SAP S/4HANA enables enterprises to set a clear course toward the digital economy. To make their journey from the old to the new economy a smooth one, they need to create their own road map for migrating to SAP S/4HANA – and then stick to it.
Market research firm IDC predicts that the digital transformation will be the dominant topic for business in 2016. And already this year, enterprises are looking to do much more than implement isolated digital (pilot) projects; their aim is to start netting real competitive gains from the new digital economy. But to make this happen, warns IDC, companies must first fulfill two key requirements for digital growth: They must be innovative, and they must be capable of managing the constantly growing volumes of data in their organizations.
Yet many enterprise IT infrastructures are so complex that they pose a serious obstacle to companies’ ability to master the digital transformation and thus become digitally innovative. According to management consultants at Capgemini, 69% of corporate IT budgets will be spent on operational tasks this year. In contrast, only 24.4% of expenditure will go on innovation.
SAP S/4HANA as Core of Business Transformation
Built on the SAP HANA platform, SAP S/4HANA was designed to match precisely the requirements and challenges of the digital economy. The next generation of the SAP Business Suite, SAP S/4HANA empowers companies both to optimize the processes they already have and to implement completely new, innovative ones that will help them remain competitive in the internet economy. Enterprises that opt for SAP S/4HANA as the digital core of their IT architecture will find it easier to digitize their processes and thus to implement and commercialize digital business scenarios.
For any company, the first step toward becoming a digital enterprise is to clear the way for innovation. That means lowering operating IT costs by reducing the level of complexity in the IT landscape caused by interfaces and systems. It also means enhancing existing solutions – but also developing new ones – according to a two-speed IT architecture approach, which provides vital freedom for digital innovation.
SAP S/4HANA helps companies make this step in three relevant areas:
- Complex information flows: Scattered and redundant data storage prevents companies from gaining a single version of the business truth. This makes it hard for them to reach decisions and to implement new ideas in a way that fits market needs. To give just one example, it took a globally active SAP customer with over 68,000 employees 20 days after the cut-off date to prepare its consolidated financial statements. The reason, quite simply, was that rapid business growth had resulted in an array of disparate IT structures. SAP S/4HANA facilitates sound decision-making by offering a central finance function based on a unified data store and standard processes in a single management reporting system.
- Complex business processes: Many business processes are still aligned to traditional batch processes; some are even manual. The result is integration gaps that require users to switch between system-based and paper-based processing. The Boston Consulting Group estimates that organizations spend between 40% and 80% of their time on activities that do not add value to the business. SAP S/4HANA brings together analytics and transactions in a single system and provides simplified, role-based user interfaces.
- Complex technology: Many IT infrastructures are reaching their limits, not just in terms of their innovative power but also in day-to-day IT operations. SAP found that between 25% and 75% of custom code in a typical customer ECC system remains unused after 15 years, and up to 50% of its modifications are obsolete (see “At a glance”). Migrating to SAP S/4HANA is a chance to return processes to the standard, to integrate them, and to encapsulate them in the digital core. What’s more, processes are only enhanced if doing so will add value to the business. Solutions that require frequent modification and that are closely oriented to customer feedback are developed outside the digital core on the SAP Cloud Platform.
At a Glance
1. Custom Code as a Challenge for IT Operations
Example: global ECC system with15 years of history
- 1,500 standard, 500 custom processes
- 150,000 custom code objects
- 6,000 modifications
- 2,000 extensions / user exits / BAdls
- 25% – 75% of custom code is unused
- Up to 50% of modifications are obsolete
Road Map Shows the Way
With their sights set on becoming digital enterprises, businesses soon realize that an SAP S/4HANA implementation project entails more than an upgrade or database migration. Before the transformation can even begin, companies must radically simplify their IT infrastructures. That requires foresight and immediately prompts one basic question: “Where on earth do I start?”
If the overarching objective is to become digitally innovative, then the starting point for any restructuring must be to address the specific challenges the company faces from the digital transformation. That involves analyzing the company’s digital objectives – both from the technical and the business perspective – and ensuring that the analysis takes account of the processes in all of the organization’s lines of business. Within IT, it’s useful to distinguish between challenges that relate to the infrastructure and those that relate to actual IT operations – so that both system-relevant and service-relevant aspects are included (see customer example below).
2. Sample Customer Analysis: Challenges Posed by Digital Transformation
- Make new fields of business more profitable
- Enable “one customer relationship”
- Standardize regional business processes
- Manage the digital transformation in the long term
- Complex system landscapes (technologies, configurations…)
- Complex, cross-system, end-to-end processes
- New business requirements (mobility, UI…)
- Manage IT operations
- Lower TCO (IT landscape, implementations, operations)
- Standardize (governance, flexibility, reduce complexity)
By analyzing their specific challenges, companies create their own set of specifications for the digital transformation. The prioritized action areas they define form a road map for every stage of the transformation, culminating in the target IT architecture with SAP S/4HANA as its digital core.
There are various possible paths for transitioning to SAP S/4HANA: a from-scratch (greenfield) implementation; a brownfield or co-implementation in a central SAP S/4HANA system; or an IT landscape transformation (blackfield implementation) with SAP S/4HANA as the leading system. However, there is no need to settle on a path before beginning the analysis. On the contrary, companies soon recognize which path is the most appropriate for them when they actually come to create their road map.
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