When It Comes to SAP S/4HANA, Don’t Procrastinate—Evaluate
A minority of Gartner clients that are existing SAP ERP users currently have no plans to adopt S/4HANA, yet the handwriting is on the wall. According to Gartner’s report, Best Practices in Planning for SAP S/4HANA — 2017 Update:
“SAP is still delivering enhancements for ECC 6.0 (as seen in the company’s current roadmaps) but it is Gartner’s opinion that most innovation will occur in S/4HANA. Consequently, if your organization views SAP as strategic, you need to plan to adopt S/4HANA by 2025.”
While 2025 might sound like the distant future, the fact remains that migration to S/4HANA is no simple matter and requires detailed planning, budgeting, and execution.
To put it in tangible terms, customers will have had to make their S/4HANA decision by 2022 to avoid testing the veracity of SAP’s current de-support deadline. However, according to a January 2017 survey by the Americas’ SAP Users’ Group (ASUG), 19 percent of respondents were not currently considering an S/4HANA purchase, and another 20 percent didn’t know or weren’t sure about their organizations’ plans. In this blog, we’ll look at why organizations are on the fence and how we believe you should begin your preparations for a migration.
S/4HANA Business Case, ROI Stall Migration
A 2017 global survey of 208 SAP ERP licensees showed an even higher number of S/4HANA procrastinators than the ASUG survey. In it, 89 percent of respondents said they plan to run their current, proven SAP ERP releases, and 65 percent said they would not, or were undecided about, reimplementing their existing SAP systems to S/4HANA. When asked why, 57 percent saw “no strong business case and unclear ROI,” 34% cited “high migration and implementation costs,” and 19% found S/4HANA an “unproven, early stage product.”
One reason for the lack of confidence in ROI is the complexity of migrating to S/4HANA. As Gartner notes in the Best Practices in Planning for SAP S/4HANA — 2017 Update: “Many organizations mistakenly assume that S/4HANA is a straight replacement for SAP ERP 6.0 and that all they have to do is ‘upgrade to S/4HANA.’ Although there are significant common functional capabilities between the two products, moving to S/4HANA involves changes to functionality and business processes that can be significant.”
In the global survey just mentioned, those whose who had committed to S/4HANA estimated the total cost of reimplementation between $10 and $100 million. It’s true that the licensing and consulting costs can rapidly build, making an S/4HANA reimplementation seem cost prohibitive for some organizations. A sticking point for S/4HANA reimplementation is custom code built in ECC, which typically involves reports that are difficult and time consuming to migrate to the new environment, unless you are using an Excel-based reporting add-in that has already proven itself compatible and portable from ECC to S/4HANA. Still, if SAP is strategic for your organization’s business goals and processes, the long-term costs of not upgrading could create even more complex and expensive problems.
Stepping Away from the Status Quo
If your organization is on the fence about an S/4HANA project, the best way to make a decision and create a map forward, whatever your ERP choice, is to simply start evaluating your options. In Gartner’s comprehensive 30-page Best Practices in Planning for SAP S/4HANA — 2017 Update, we believe you will find detailed recommendations for where to start, depending on what your current position is regarding S/4HANA. The time is now, according to Gartner, to start this process:
“All current users of SAP ERP that have not decided on their strategy for S/4HANA should immediately perform a benefit analysis to assess the potential benefits of S/4HANA. It’s important to do this now because application leaders must engage in a discussion with business leaders and senior management about plans for S/4HANA, and the potential business benefits will be key to this discussion.”
Gartner [Best Practices in Planning for SAP S/4HANA — 2017 Update], [Nigel Rayner, Derek Prior], [20 March 2017]