New go-to-market models, digitalized products and services, and process automation – all these changes bring tremendous value. But don’t forget long-simmering evolutions in legacy business functions, as they also require the attention of a well-supported transformation plan to keep IT costs low and help ensure business continuity.
Many executives guide their transformation efforts by following the signs of emerging market trends and ticking off the boxes of their corporate strategy. This mindset unquestionably generates exciting new business models, products, services, and experiences. But it still misses the ultimate goal: to reimagine everything from the innermost depth of their infrastructure to the furthest reach of their operational edge, including soon-to-be decommissioned legacy business functions.
This reality is also true when modernizing enterprise resource planning (ERP) systems. When moving from SAP ERP to SAP S/4HANA, IT teams must also support the change process for legacy business areas with a three-fold approach:
- Reduce overall IT complexity and total cost of ownership
- Maintain a stable IT environment for current operations
- Prepare for and provide a future-ready IT landscape and operation
By paying attention to these less strategic functions, ERP modernization can further minimize IT cost and effort. More importantly, unplanned shutdowns and intelligence displacement can be avoided while operations and data security remain stable.
Strategy #1: Keep Legacy ERP As Is
When considering the future of legacy ERP, some organizations choose to preserve their existing system as long as possible and carry out housekeeping activities to simplify the system operations, especially when supporting less strategic business areas. This approach helps ensure stable, continuous operation of the SAP production environment while avoiding new investments.
Sounds good, right? Unfortunately, extending an ERP system beyond its useful life can require incremental expenses that do not fully deliver any real impact – for example, cost savings – for the business. On the IT side, the historically grown complexity of the ERP system keeps IT operational costs high.
Strategy #2: Convert Legacy ERP to SAP S/4HANA
Converting the legacy ERP to SAP S/4HANA is the best choice when organizations must retain proven business processes and value chains, use in-house applications, support numerous subsidiaries, or rely on historical data. In addition, the overall business benefits from a long-term maintenance and support relationship with SAP.
Our team of advisory experts supports the conversion model in two phases: first, housekeeping and preparation and second, execution. During the initial stage, organizations simplify their existing ERP system by reducing its data footprint and removing unused custom developments, data, and software inconsistencies and redundancies. The latter phase delivers the measures necessary for the transition to SAP S/4HANA, including delta solution design and a multi-cycle execution plan covering every aspect up to full production.
This tactic gives our customers the ability to adopt SAP S/4HANA with few training and change management needs and no additional data migration. The conversion also allows organizations to maintain operations for their familiar legacy processes in a new technical environment, helping to ensure that SAP S/4HANA and the data it leverages is maintenance proof.
Strategy #3: Implement SAP S/4HANA with a Steady Move to the Cloud
SAP S/4HANA can be built alongside an active legacy ERP system, which can be retired later. While it encourages organizations to redefine processes and consider new ways to balance traditional operations with new capabilities, this approach may not make sense for legacy business, considering the cost and effort involved.
This is where deploying SAP S/4HANA in a public cloud environment can help. By following the SAP Activate methodology and standardizing business processes, our customers can quickly start moving to a modern ERP, build it up intelligently, operate it with simplicity, and innovate continuously.
While implementation costs can be reasonably controlled by adopting the SAP software standard, the public cloud allows customers to significantly reduce operating costs by scaling their digital capabilities and processes to meet today’s business needs. Plus, they can simplify system operations to prepare for tomorrow’s changes with a future-proof, maintainable, and scalable ERP.
However, this doesn’t mean that these customers must start with a new implementation and move to the cloud immediately. With a mixed mindset of “keep legacy as is,” and “implement the modern ERP as new,” organizations can first maintain the status quo and improve the legacy system operations. This perspective gives executives additional time to react to market trends, business changes, and innovations. Then, they can define a comprehensive transition strategy to SAP S/4HANA. Meanwhile, SAP S/4HANA continues to evolve with broader functional innovations.
When ready, our customers can transition SAP S/4HANA fully to the cloud to help ensure a future-proof, lean ERP that further optimizes operating costs and reduces IT complexity – even across legacy business functions.
Bringing the True Spirit of Transformation
C.S. Lewis once wrote, “Mere change is not growth. Growth is the synthesis of change and continuity, and where there is no continuity there is no growth.”
The same is true for ERP transformation: Projects that bring the most significant changes are still relevant to legacy business functions that may no longer appear as strategic as newer approaches to go-to-market models, products and services, and organizational processes.
Explore how SAP Advisory Services can help energize your business’s digital transformation with flexible and scalable options for deploying a modern ERP software, such as SAP S/4HANA.
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Di Li is a principal business consultant and enterprise architect at SAP.
Georg Heberle is a senior business consultant and enterprise architect at SAP.