The way is the goal
For some existing SAP customers, digital transformation has become a reality. Now they need to find tools and ways to build a new ERP landscape. But the SAP community is ambivalent.
PAC analyst Frank Niemann says that many existing customers are convinced that they will have to follow the SAP product strategy sooner or later, while others already see clear benefits and innovation potential that S/4 offers them.
According to Niemann, they hope to be able to better master some of today's challenges in connection with SAP environments. Less frequently, the use of S/4 is driven by the desire to transform business processes and to design new business models around Big Data, Internet of Things or Industry 4.0. The PAC study also shows that around one in three companies plans to introduce S/4 in the next few years.
Nearly 40 percent of them dare to make a fresh start and want to completely rebuild their systems. From PAC's perspective, SAP has ushered in a new era in its product strategy with S/4, which means opportunities and challenges for both SAP users and SAP partners.
As the results show, this has not yet been properly received by all companies. E-3 Editor-in-Chief Peter Färbinger had the following conversation with Scheer CEO Josef Bommersbach in the run-up to CeBIT.
How do you get to S/4 technically? A study by the analysts at PAC states that almost half of SAP's existing customers are planning a new start for their ERP with S/4. Is that realistic?
Josef Bommersbach: After conducting numerous S/4 assessments and also initial implementation projects, we can confirm the basic assumption of the aforementioned PAC study.
It is not possible to make a blanket statement as to which of the two approaches, greenfield or brownfield, is the better one. Both approaches have their advantages and disadvantages, but individual discussions to identify the optimal approach are a basic requirement for serious and reliable advice.
This is the only way to identify the best path for the customer from a time and cost perspective. Our recommendation to all existing SAP customers is to keep their current SAP environments as up-to-date as possible and, of course, to maintain them in order to have the greatest possible flexibility to switch to the new technologies and platforms at the right time.
How complete is S/4 today compared to ECC 6.0 and Business Suite 7?
Bommersbach: SAP's new Business Suite, S/4 Hana Enterprise Management, continues to contain the core processes and functionalities of a classic Business Suite or ECC 6.0, which can be used by SAP users as before.
However, it is only with the introduction of the newly developed S/4 modules, such as Finance, that customers achieve the actual added value that S/4 offers. After S/4 Finance, Logistics is the next solution in the S/4 world.
This was already released in a first release in November last year, but will contain further functions and features in the next versions. This successive approach and conversion of the new SAP solution absolutely benefits the customer, as he does not have to convert his SAP system landscape in a so-called big bang approach.
A study by Crisp Research says that the release change is complex and hardly any users can manage without help from consultants. Where and how can you help a potential S/4 user?
Bommersbach: Digital transformation requires a revision or even realignment of business processes and the implementation of completely new business models.
SAP offers its customers a purely technological approach to potential analysis. The Business Scenario Recommendations Report provides insights into optimization opportunities in the existing SAP systems.
Scheer additionally offers its customers a process-based approach in which customer-specific processes are put to the test and examined end to end. In addition, future processes must be mapped in such a way that they harmonize optimally with the application software.
In this context, it is also important to take into account the simplification lists introduced by SAP, which means simplifying or even eliminating previously supported processes with the new software. (Editor's note: see graphic on page 50)
How does an existing SAP customer reach a decision?
Bommersbach: Scheer offers an S/4 assessment for decision-making. An assessment requires a structured procedure with the objective of covering a customer's requirements from a holistic perspective, taking into account various business and IT aspects.
Based on a structured catalog of questions, not only the technical parameters relevant for a changeover to S/4, such as system and interface architecture, system parameters and sizing, are considered, but also project and company dimensions are analyzed and evaluated on the basis of individual criteria.
A maturity assessment is performed for the organization in terms of S/4 readiness, which takes into account, among other things, a strategy audit - key success factor analysis - but also the status of the applications.
Who would you recommend S/4 to now and who should wait?
Bommersbach: Every user should concern himself with the subject of S/4, even if the switch to the new solution is not currently planned in concrete terms. The basic prerequisite for a planned changeover to S/4 is to bring the existing system landscape up to as current a release status as possible and thus create a good starting point for the changeover.
Depending on the system status, this preparation can be very time-consuming and in some cases take more time than the actual migration to S/4.
S/4 only runs on Hana: How much Hana know-how does the user therefore need to have?
