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Road to SAP S/4HANA will be long, but many aim to get there

Many users and analysts believe the move to SAP's ERP suite for the HANA in-memory database is inevitable, but it will take time and clearer direction from SAP.

Like Clark Griswold packing the family into the old Wagon Queen Family Truckster and heading for Walley World, many SAP users are dusting off the roadmap and heading out -- destination SAP S/4 HANA. It seems that very few believe the journey to the in-memory database destination will be easy, but hope that it won’t turn into the disaster that beset the hapless Griswolds.

Many users and analysts believe that upgrading SAP ERP systems to SAP S/4HANA is inevitable, but are not yet embarking on solid projects. As with almost any major IT project, there are many reasons for this go-slow approach, from technical and business process issues to economic reasons.

Maersk Line, a Copenhagen-based global shipping firm, has put any move to SAP S/4HANA on hold, according to Morten Christiansen, the company's CFO and head of IT delivery.

Maersk runs SAP ECC for its ERP platform, but has no immediate plans to upgrade that to S/4 HANA due to more critical IT priorities. "We think that in the longer term we’ll end up there but there are all kinds of IT projects that we need to do before, so it’s not within the next couple of years I think," Christiansen said.

He explained that Maersk is embarking on a complex IT project to create on online customer experience to replace the current process that still relies heavily on phone calls and mail. "This is a huge undertaking that could take several years, but this is the priority and SAP S/4HANA is only a component in this journey," he said.

The company had more immediate plans to move its SAP Business Warehouse system to HANA, but put those on hold due to a softening of the shipping economy.

"We were planning to upgrade our BW installation to HANA starting now, really, but for cost reasons we have decided to postpone that upgrade," Christiansen said. "We have to do it because our current BW installation is having problems with performance, so we actually bought the necessary licenses back in July. There’s no doubt that HANA is the right thing for us to do, but with the economy we simply have to stay put for a while."

Christiansen explained that Maersk plans to perform hardware upgrades and data archiving so that the current installation can run for at least another year or two when the upgrade can get underway.

The real-time capabilities in SAP S/4HANA's Simple Finance module make the upgrade inevitable, Christiansen said. "It’s about speed really. The primary application of SAP BW in our company is financial, and as like all other companies we get tighter and tighter deadlines for closing the books," he said. "It’s just a hassle.  It’s all rather complicated and it would help us a lot if we could have real-time data supported by HANA."

Other companies are just starting to pull their SAP S/4HANA plans together, but are intent on getting there eventually.

James Shaffer, systems analyst for Freeman, a Dallas-based company that plans and produces events and trade shows, said the company is planning for S/4HANA, but the project is barely underway and years from completion. He met with SAP executives at SAPPHIRE in May to begin to develop a workable roadmap.

"When we met with SAP, we discussed how to make a 10-year roadmap to get to S4/HANA," he said, "primarily because they announced [SAP ECC] will be supported for another 10 years."

Freeman implemented SAP ERP in 2007 and currently runs ECC 6.0 EHP7, primarily using the back office functions, including finance, purchasing, human resources, and payroll, Shaffer said. Although managers are happy with how the current system works, they are intrigued by S/4HANA’s ability to speed processing for transactions and reports. "The Simple Finance demos have been appealing," he said. "We like the ability to use the GL [general ledger] cockpit for month-end close, which makes the process easier and reduces time to close."

The project is still in the formulation phase, and Shaffer believes they will need help from SAP all along the way.

"We will need a HANA server and we will need assistance from our enterprise support team to prepare us for the transition," he said. "Most likely, we will utilize a report from Solution Manager and we will need training on the new architecture."

Shaffer expects that Freeman will engage SAP or another technology partner directly in the implementation process.

SAP needs to get its messaging clear, analysts say

SAP has a compelling tale to tell with S/4HANA and its integration with the HANA Cloud Platform, but it must align this message with customers’ real needs, according to Josh Greenbaum, principal at Enterprise Applications Consulting.

"SAP is trying very hard to get its story aligned with reality and what customers are looking for, and I think that that’s just going to take some time," he said. "I believe that there are emerging two camps of SAP customers. There are the 'old guard' who are really trying to resist a big upgrade and are trying very hard to cling onto the status quo, and then there are the mavericks -- or the innovators -- who are certainly looking at the HANA Cloud Platform in the way SAP wants it to, which is to be able to do a lot of innovation and then trying to figure out what the strategy is for acquiring things like S/4 and they’re on the way to doing so."

SAP needs to organize its messaging around a very well-defined path that users can glom on to, Greenbaum explained.

"The tech part is well established and the cloud part looks good and feels good. It’s really a matter of putting more functionality into S/4, which needs to have more capabilities to cover what big enterprises want," he said. "But I think it has to be better integrated into the rest of the cloud story because S/4 really falls under a strategic planning function, not a tactical move. It’s a strategic move, so if I’m an SAP customer and I have three or four strategic directions that SAP wants me to go, it’s confusing, quite frankly."

SAP faces a challenge in figuring out if it wants to move customers to S/4HANA through a component-based model or make a wholesale change, said Jon Reed, an independent SAP analyst and co-founder of Diginomica.com. And although the technology is compelling, most organizations with established SAP implementations will have to seriously realign some business processes before they can implement Simple Finance.

"The most mature S/4HANA component in relative terms is Simple Finance, but I have yet to talk to an established customer that’s made that journey to Simple Finance on S/4," Reed said. "I’ve talked to a couple smaller companies who are 'greenfield' that started with S/4HANA. Simple Finance is a little bit of a change for folks in how they handle their financial systems and I expect to see more of that over time."

SAP should be helped by the announced enhancements in S/4HANA that bring in more ERP functionality along with Simple Finance, Reed explained. However there is some confusion about whether SAP favors component-based upgrades.

"The appeal of [the component model] is that it’s not a big-thing type of implementation anymore," Reed said. "You can just pick and choose the components you need when you need them."  He said that approach lowers SAP's risk of a "sourcing event" that prompts the purchaser to look at what other vendors have to offer.

Reed is not convinced that this is the approach SAP wants to undertake, however, because it has found that there are too many interdependencies between different functional areas that could make component-based upgrades impractical. Using Simple Finance as the first step to a larger upgrade is the more likely strategy.

Reed said companies can go the Simple Finance route for now, but SAP has implied that wholesale transitions will be the model in the long run. "It’s not a bad strategy per se, but I view it as a bit of a riskier strategy than a component-based approach."

Next Steps

Read how and when to start to move to S/4 HANA.

See how the S/4 HANA roadmap was discussed at Sapphire 2015.

Learn how Manchester City airport implemented S/4 HANA.

Blaze a trail to HANA deployment.

A Q&A with SAP COO.

 

This was last published in November 2015

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What are the reasons your organization will put off implementing SAP S/4HANA?
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Maersk is an interesting story, since one of the biggest HANA promoters from SAP AG joined Maersk recently. That leaves room for thought.
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security issue. Despite repeated assurance on public cloud security aspect big MNCs won't buy this logic. Private cloud and that too if it's their product is the only way forward.
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