Over the past 10 years, cloud technology has redefined entire industries and changed how companies run their day-to-day businesses. Moving from purchasing annual contracts to paying on a monthly or quarterly basis, customers are choosing subscription- or consumption-based models.
And with our own industry shifting toward the cloud, SAP requires higher levels of flexibility and agility.
“Our move to SAP S/4HANA is more than a technological core transformation, but a true business transformation.”
– Christian Klein, CEO of SAP SE
Our move to SAP S/4HANA was key in responding to these changes and laying the foundation for our overarching transformation to the Intelligent Enterprise. SAP’s legacy enterprise resource planning (ERP) system was designed for handling massive contracts and annual maintenance renewals and not equipped for today’s business models. We made a long-term commitment to fully become a cloud company and adopt SAP standard solutions — our ultimate goal is to move to SAP S/4HANA Cloud.
End-to-End Integration and Process Simplification
With SAP S/4HANA and the SAP Customer Experience portfolio as our main architecture pillars, SAP is maintaining a hybrid landscape. Major processes such as lead-to-cash start in SAP Customer Experience, residing purely in the cloud, and fuel SAP S/4HANA on premise to manage invoicing and core financial processes.
Technically speaking, SAP S/4HANA is our digital core, hosting all our financial processes — starting from contracting, core finance, order to cash, and procure to pay. It integrates our core with internal products such as SAP Customer Experience, SAP Marketing Cloud, and procure-to-pay: SAP Fieldglass, SAP Concur, and SAP Ariba solutions, along with human resource (HR) with SAP SuccessFactors solutions. With SAP S/4HANA, we can leverage all integration points end-to-end.
Furthermore, SAP S/4HANA allows us to simplify and streamline our financial processes and reduce complexities.
In conversations with customers, I am often asked how we implemented SAP S/4HANA at SAP. In general, there are two main approaches. Greenfield describes a project from scratch, with no prior development work, which allows the business transformation to drive the approach. Brownfield — or as we call it at SAP, conversion — is a technical approach we used in converting the legacy ERP system to SAP S/4HANA. Building on top of given structures, it drives simplification of business processes along the implementation life cycle and results in the targeted business transformation.
We have used both approaches. When we integrated SAP Concur software into the SAP landscape, we went with greenfield. We also did that for SAP’s corporate ERP system, where we went for a complete conversion from SAP ERP Central Component 6.0 to SAP S/4HANA in one go. Leveraging the brownfield approach in our move to SAP S/4HANA allowed us to drive transformational elements step-by-step in parallel with the conversion. It enabled us to take a quick technological step into SAP S/4HANA, carve out the process simplifications, and handle them separately in the respective process areas.
Both approaches are suitable for implementing SAP S/4HANA. They truly depend on a company’s situation in terms of process simplification, maturity of digitalization, and the desire to drive a full business transformation.
Post-Implementation Perspectives and Benefits
The conversion to SAP S/4HANA brings new perspectives for business capabilities, which we are introducing based on standard functions. With SAP S/4HANA, for example, we have now enabled end-to-end solutions for the areas of contract to revenue, spend management, and core finance. Importantly, the switch to SAP S/4HANA has inevitably resulted in a business process transformation, with a focus on incorporating new technical and innovative features.
- Automation: New intelligent robotic process automation scenarios allow us to limit the number of manual activities.
- Innovation: Scenarios based on machine learning and artificial intelligence (AI) are being introduced and we are collaborating with SAP Product Engineering to integrate these features into SAP standard solutions.
- End-to-end integration: Integration is an important topic based on customer feedback. SAP S/4HANA has been integrated at the core of our internal enterprise architecture and in most of our end-to-end systems.
- Process simplification: SAP S/4HANA is instrumental in our reduction of process and business complexities.
Prior to the conversion, we identified roughly 3,000 modifications in our legacy ERP system. With the conversion, we reduced the number to about 1,500. To be committed to that change was a big decision for SAP, as it effects many lines of business and takes time and budget. The impact must be transparent to all and cannot be underestimated. Our recent upgrade to the newest release of SAP S/4HANA has further reduced that number, and we are committed to eliminate all modifications step-by-step to fully run on SAP standard solutions.
A critical element in my role as CIO of SAP is the total cost of ownership (TCO) of a solution. By having a series of single applications serving the end-to-end process as opposed to several different applications serving the same process, we accomplished a significant reduction in our TCO.
COVID-19 and the Impact of SAP S/4HANA
We are experiencing current situation together. The entire world continues to be heavily impacted by the current pandemic, and we can only guess the long-term economic effects. However, many companies already feel the immediate repercussions as they struggle to pay their bills.
With SAP S/4HANA, we recently introduced an exception handling framework to our cash collections processes. The exception framework functions as a notification tool and can drastically improve approval time in processes where payments need to be postponed. While we are not solving the economic fallout for our customers, it does illustrate how reduction of business complexity driven by technology can have a positive impact in times of crisis.
In summary, SAP S/4HANA offers a consistent, intelligent ERP solution across cloud and on-premise deployment models, unlocking new levels of performance within our entire organization. It delivers the industry depth we need, and the cloud benefits we want. This enables us to predict and act in real time, delivering the ultimate customer experience. Moving to SAP S/4HANA is so much more than a technological transformation; it is an overarching and fundamental business transformation.
The move to SAP S/4HANA is a transformational journey. And I hope that sharing our experience will help you to gain insightful perspectives for your own organization. Innovation and cloud technology demand flexible business models and SAP S/4HANA is a powerful companion to take that next step.
SAP Runs SAP S/4HANA: Discover more about how it is the intelligent ERP system for today’s business here.
Florian Roth is CIO SAP SE.