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SAP users feel the pressures of digital change

An ASUG survey shows SAP users understand the challenge of digital change; new SAP accounting application features help organizations to comply with new standards.

SAP customers face the pressures of digital disruption and feel they need to take urgent action to deal with it,...

according to a new report from Americas' SAP Users' Group, or ASUG.

The report, ASUG Research: How ASUG Members View Change and Digital Transformation -- the first of its kind from ASUG -- surveyed members on several different topics related to digital change and disruption in their organizations. The survey was conducted over a two-month period, from April through June 2016, and drew 788 respondents from a wide variety of industries, company sizes and organizational roles, according to ASUG.

The survey asked for responses to questions on issues like the main drivers of organizational digital change, the top actions needed to address change, the urgency in which the organization is addressing the issue and who in the organization is leading the change.

Among the respondents, 39% said fundamental changes in the way customers want to purchase and consume their products is the No. 1 driver of digital change in their organization. The report noted that markets today are "increasingly customer-centric, with the consumer determining how and when to engage with sellers and pushing for further product personalization."

Thirty-four percent of respondents said the rise of emerging technologies, including internet of things, 3D printing and robotics, is the second most common driver of digital change.

These top two drivers indicate companies face a digital change unlike anything they've faced previously, said China Martens, ASUG senior editor and author of the report.

"It's these two differences that haven't been around before, and they're coming, and I think part of it is that there's just so much change coming all at the same time," Martens said. "It's not like we all had to be online, or we had to move from client-server; this is coming from all directions, and they have to deal with people who are savvy to the startups that don't have all this legacy software -- they have to think about, 'How do I do that as I try to change my business?'"

Less compelling reasons for digital change were brand-new business models, such as micropayments or outcome-based subscription services (9%), and the merging of industries leading existing companies or partners to become business rivals (7%).

Taking action to operate more efficiently

While ASUG members generally seem to be in agreement about the two major drivers of digital change, the actions needed to address the change are a more mixed bag. Of the 463 respondents to the question, "What is the No. 1 action your organization needs to take to address the change disrupting your industry?" the largest response (28%) was to operate more efficiently within their own organization. The other most common responses were adapting to change quicker than competitors (19%); taking advantage of emerging technologies (17%); engaging more fully with customers (17%); and investing in new business models (9%).

The need to operate more efficiently seems to indicate businesses want to get their own houses in order before they address the digital change, Martens explained, which, in some ways, echoes what SAP has said for a while.

"It's kind of a sense of, 'We have to reimagine how the business runs,' which, in a way, is speaking SAP's language, to reimagine your business processes and get that all sorted out before you look for new opportunities," she said.

The survey recorded differing opinions on what the digital transformation actually meant, Martens said. "We asked folks to define digital transformation, and that's where there was a bit of difference. Forty percent see it in the way that SAP and others are positioning it: as this rethinking of the entire operation," she said. "The next largest group, at 23%, sees it as the refocusing of resources to become a customer-centric omnichannel business, which is part of digital transformation, but it's not all of it."

Making plans for the digital change

According to the survey, many companies have begun digital transformation: Thirteen percent of respondents are less than one year into the implementation; 13% are more than one year, but less than two into the implementation; and 11% are more than two years into the implementation. A significant chunk of respondents (41%) are actively formulating plans, but have not put them into place. And 9% have formulated a digital transformation strategy, but haven't begun to implement it. Just 13% of respondents said they have yet to start thinking about the digital transformation.

When asked about the SAP technologies that would best help the digital transformation, 52% of the 458 respondents chose SAP S/4HANA. SAP's line-of-business cloud applications -- including Ariba, Concur, Fieldglass, Hybris and SuccessFactors -- were a distant second, at 13%, followed by HANA Analytics at 9%, HANA Database/BW on HANA and HANA Cloud Platform both at 8%, and HANA Vora at 1%. 

Because most ASUG members run systems other than SAP as well, the survey asked which other vendors would supply technology to enable the digital transformation. Of the 452 respondents, 27% chose Microsoft, followed by Amazon (12%); open source technologies, including Hadoop and Spark (15%); Google, IBM and Salesforce (each at 10%); and Oracle (6%). "Other" was selected by 15%, which further included a variety of vendors and systems integrators -- although, the most common response for this was "don't know" or "not sure."

New SAP accounting application features help organizations meet upcoming standards change

New accounting standards will have CFOs and chief accounting officers scrambling for compliance, but new enhancements to SAP's revenue accounting platform should ease the transition.

The new IFRS (International Financial Reporting Standards) 15/ASC (Accounting Standards Certification) 606 are accounting standards that apply to all public, private, and not-for-profit entities that have contracts with customers and will supersede virtually all current revenue accounting requirements.

SAP announced the SAP Revenue Accounting and Reporting application will automate and simplify revenue accounting and support organizations, as they comply with both current and impending standards, according to the company. These are the first in a series of functions from SAP designed to help financial professionals comply with IFRS 15, IFRS 16 and IFRS 9.

The new IFRS 15 revenue recognition standard -- called ASC 606 in the U.S. -- eliminates the transaction and industry-specific revenue recognition guidance under current U.S. Generally Accepted Accounting Principles, or GAAP, replacing it with a principle-based approach to determine revenue recognition. The change can affect companies' reported revenue, how and when they report financial performance, and overall financial decision making. The new standard takes effect in 2018 for public entities and 2019 for private companies.

According to SAP, the new features in SAP Revenue Accounting and Reporting 1.2 include cost recognition, capitalized costs integration with project systems and results analysis from SAP, improved contract combination and modification capabilities, and integration with service and billing scenarios in the SAP Customer Relationship Management application. It also includes advanced features to transition to the news IFRS 15/ASC 606 standards.

"CFOs are facing a perfect storm of accounting regulation, with three major IFRS standards converging in rapid succession. Time to implement these new processes is running out," Thack Brown, SAP's general manager and global head of line-of-business finance, said in a press release. "It takes approximately 18 months for the average Fortune 1000 company to make a change of this magnitude, and we just passed that point in the countdown to the mandatory effective date of the new standards. Corporate finance departments should act now to ensure that they are prepared for the transition and have the right tools to automate and simplify the process."

Varian Medical Systems Inc. is an early adopter of the new features. "While the current U.S. GAAP standard is very specific, and things are pretty black and white, the new standard brings with it a gray area and more variability," Prasad Kothuri, Varian Medical Systems' senior manager of VIT enterprise applications, said in a press release. "Based on our initial testing and implementation, SAP Revenue Accounting and Reporting has the potential to be an effective tool to guide our corporate finance team through the transition."

Next Steps

Digital transformation spending must continue.

ASUG says SAP HANA implementations growing steadily.

S/4HANA is at the core of business digital transformation.

Is ERP ready for IFRS standards?

Dig Deeper on Compliance management for SAP

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