CIO.com Virtual Roundtable: Exploring Strategic Options for SAP S/4 HANA Modernization
The presence of multiple instances of SAP, extensive code customization, and sprawling global presence were imperatives for embracing S/4HANA, while similar variables were cited as the reasons to wait-and-see or even extend the life of their current SAP environments.
In more recent years there has been corporate interest in consolidating their SAP investments by creating more common operating procedures across the different business units.
The biggest bang is achieved when technology modernization is closely linked to digital transformation by exploring how S/4HANA can contribute to both TCO and total revenue attainment.
As businesses explore their SAP modernization options, the best way forward for many organizations may lie in hybrid installations of SAP S/4HANA that allow IT teams to maintain their current infrastructure, deploy new infrastructure, and/or split data and applications in a way that is optimal for the organization, according to analysts at Frost & Sullivan. This is because most established companies often have application estates that are inflexible, monolithic, and outdated.
To explore these issues, over a dozen enterprise technology executives from around the country joined a CIO.com Chatham House Rule virtual roundtable that was co-hosted with John Pawlikowski and Kohei Uchida of IBM.
Here is what they had to say:
When it comes to SAP modernization, challenges and opportunities are in the eye of the beholder. As we kicked off our conversation it was interesting to see how the same issues that were driving some organizations to modernize their SAP environments were cited as barriers by others. The presence of multiple instances of SAP, extensive code customization, and sprawling global presence were offered up by some roundtable participants as imperatives for embracing S/4HANA, while similar variables were cited as the reasons to wait-and-see or even extend the life of their current SAP environments.
Over the course of our dialog, the extent to which organizations are able to effectively engage in extensive business process reengineering emerged as the determining factor that distinguished one camp from the other. While all organizations reported that they were in the process of executing significant modernization initiatives, some were in a better position than others to revamp the role of SAP to support comprehensive transformation.
The executive of one global company that had grown through a series of mergers and acquisitions over decades, described how a variety of SAP instances had mushroomed to support the discrete operations of acquired companies. In more recent years there has been corporate interest in consolidating their SAP investments by creating more common operating procedures across the different business units. Moving toward this objective, however, has proven to be a major leadership challenge. “Could we have organized at the beginning as multiple SAP deployment decisions were being made? Yes. But culturally, that's not how we were organized.” The situation, however, is changing as a result of new dynamics in the market. “We now want our new strategies to become standardized with global processes. To do this we need global systems to support global products.”
Other executives engaged in comprehensive market-driven transformations described how major change management initiatives have coincided with the projected expiration of ECC 6.0 support in 2027. This has prompted them to completely reimagine the role SAP in their organizations. In so doing, another participant noted how the acceleration of her organization's transformation initiative drove adoption of S/4HANA. An additional sense of urgency entered the equation as the leadership team sought to capture and engage with the consulting and professional services providers before they were all tied up with other clients. “We decided early on that we didn’t want to be an organization that was running ECC in an unsupported environment. Also, as we moved to S/4HANA, we wanted to be one of the earlier adopters so that we could get the pick of the vendors to support the implementation.”
Several executives described decisions about the future of SAP in their organizations in the context of technology modernization prior to comprehensive business transformation. “We moved to HANA roughly four years ago. It's actually been very stable, and we've had almost no unplanned downtime. Moreover, the processing has been much improved. Now we are bracing the enterprise for business process change, working with our business counterparts to maximize the benefits of HANA.”
On the same point, another participant described how value is left on the table when technology modernization is not coordinated with business transformation. “We made a technical upgrade to one of our business units, which is now running on S/4HANA. However, we are finding that we can’t really take advantage of any of the business transformation benefits that would normally occur with a Greenfield implementation. More business transformation will be required because it wasn't done when we upgraded.”
The level of business process reengineering associated with enterprise-wide transformation initiatives is daunting for many organizations. As a result, a spectrum of SAP deployment models are being considered:
Greenfield Models - when entirely new SAP projects (such as a move to S/4HANA) are deployed and are not built on a previous project.
Brownfield Models - SAP projects that are added onto existing SAP instances.
Bluefield Models - SAP projects that are rebuilt from the ground up, to replicate the capabilities of an existing instance of SAP.
According to John from IBM, there is growing interest in the role that Bluefield Models can play in modernizing SAP technology in the enterprise. “Bluefields are a good way to judiciously take advantage of what has been done in the past...and landing on a strategic destination. That way, you're not starting from scratch. You're starting from what has been tried and true with your organization and transforming existing efforts to fit in with a strategic goal.”
Kohei from IBM noted that a growing number of enterprises are exploring S/4HANA as a way to get off data centers and move to cloud. ”A lot of companies are looking at their modernization strategies from a total cost of ownership perspective. They are looking at how costs and risks can be mitigated from a security perspective while elevating their level of agility by integrating DevOps into their SAP operations.”
The biggest bang, however, is achieved when technology modernization is closely linked to digital transformation, said John. “That is why it is important to explore how S/4HANA can contribute to both TCO and total revenue attainment. There are 200-plus services available with S/4HANA in the cloud. That is why 90% of the SAP customers that have moved to the new platform have seen an increase in revenue, while 80% have seen a reduction in costs.”
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