Bommersbach: The end user does not need any special Hana know-how. Much of the old world is still there, but new applications such as S/4 Finance with their new user interfaces offer a new look and feel to which the user must adapt.
In order to be able to provide the new software technology in-house, various training measures for the system administrators are of course necessary to support the system.
For a classic SAP ERP user, the investments for S/4 are very high: new hardware, new infrastructure and architecture, new database and new licenses. Do you see any problems in the SAP community with this investment project?
Bommersbach: We cannot confirm this statement 100% due to the following points: the acquisition of new hardware is not mandatory because cloud solutions can be considered; the hardware costs for on-premise solutions have fallen drastically in recent years; the license costs for the pure database are within the range of common databases such as Oracle, DB2, etc.; and the added value when using an in-memory-optimized SAP application outweighs the effort and possible additional costs.
We are also experiencing great openness for the topic of S/4 and Hana in the SAP community. For SAP users who have not yet made their final decision, Scheer offers a Hana proof-of-concept in which we demonstrate the benefits of the new SAP software to the customer on the basis of his own data and allay associated fears, for example with regard to usability, operation and possible additional costs.
What are Scheer's expectations for S/4 this year? How will the product develop in the SAP community?
Bommersbach: We expect interest in the topic of S/4 to continue to grow strongly, as is clearly demonstrated by the number of S/4 assessments we have already scheduled, ongoing customer workshops, and projects.
This will also be evident at CeBIT, as S/4 will be a core topic for us, our partners and our market companions. CeBIT is certainly a good multiplier that will make this topic appear even more present for the majority of customers.
What does the S/4 license cost? Now that SAP says that S/4 is not a legal successor to any SAP product, all future S/4 users will have to buy new licenses. What is your recommendation here?
Bommersbach: Hana is the basic prerequisite for S/4. Hana costs 15 percent of the software acquisition value. When converting the database from e.g. DB2 or Oracle to Hana, the customer does not incur any additional software costs or even saves on the use of the new in-memory database technology.
For existing SAP customers, SAP has been offering the S/4 license since the beginning of the year as part of a "one-time flat fee per customer" of 9,000 euros in addition to the existing user licenses.
For new customers, there are new S/4 user types on the SAP price list that are priced similarly to the current Professional User in a traditional ERP system.
The pricing model is extremely complex, but the number of users and the number of software products used have an impact on the final price and the associated annual maintenance costs.
Do you know how many operational S/4 users there are at the moment, how many of them are existing customers with a release upgrade and how many are new customers?
Bommersbach: In the first eight months after the launch of S/4 in February 2015, SAP has more than 2140 licensed customer scenarios to show for it. Over 400 active customer projects have been launched since then, of which 31 customers are already live.
The customers mentioned span 26 industries and are located in 54 countries. Last year, SAP and partners performed 168 migrations to S/4. Of these, 74 percent were new SAP customers.
2025 is supposed to be the end of regular maintenance for ECC. 6.0 and S/7. Do you think that all existing SAP customers will have migrated to S/4 by then?
Bommersbach: Sooner or later, every SAP customer will have to deal with S/4, since the maintenance window for the Business Suite will close in 2025, according to SAP's current predictions.
Until then, customers should prepare a migration carefully and benefit from the experience of projects that have already been implemented. In addition, companies can use the time until then to decide which systems they want to transform or completely rebuild.
Thank you for the interview.
Green
The greenfield approach has the advantage that complex technical infrastructures and process configurations can be cleaned up by restarting the systems. Otherwise, advantages of Hana are lost when customer-specific programs are simply migrated without making a process-related adjustment.
Furthermore, with this approach, current business challenges can be optimally supported and at the same time a basis for the implementation of future requirements can be created.
Such projects are easier to calculate because the implementation of the new system architecture and processes is comparable to an initial installation. On the other hand, additional costs must be calculated for the redesign of business processes and greater involvement of the business departments.
Brown
The brownfield approach has the advantage that it is only a software update that delivers great added value to the customer. SAP processes run significantly faster after migration to the new technology, also use the new user interfaces, the required data storage is reduced due to the new data footprint, and superfluous system settings can also be eliminated by the migration.
However, it must be clear to every customer that even after a migration, the business processes will still be the old, perhaps far too complex processes. SAP offers its customers tools and instruments to keep the risks of a migration as low as possible, but SAP and of course we as partners must gain experience in this.
