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SAP S/4HANA functional completeness in eye of the beholder

Experts give their take on when S/4HANA will have all the ERP functions needed to replace Business Suite -- and why the real issues driving upgrades may lie elsewhere.

SAP S/4HANA is the "next-generation business suite," according to SAP, but is it really ready to stand on its own and replace Business Suite?

On the surface, it seems as if the question could be answered with a side-by-side comparison of functions, but as it turns out, the question of functionality is just one piece of the SAP S/4HANA puzzle.

For instance, the needs of new users are far different from those of longtime SAP ERP users, who not only have to consider functional parity and customizations, but also pour through licensing issues that span not only SAP but trickle into enterprise database licensing with IBM, Microsoft and Oracle.

According to SAP, a little more than 50% of its 2,700 SAP S/4HANA purchasers are already in the SAP family -- for example, upgrading from Business Suite. In addition, while SAP is still selling some traditional Business Suite licenses, most new SAP ERP customers are naturally choosing SAP S/4HANA over Business Suite.

So, is SAP S/4HANA ready for prime time?

"If you look at the S/4HANA system that we released in November of last year that we are calling 1511, we can say that this is already a complete ERP system," said Uwe Grigoleit, SAP global head of business development for Business Suite on HANA and HANA applications.

"Why can we say this? If we are looking at pure modules we are shipping already, S/4HANA spans across financials, material management, inventory management, procurement, distribution, product and planning," he explained. "It's going across the vast majority of the ERP system already."

One of the most important components of the 1511 release for the on-premises version of SAP S/4HANA added key logistics functions, which SAP is calling Materials Management and Operations.

More recently, SAP released three new SAP S/4HANA "1603" cloud editions that provide industry-focused capabilities for marketing, professional services and more general enterprise ERP needs. In fact, the vendor is producing new updates for both cloud and on-premises SAP S/4HANA editions every quarter -- so the answers to the question of functional completeness for S/4HANA are effectively changing every three months.

As for the SAP S/4HANA roadmap, SAP is busy removing some of the multisystem complications found in its more traditional ERP customer implementations.

"We are reintegrating dimension capabilities into S/4HANA as one single delivery," Grigoleit said. "Let's take the example of the APO [Advanced Planning and Optimization]. With S/4HANA, you can run the APO on the same HANA box as the S/4HANA system -- you don't have an externalized architecture any more. This is a huge advantage for our customers because in the planning area you can do constraint-based resource planning together with the material planning in one single cockpit in one single system, without having to set up and go to different systems."

Along the way, SAP S/4HANA is also evolving beyond SAP Business Suite in capability, which in turn starts to change the nature of how you compare traditional Business Suite capabilities to new S/4HANA capabilities.

"In S/4HANA, we are connecting classical ERP processes with new processes of the digital economy," Grigoleit said. "For example, if we are talking about asset management as a classical ERP process, then we are making a connection to information networks so that you're not entering data on your own -- you're getting the data out of the network automatically, connecting it to the asset management and location services."

For something like maintenance, he said, SAP is changing classical maintenance with machine-to-machine communication, which helps generate "predictive maintenance scenarios."

SAP publishes Feature Scope Descriptions for the most recent editions: SAP S/4HANA, on-premises edition 1511 and SAP S/4HANA and cloud edition 1603. Both PDFs provide links to help ensure you're looking at the most recent documents.

With SAP S/4HANA, 'completeness' may be a moot point

While SAP is working to make S/4HANA the next-generation upgrade to Business Suite, customer adoption plans are all over the map.

"In some cases, [you have to] wait 18 months and do a 'big bang' implementation, and in other cases [you can] start now, so we can phase the program. Every customer we're working with is planning that journey to S/4HANA," said John Appleby, global head of SAP HANA for Bluefin Solutions.

"I'll give you an example," Appleby explained. "I'm working with a U.S. customer in telecommunications, and the feds have told them they have to change the way they do revenue recognition, which they have to do before April of next year. They don't think they can do what they need on Oracle, so they want to implement Suite on HANA, which will work well enough to do the new revenue recognition."

And what about SAP S/4HANA? "They're saying, 'We'll deal with S/4HANA sometime later.'"

Appleby said he is working with another company that has an aging Infor system and five different manufacturing execution systems. "They know they need a digital platform to reframe their business, so they are implementing S/4HANA in a phased approach, starting with Simple Finance," he said.

Simple Finance, which SAP is now calling SAP S/4HANA Finance, is often recommended as a starting point for S/4HANA migrations.

"For a lot of customers who haven't done a fast close, it's a quick win. If your finance processes are a little outdated, you can get your finance enhancements all in one go," Appleby said.

So does it matter if SAP S/4HANA is functionally complete? Not necessarily, Appleby said, because each roadmap is unique. "They are all different because every company has different priorities."

The licensing priority

The real world of SAP's 2,700 S/4HANA customers is at once varied, but it also seems very much rooted in the early stages of adoption where licensing contracts are worked out well in advance of a customer's expectation of when the product will actually be ready.

Why? Early adopters are often able to get the most favorable licensing deals as software vendors try to drive momentum and demand for their next-generation applications.

"If you're a company on the fence, you might run out of runway for when the contracts are very good, and get to a point where it's going to cost you significantly more for waiting," said Lori Samolsky, a research director at Gartner.

So, can S/4HANA do everything a company needs right now?

Surprisingly, this question might not be all that important to SAP yet. Samolsky takes around 600 calls related to SAP every year, and from her experience, S/4HANA isn't the priority in many of them.

"S/4HANA is sort of like the Trojan Horse because what SAP really needs is the runtime license -- the runtime product that goes underneath S/4HANA," Samolsky explained.

"In the absence of that runtime license, SAP can't accomplish what it said it would accomplish, which is the replacement of all third-party databases for the future for SAP -- so that's the real golden goose SAP is driving for, which will generate for SAP the vertical integration they need to build upon," she said.

Next Steps

Get S/4HANA predictions

Learn about new S/4HANA functions

Read analysis of the S/4HANA roadmap

A Q&A with SAP COO

This was last published in March 2016

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