?
- How important is data architecture & governance?
- What lessons should we learn from problem programs?
- How should we partner/resource the program?
The table agreed that every company will have different and unique requirements and challenges based on a range of variables. However, one common theme was “How to resource the team needed to successfully deliver the transformation agenda?”. An early decision on the resourcing strategy (e.g. the balance of in-house skills vs. 3rd party resource capability, the approach for business involvement, and back-filling) is crucial.
The roundtable offered an interactive forum where participants discussed their own experiences and gained valuable insights to help them navigate their respective S4/HANA journey. It was clear that each participant had different considerations and challenges around how best to approach their respective SAP roadmap. Current and new customers are still trying to decipher the messaging from SAP. The SI and Consulting communities are also working through their commercial models, so given the challenges, complexities, and, in some cases, ambiguities the insights and opinions shared by the hosts were gratefully received.
The content and output from the roundtable will go some way to help companies have a better chance of preparing and delivering against a compelling S/4HNA business case.
Until there are more compelling use cases around S/4HANA truly delivering successful transformation and greater adoption of RISE customers will remain cautious. It will be interesting to see if this creates an opportunity for SAP’s competition where the perceived risk/reward model may be more appealing.