Ivelin Radkov - Fotolia
The state of SAP S/4HANA implementation projects may have hit a snag with the COVID-19 pandemic, forcing companies to face a new reality and reassess their plans.
On the one hand, those facing questionable economic futures had to take a hard look at big-ticket IT projects, and few enterprise endeavors are bigger than an S/4HANA implementation.
On the other hand, the disruption and changes in market dynamics caused by the pandemic provided an immediate rationale for why a modern ERP system like S/4HANA is so needed today.
The situation begs the question: What is the best strategy for an S/4HANA implementation project in the era of uncertainty and disruption? Two SAP experts said it's to just keep going.
S/4HANA projects keep going
SAP experts with S/4HANA implementation experience agree that the COVID-19 disruption has had an effect on how organizations approach them, but they believe there's no reason to halt such projects.
"Many customers are still engaged in their S/4HANA roadmap, as they were prior to COVID," said Steele Arbeeny, CTO at SNP, a consulting firm in Heidelberg, Germany that provides S/4HANA migration and other SAP services. "They may not be moving as fast because they may be addressing other concerns that have come up, but these projects certainly have not been shelved."
Steele ArbeenyCTO, SNP
SNP's S/4HANA implementation approach focuses on discovering the business areas that will be most affected by the migration and tailoring the project to meet those requirements. SNP calls this approach "bluefield" to differentiate it from a greenfield project, which is a new implementation of the system, or a brownfield project, which migrates legacy ERP including old processes. A bluefield project, on the other hand, identifies and moves the most critical functions while discarding those that are not needed.
Right now, the fate of S/4HANA implementation projects, and IT projects in general, largely depends on the business value, Arbeeny said. Those that lack a strong business impact are more likely to be paused.
However, some companies are going ahead with -- and even accelerating -- their S/4HANA projects because they need the modernization to help deal with changing business requirements, and the project disruption won't affect operations as much.
"Several customers have said that they're in a slowdown right now, so now is exactly the time to take on some modernization because it won't impact the business as much," Arbeeny said. "Things that may have been put on the back burner because they might impact operations too much have moved forward, and other things have moved back."
Impact depends on the industry
SAP organizations felt an immediate impact at the beginning of the crisis, which affected S/4HANA implementation projects, but this is changing, said Ekrem Hatip, senior solution architect at Syntax, a Montreal-based managed cloud services provider for SAP customers.
"The knee-jerk reaction was, we don't know what's going on, so let's just tap on the brakes a little bit and then make a decision for S/4HANA conversions or S/4HANA greenfield implementations," Hatip said. "But soon after that, customers began to realize the need to have a flexible and agile ERP system."
The economic uncertainty brought on by the COVID-19 pandemic affected some industries negatively, such as hospitality, Hatip explained, and these projects are vulnerable to shrinking or frozen IT budgets. However, he recommends that instead of stopping these projects entirely, companies use the situation to do back-end work to prepare the legacy SAP ERP for an S/4HANA conversion.
"Many systems have been neglected for years -- they haven't been patched, they haven't been upgraded, they haven't been kept up for different reasons," he said. "Now when the business is a little slower, you have the opportunity to take care of all this technical patching, upgrades, updates to prepare your environment for the S/4HANA conversion."
Take advantage of the slowdown
Arbeeny recommends that customers use the slowdown to undergo a thorough analysis of their legacy SAP ERP to determine the areas that have the biggest business impact. These can be prioritized in the S/4HANA implementation while processes that aren't needed or have less impact can be set aside or discarded.
"Many customers already have a preconceived notion of what they want to do, and that's what blows out their budget, but the idea of what they want to do can be rethought," Arbeeny said. "Everything needs to be looked at much more carefully. This has led to some work being stopped, but it's also led to a reprioritization where some things that might have a higher business impact are being moved forward."
One of the main ways to prioritize the key processes and reduce the cost of an S/4HANA implementation is to examine all of the customizations in a legacy SAP ERP system, which can be costly and inefficient to migrate.
"We routinely see systems that have 20,000 customizations, of which only 1,000 are ever used," Arbeeny said. This often results in nine-figure SAP projects that don't return expected value because the vast majority of the customizations aren't used, he said.
Similarly, Hatip recommends that organizations should use the slowdown for data cleansing efforts, which are necessary for an S/4HANA migration to be successful.
"If you just do a one-to-one conversion of your existing ECC environment to an S/4HANA environment, it's going to be garbage in and garbage out," Hatip said. "If you have lots of unneeded data on your source system, that unneeded data will end up in your target system, which will hold up valuable real estate on your S/4HANA system."
The most important task, however, is to convince top-level executives that the S/4HANA project should continue, according to Hatip, as they are typically inclined to stay on the current legacy system and may be more risk-avoidant during times of such disruption. But, he said, CIOs should use the pandemic to their advantage.
"There's an opportunity now for organizations to present to top management that market conditions can change overnight, as you might switch your product line in a very short amount of time," he said. "In order to do that, you need to have a flexible and agile environment and S/4HANA brings to the table all of the new AI capabilities, process automation and analytics."