SAP ERP Central Component (ECC) much like writing a check at your favorite grocer works, has for decades and is supported by virtually all major financial institutions. Paper and pen are a solid if uninspiring interface, not designed to be collaborative, and certainly not one that can quickly adapt to new challenges. It can with effort and careful tracking allow for near real time reconciliation of balances. Add in some spreadsheet magic and you might even be able to produce some basic reporting. If one were to look at the corresponding bank accounts the check is reflected…eventually, but certainly not real time. In other words, it works but there’s a good reason it’s phasing itself out without external mandates.
SAP ERP Central Component (ECC) – Writing Checks in a Digital World
Whether it be swipe, insert or tap the next generation of enabling technologies allow for real time insight into balances, reports and trends are at our multiplatform fingertips as are full detailed understanding of balances. SAP S/4HANA mirrors this generational change that readily provides a platform for real time, intuitive, mobile and collaborative decision making based on a single version of the truth and, in many cases, automates those decisions with real time learning algorithms and embedded analytics.
Answering the major questions:
How?
The value proposition of SAP S/4HANA has evolved past the point of a compelling set of finance features plus backwards compatibility of other legacy SAP ECC releases into a broad set of next generation features that provide compelling value propositions across the supply chain. In parallel, the proposition of a technical migration from ECC to SAP S/4HANA is becoming more and more a self-deprecating and unviable proposition as legacy ECC functions designed without an in-memory database are being increasingly retired. Eventually, all customers will be forced to think of S/4HANA generally as a "greenfield" implementation.
Currently many organizations examine the move from ECC to S/4HANA as a binary choice between “green” (aka fully net new) and "brown" field (aka technical migration only) implementations. However, there is a more pragmatic approach to the debate between how to move to the S/4HANA platform.
The first argues that the latest SAP platform as a fully supported rapidly evolving platform and can meet all the legacy system functions, especially when paired with approved enhancements by SAP and 3rd parties. This SaaS rationale would also argue that solutions are proactively tested as part of quarterly updates and annual major releases relieving individual firm a vicious cycle of regression testing deviations including in house value added bespoke features. It argues that legacy systems, whether ECC or otherwise have enough technical debt built up over many years by resources that are no longer available that are turning into unsustainable burning platforms with limited supportability. Note SAP ECC is on the slow burn path as SAP has turned its significant investment dollars entirely to the new platform and is sunsetting support for ECC.
SAP’s brownfield proponents will point out that the legacy customizations, often representing years of IP that are competitive advantages and which have catered to unique scenarios that remain white spaces in the S/4HANA features must be abandoned.
Ultimately it comes down to addressing our customers options as each one is unique and comes with their own challenges. As a customer which line in the checkout would you choose? A Birlasoft sponsored pragmatic approach strikes a balance between the two extremes in part by asking 3 basic questions:
What MUST we do?
Most organizations have access to SAP and SI tools that do a great job of establishing all the break points if one were to drag and drop a current ECC solution onto and S/4HANA platform. The tools highlight in detail the number and category of errors including:
- Database
- Security
- Application Layer (t-codes, function modules, etc.)
- Interfaces
- 3rd party applications
- Pre-conversion, conversion and post-conversion projects
- Pre-conversion initiatives will include New GL / Universal Journal, Business Partners, RAR preparations, archiving, and solutioning of other non-migratable items and/or where conversion is problematic (example: function module deprecated). These are efforts that are safe to complete at any time without fear of wasted efforts.
The tools also highlight mandatory pre-conversion projects that address mandatory technical and functional readiness when migrating (brown) solutions.
What COULD we do?
There is a growing list of new possibilities with every release of the S/4HANA based solutions. Prioritization is often a matter of perceived business need, competitive necessity, opinion, budget, organizational readiness, or where the blaze of burning platforms shines brightest.
A pragmatic approach follows the following prioritization:
- technically mandatory
- legally required
- mandated by customer
- then… what is the highest ROI?
These are other items typically are placed in a backlog and periodically scrubbed in program portfolio sessions.
What WILL we do?
This is not so much a matter of scope if the “could” portion is agreed but rather a matter of who, and when, aka the deployment prioritization, project methodology and sponsorship/budget. Typically, prioritization is heavily influenced by the program sponsor. Business leaders have a focus on their respective areas of inefficiency. CFOs have justified the transition based on new real time accounting insights, expedited period end close, streamlined compliance reporting and cost reduction.
CIOs look at the platform possibilities, the ability to simplify the landscape, standardization, TCO reduction and to remain in step with SAP mainline support agreements. COOs see the ability to automate and add intelligence to the supply chain. Regardless of the source, implementations can address many objectives leveraging well established best practices in combination with semi-preconfigured industry focused solutions whether on-premise, hosted/single tenant or multi-tenant/public cloud.
Where?
Business wise the rule has been to implement a representative site with low volumes and at a time that is low risk. While on paper this may seem a logical approach, the reality is that risk aversion is better served by examining the organization change management (OCM) impacts and selecting the readiest organizational geographies, product lines and business units. Goods news...in virtually all cases SAP S/4HANA is a refreshing update to legacy SAP ECC end users. Beyond the more robust capabilities the user interface introduces unified, cleaner look and feel as well as a simplified reporting, workflow, real time decision support tools and automation opportunities.
