S/4 - cloud or not cloud, that is one of the questions here

Arvato Systems and PAC (Pierre Audoin Consultants), one of the leading market research and consulting companies in the field of software and IT services, have conducted a study in recent months on why companies decide pro or contra S/4 Hana, what demands and expectations potential users have of the new application suite, and whether they would prefer to migrate or reimplement SAP systems.

Another set of questions revolved around the topic of the cloud: When introducing S/4, shouldn't one immediately dispense with the on-premises version and go to the cloud?

What executives in German business think of S/4 in the cloud: For some time now, cloud applications have been on the rise in German companies. In the case of the use of S/4, however, the situation is somewhat different.

Only eight percent of the participants in the PAC study would even consider an exclusive cloud edition. This compares with 60 percent who rely exclusively on the on-premises variant.

In this context, a cloud solution has certainly caught up, as demonstrated by lower total cost of ownership (TCO) and a faster return on investment, improved governance and compliance through higher standardization and early release upgrades.

Cloud is a matter of trust

Numerous studies and surveys have already shown that the biggest obstacle to cloud applications in German business is massive concerns about security and data protection.

These issues also drive the participants in the present study "SAP S/4 Hana in Germany". The co-authors of PAC also suspect that some of the companies interviewed lack functions in the cloud version, for example in the area of production control, or fear that a cloud-based system does not have sufficient customizing options.

Of course, there are also plus points on the on-premises side. You retain control over the source code and operation, can modify the source code, are responsible for upgrades, and decide where the system is hosted: in your own data center, with a hosting partner, or with a hyperscaler. In addition, it is often easier to integrate a local SAP system into the existing IT landscape.

For the cloud, many companies still need to take action with regard to compliance and governance, which is definitely an important reason not to go to the cloud for the time being.

According to this study, of the 60 percent who opt for the S/4 on-premises edition, more than one in two would be in favor of running the software in-house, while around one-third would like to use SAP outsourcing services.

Twelve percent of the study participants stated that for them the simultaneous use of both versions - on-premises and cloud - is conceivable. One possible explanation would be that these are companies with multiple locations: The company headquarters would use an on-premises SAP system, while the branch offices would obtain the ERP via the cloud, as the software can be installed, updated and maintained more quickly in this way.

A significant proportion - almost one fifth - have not yet made up their minds about the cloud. It is possible that these companies have not yet sufficiently addressed the issue.

But before it's even a question of 'cloud or not cloud', you first have to decide on the new SAP release. And many companies are not yet sure about this.

What speaks for S/4

The respondents see a lot of potential in the new SAP system. The study showed that around 66 percent of respondents expect S/4 to significantly accelerate their processes and data analyses, more than half expect the software implementation to provide a kind of initial spark to modernize existing SAP applications and infrastructures, and for 48 percent, S/4 is associated with increased user-friendliness, greater flexibility and improved adaptability, as well as a reduction in the costs of SAP operations.

Where is the grating in SAP's gearbox?

As a result, almost a third of the companies have already completed the migration to Hana and S/4, are in the middle of it, or have at least planned it. The respondents were rather vague about what speaks against the system.

Many, almost 70 percent, worry whether they can really assess the cost-benefit ratio correctly. In addition, more than half of the companies currently see no convincing use case for themselves and 40 percent currently see no added value of the system for their own company.

With increasing knowledge about the performance of S/4 and more business cases showing the added value of the application in practice, S/4 and Hana will certainly continue to gain popularity. Finally, the study also reveals that only a minority of seven percent are determined to migrate to third-party applications.

The topic of agility is on everyone's lips. Only an agile company manages to keep adapting to the constantly changing requirements of the market. More agility and a faster response to change are required.

Of course, the IT tools have to keep up. The majority of the study participants see it the same way: 76 percent would introduce S/4 and Hana primarily to make SAP processes more flexible and agile.

Especially since more than 60 percent speak of a major challenge when it comes to using their existing SAP systems to implement innovative business requirements more quickly or to better align their ERP-supported processes with current needs.

In addition, almost every second person says they need an SAP system that is easier to customize. People are also dissatisfied with the user-friendliness of the previous versions: Almost half of those surveyed complain about user interfaces that are too complex.

So there are plenty of good reasons to discover the advantages of S/4 - such as its simpler handling and much faster data analysis - for yourself.

More on this complex of topics, including who are the typical drivers for the change to S/4 and Hana in a company and on which path the changeover would preferably take place - keyword greenfield versus brownfield - can be found in the full version of the study, which is available here after registration: it.arvato.com/s4hana_study

SAP S/4 Hana in Germany" study

Around one hundred executives and SAP managers from German companies with at least 1,000 employees were interviewed by telephone. More than a quarter of the respondents already use the SAP Hana database platform, for example as the basis for the data warehouse (SAP BW).

The survey took place in May and June 2018. 43 percent of the companies belong to the manufacturing/production sector. The other 57 percent belong to the service, trade and transport sectors.