S4/HANA: Get Ready!
2025. That’s 5 years from now. That’s when SAP is ending support for SAP ECC. In approximately 50 days from this writing, the current decade will end and the start of the next decade begins. If you thought that 2010 – 2020 was fast moving from a technology perspective, the next decade is going to be supersonic. And 2025 is in the middle of this geometric technology innovation cycle. Getting nervous? You should be! Houston, we have a problem.
As executives in companies, many of you are wondering (a) how this is going to happen, (b) how this will impact or disrupt your current company, competition, and/or industry, (c) what you need to be thinking about to get ahead of it, and (d) how you can position your company to be in the driver’s seat for implementing some of the many new and exciting technologies that will be enabled with SAP Leonardo.
The disruptive changes will extend to all parts of business: supply chain, finance, sales, reporting, and more. Meanwhile, mergers, acquisitions, divestitures, and responding to ever changing regulations and reporting requirements worldwide will continue. It won’t slow down and neither should you!
So, where does one start? The first thing many CFO’s and COO’s think about is the sheer cost of migration. I would argue the cost of sitting still is even higher and perhaps deadly. Many companies today are simply not geared up, nor recognize the need to move to S4/HANA. Sort of ‘wait until I have to’ mentality. Any delay migrating to S/4HANA risks business disruption from existing and future competitors, but also risks missing the opportunity to quickly disrupt competitors who choose not to migrate.
However, one direction that starts untangling the current hodgepodge that is in place today starts with S/4HANA Finance. All roads tend to lead to finance and for very good reasons.
There are a couple of different approaches one should consider and these were the subject of other blogs I have written, like going greenfield (fresh start with a new model), or brownfield (change the model and migrate simultaneously). The answer depends on your business complexity, global reach, industry and current competition. Migrating to S/4HANA is not like a ‘normal’ SAP ECC technical upgrade. It does require a deeper understanding of the business structure and technical implications as well as updated IT skillsets and perhaps disruptive business strategies. That said, it all comes back to finance.
First, opportunities to move to the same ERP as operations, and to have access to the reporting capabilities of SAP Leonardo, is the foundation of business management decisions and external reporting. Second, doing so may be the best way to consolidate the many systems that you may have running globally, in acquired businesses, and in different business industry types under your umbrella. Remember that within your company, many operational and reporting systems may not be within the SAP ecosystem. They are external systems that were bolted on to SAP because they provided a specific function, delivered a capability, provided a compliance that did not exist. They may also be custom ABAP code that provided some capability or streamlined a function that was not present in the SAP of the day.
A key thought that goes through one’s mind is how all of these various add-on’s and custom code functions are integrated. How is the data controlled, managed, and of course how all of this is protected with reliable security up and down the architecture? Now is the time to start looking at these custom functions and bolt-on’s to determine how much of this is actually (a) required, (b) still used, (c) overkill or provides little benefit, or (d) is just complicated to the point of disuse.
S4/HANA Finance is a fully functional system and is perhaps the most sophisticated and well-oiled of the suite of products in the S4/HANA portfolio. Other SAP products are moving at lightning speed as well, so the picture is only going to look better. Look at finance as the starting point for disruption in your business. Seriously. I know, it can be hard to get your head around how finance can be a disruptor.
For older companies going through the thought process, going greenfield to start over with one comprehensive SAP platform that includes current technology and data integration might look good. This option can facilitate current and future third party innovative and agile apps with low cost, seamless integration and API’s. This replaces today’s hodgepodge of yesterday’s SAP ERP, Oracle Financial Database, and custom code. The outcome: new apps with new global reporting capabilities for standard structured operational and financial data with today’s digital capabilities. This allows companies to focus on including unstructured data, new metrics and KPI’s, and the data analysis required for business transformation today and tomorrow. It may be tempting.
Another option is to migrate your existing SAP, Oracle, apps, and custom code into the new SAP S/4HANA Finance with industry specific offerings included in the S/4HANA Finance module. This approach keeps the SAP platform as the core, feeding into SAP Leonardo for tomorrow’s structured and unstructured reporting, analysis, and predictive engine capability. This choice may have a lower risk than can occur in a greenfield option that doesn’t have the knowledge or data to ensure key functions and existing capabilities, crucial to today and tomorrow, are not accidentally omitted.
In both cases, the new model will require a digital technology ERP and reporting platform with fully integrated best-in-class SaaS apps plus the remaining custom code required to easily integrate into the new system. Note that ‘remaining custom code’ requires a company to really assess how much of the legacy custom code is actually still used and required. In my experience, better than 50% of most custom code is not being executed (see my blog ‘Automation to Migration’ which outlines what West Trax can do to really nail down the real KPI’s of your custom code base).
Whichever approach is chosen, companies who delay migrating to S/4HANA risk business disruption from existing and future competitors, but also risk missing the opportunity to quickly build their own ability to disrupt competitors who choose not to migrate.
The Next Step: Now!
The business case for a finance start may seem hard to justify at first glance. It is an opportunity to de-complex the legacy finance function and consolidate onto a single, high-performance platform, whether in the cloud or on prem, and should be a relatively easy business case. For example, the use of structured and unstructured agile metrics, data, and analytics should increase a) forecast, cost accounting, and reporting accuracy, b) cost savings, controls, and fraud identification, c) predictive analysis, and d) the potential for new benefits such as globally consolidated People Governance on a local and corporate wide basis.
For your employees, it’s an opportunity to be part of something they might never experience again. An opportunity to re-tool skills, business knowledge and be part of something truly disruptive. The next decade is going to be filled with disruptions of business models, jobs, and competition. The alternative? Let your competitor do it first.
Originally published on BTT’s IT Toolbox: https://nomadcio.com/2019/11/19/s4-hana-finance-where-all-roads-lead/