Many entrepreneurs are breathing a sigh of relief: SAP has recently extended the deadline for upgrading to the S/4HANA Business Suite. Companies now have until the end of 2027 – or for a surcharge, until 2030 – for the migration. We spoke with Thomas Latajka about the burden on companies and why you shouldn’t just sit back and relax.
The maintenance deadline for the SAP Business Suite 7 has been extended. What is changing now for companies using SAP?
In principle, companies now have 2 to 5 years longer to update their SAP ERP software to the new Business Suite S/4HANA. With this step, SAP has defused the conflict that has long been brewing with companies that use its software. For many people, it is impossible to implement a transformation project like this by 2025. There’s always a lot to prepare. Establishment of expertise, change management, and master data quality are just a few important keywords here. This is why the extension should not be regarded as a reason for further hesitation. You shouldn’t forget that the real deadline for new technologies and business models isn’t set by a software provider. In the end, the market always determines the requirements.
What should drive companies to a quick change?
Initially, the consolidation of the market began long ago with companies that wanted to remain a nose ahead when it comes to digitalization. If you look at the profound changes – and with this I mean the market-defining opportunities of S/4HANA – it quickly becomes clear that nobody should sit back and relax. And that’s not the only reason. Even now, SAP consulting and implementation companies are extremely busy. Supportive digitalization experts with deep industry knowledge are absolutely necessary for S/4HANA projects. If the companies using SAP’s software do not accelerate their transformation, it’s only a question of time before there is a huge project jam. According to the 2020 investment report of the Deutschsprachige SAP-Anwendergruppe e.V. (DSAG), in the meantime an “awakening” seems to be underway – for the first time, investments in S/4HANA are higher than those in the Business Suite, however many companies are still in a holding pattern. 40% of the companies surveyed are planning to upgrade in the next 3 years, another 23% even later than that. Surely this will make a lot of people sweat again very soon.
According to the DSAG investment report, many people do not understand the added value of S/4HANA. How great is the potential?
The real question that a company has to ask is where am I in the software life cycle with my ERP solution. After 15-20 years, every ERP solution has reached the end of its life span and it must be replaced and optimized. Why is that? In this period, companies have frequently confronted radically new market requirements, such as carve-in and -outs, internationalization, diversification of the product line, and manufacturing down to batch size 1. Old structures can no longer sufficiently map such processes. Here, the software exploits only part of the potential. The actual opportunity is the redesign of existing processes. We all know the feeling that cleaning up frees us. That’s the case here too. In the end, you generally have slimmer processes and much lower costs for operation and maintenance.
Clearly the potential lies in the innovative power of S/4HANA, which makes possible slim, more flexible processes and the new technologies, which as a whole enable intelligent, comprehensive networking. With S/4HANA, machine learning and artificial intelligence are part of the SAP standard and the topic S/4HANA Cloud opens up additional possibilities for the quick deployment of a powerful ERP solution. However, above all it is important to understand that only by upgrading to S/4HANA can companies profit from the quick SAP innovation cycles and the annual new releases. This means that S/4 actually creates the technological basis for being able to participate in digital developments. None of this is possible if you are still stuck in the old ERP or R/3 worlds. The specific concerns here are electronic incoming invoice processing, contract monitoring, and a more transparent overview of inventories. The list of innovations in S/4HANA is long and SAP is speeding up the enhancement of the Business Suite.
From a technological point of view, the HANA database performs much better under the application system and the mobile, browser-based Fiori interfaces are also a great advantage. Therefore, the S/4 system can provide much more precise, better information in real time at the touch of a button. Simply explained, a SAP-ECC system employs a pull approach. The user has to actively search for data and extract it by selecting functions, providing these with various selection parameters, and executing them. The SAP S/4 system employs a push approach. It is in a position to make the user aware of critical situations right away, based on events and using analytical dashboards and Fiori tiles with live KPIs. That is, the user no longer has to search in the system to detect this critical situation; he is made aware of it immediately and can react appropriately. Much less SAP knowledge is required for the push approach. That is: the SAP S/4 system is much more user-friendly.
This sounds like a technological revolution…
Yes, I hear this term a lot in connection with SAP S/4HANA. However, I believe that this comparison isn’t quite accurate. It isn’t possible to flip the infamous switch and make the quantum leap into the digital age. It’s better to compare the conversion to an evolution or a journey. Each company that takes the step toward digitalization is embarking on a journey and undergoing a development in the process. The preparations are always important: for a real journey, first you specify the route, plan any vaccinations you may need, gather the important travel documents, and coordinate yourself and your guide. For the destination S/4HANA, the procedure is similar: first you have to decide which route you will take, that is, which project approach to select. This can be Greenfield, Brownfield or something different than both of these. With the Greenfield approach, you define the processes anew on the “green field” and you can use cloud technologies to the fullest. At first glance, Brownfield frequently appears to be a better choice because here the existing processes are migrated. Many new possibilities such as those of the cloud applications cannot be used here, however.
The next step is the design of the road map and – very important – how you can get your own employees on board and make them the messengers of this change. This point, which relates to more than just IT concerns, cannot be overlooked. And you shouldn’t expect completely linear project progress without some surprises. Surely there will be one hurdle or another to overcome on the journey, a place where something doesn’t work right away or it doesn’t work as planned. The project team and the other employees should expect this. And that’s a point that companies cannot ignore when regarding the technical view of things since it can be decisive for the project’s success.
Do you have to approach S/4HANA projects differently than classic SAP projects?
In a nutshell: of course you can approach S/4HANA projects in the classic manner with blueprint and waterfall methodology. However, this generally becomes very time-consuming and expensive. We have developed an agile project approach, project simplification, with which we can implement S/4HANA topics in particular much more quickly and transparently. This is an advantage for customers and consultants, for both profit if the project progress can always be monitored and controlled transparently. Instead of the very theoretical blueprint phase, we work in the S/4HANA system starting in the analysis phase. This way, customers can compare their processes directly to the SAP best practice processes and use many of these in the first go-lives with all the advantages they offer even before the end of the project. That’s why we advise companies to examine their digitalization partners’ introduction methods, for these are an important orientation point for the project team at companies that use SAP software when it comes to complex SAP projects.