Technically it’s clear that the goal of this latest generation of cloud first business enablement software optimistically calls for adherence to certified product standards. The trend is also clear as most customers entertaining S/4HANA migrations are selecting a balance of control and adherence to the public cloud mandates by selecting a single (private) cloud approach leveraging the scalability and reliability of a hyperscale such as Microsoft Azure. The advantages are clear in that this approach defines the ability to control updates and major version changes while ensuring scalability, reliability, security and the financial flexibility. What is does not do is undermine the advice to adhere to certified solutions. The increasing frequency of changes to the platform will correlate to regression testing. Certified solutions are tested thoroughly by SAP and its certified solutions partners. Uncertified customer independent customizations remain for the customer to support and regression test at the accelerating pace.
When?
Discounting the moving SAP mandates of ECC end of life support S/4HANA is far beyond backwards compatibility and its reinvention of capabilities along with retirement of legacy functions has led to the realization that the longer one waits the more “must” comes into play.
Most customers looking at business continuity risk as a priority are holding in place not only at the cost of inflating the transformation bubble but more importantly the lost opportunity gains leveraging new capabilities to drive business efficiency. Also, competition may be moving ahead and taking market share as a result of its early gains by adopting new technologies. Lastly, there is a demand/supply constraint to consider in obtaining SI support at a reasonable cost as the bow wave of demand builds.
Doesn’t Covid 19 change "When"?
Yes and No.
The force majeure event that is the Covid-19 pandemic only highlights the need to:
- Maintain a competitive differentiation
- Develop lean processes leveraging organizations best and brightest people
- Automate decisions wherever possible and expedite decisions where automation is not possible
- Leverage cloud and other collaborative forums (migration to OPEX vs. CAP EX)
- Communication through a common platform with immediate tangible actions related to a more complex demand and supply ecosystem
- Establish a clean footprint and ready for demand surges and/or M&A expansion
- Leverage offshore lower cost run models leveraging the deep talents pools of system integrators
- Improve online customer experience, digital commerce with B2B and B2C presence aligning to the shift in the competitive GTM landscape
- Avoid obsolescence and address burning platforms (which includes SAP ECC)
- Minimize ECC to SAP S/4HANA business continuity risk by migrating sooner rather than later given that mandatory green field spaces continue to grow as the platform evolves
Many organizations will use this time to postpone any large investment or capital expenditure and run from the storm with targeted operational focus. Others will take this as a unique opportunity to come out of the storm stronger that its competition. This is achieved by steadily preparing to ramp-up with new operational efficiencies in place designed by its best resources whom otherwise might not be available and with solutions only possible with the latest technologies and ready to take on pent up demand.
Think of the Buffalo
Great plains of mid-west have frequent storms. The snowstorms are the worse.
When a snowstorm is on the horizon, all animals run in the other direction. Not the buffalo. These animals turn towards the storm and run right into it.
It may appear foolish, but it is the best thing to do in a storm on an open plain.
If you run away from the storm, the storm will eventually catch up with you and you will be running with the storm increasing your exposure time. Running into the storm drastically reduces it.
When you are running away from the storm, you can’t see objects flying in the storm, you can’t see the changing intensity of the storm. Obviously when you are facing the storm you can avoid the debris and respond the changes better.
Most importantly when you are running towards the storm, you can see when the storm is ending before anyone else. You get to be in the post-storm sun and calm before anyone else. Based on the market rebound currently underway it’s an enviable position to obtain through action now.
An Alternative View: Inside-out versus Outside-in
As organizations weather the Covid-19 induced recession many budgets related to SAP platform investments have changed. Some organizations have been forced to simply focus on business continuity, others have used this as an opportunity to leverage its otherwise overburdened thought leadership to plan and action business transformation to address new market dynamics with others addressing pain points that the crisis have accentuated (including a mass migration to eCommerce).
An alternative to SAP driven business transformation is to take advantage of the several cloud-based solutions including Customer Experience (CX), Integrated Business Planning (IBP), SuccessFactors (SF), IoT and machine learning/Leonardo, ARIBA, Qualtrics, and the SAP Analytics Cloud (SAC) as a starting point and then secondarily to examine the S/4HANA digital core. These initiatives require less investment as they address niche solution areas with more easily defined ROI timelines.
The answer lies in the prioritization exercise of the organization. Example: If 80% of sales were through brick and mortar sales, then an expedited CX (ecommerce) solution is an obvious priority. If core ERP systems are overly complicated, fundamental financial compliance is at risk and MRP trust is compromised, then the digital core commonly may be the priority.
Next Steps
Birlasoft has several unique offerings including S/4HANA transformation initiatives using a pragmatic approach, our IP including industry focused preconfigured EDGE S/4HANA solutions as well as Rapid Deployment Solutions (RDS) for those looking outside-in. RDS offerings like the software offerings themselves are self-contained value propositions with fixed price, timelines and outcomes.
For more information on Birlasoft's SAP capabilities including S/4HANA business transformation and RDS packages, visit our page.
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