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Implementing SAP S/4HANA: The Right Way Forward for Your Company

SAP S/4HANA is a new ERP software launched by SAP that was designed to replace all current ERP releases completely by the year 2025. However, a lot of companies have been finding the transition difficult and are rightly demanding and expecting answers to their many questions.

SAP S/4HANA is faster thanks to the in-memory technology of the HANA database, digital business processes can be mapped in real time, FIORI apps provide a better “user experience,” and integration with the SAP Cloud portfolio means that a wide range of SAP and third-party solutions can be connected. From a technical perspective, there are many arguments for switching to SAP S/4HANA as soon as possible.

However, businesses and their top decision-makers often have a different, less technical perspective on SAP S/4HANA. They are primarily concerned with new business processes and models—many using networked digital technologies, growing market and competitive pressures, dramatically shorter innovation and product life cycles, and new customer requirements and expectations. Business requirements, business challenges, opportunities, risks, and potentials take center stage and the role of IT is to deliver added value and implement requirements as quickly as possible.

SAP S/4HANA: Good to know

SAP S/4HANA represents more than a cosmetic improvement or the ongoing development of the established SAP ERP product family. SAP S/4HANA is based on new technologies, and functions and processes have been simplified, cleansed, and readjusted throughout the core product. A variety of new SAP products are now available that offer both the classic SAP ERP processes and additional new content. This means that many companies cannot perform a 1:1 migration to the new suite by pushing a few buttons, as would have been the case for an SAP ERP upgrade or conventional release upgrade.

And this is exactly where many of the operational challenges arise for companies when it comes to balancing business requirements, technological transformation, knowledge development, and time and cost pressures.

Questions about switching from SAP ERP to SAP S/4HANA

  • What advantages does SAP S/4HANA offer compared to current ERP releases?
  • Is it easy to transition from the current SAP system architecture to SAP S/4HANA?
  • What paths to SAP S/4 HANA are available, and which is best for our company?
  • Can existing business requirements be integrated into and realized in parallel with a transition to SAP S/4HANA?
  • What are the likely costs of the transition in terms of time and money?

Your first step toward SAP S/4HANA: Determining your position and performing a readiness check

If your company already uses SAP ERP, it is essential that you determine the position and SAP S4/HANA readiness of your current system. This is because SAP S/4HANA do not necessarily provide the company-specific processes and function that you have in place. SAP therefore provides standard tools for aligning your existing processes and functions with those available in SAP S/4HANA. The same applies when you are assessing whether customer-specific developments in particular can be moved to the SAP HANA database. The readiness check should use positioning models and consider quantity structures, relevance and, where applicable, necessary and possible alternatives.

If the check shows that your system is technically ready, that is, all your processes and functions will still be available after the switch to SAP S4/HANA, you can use the “system conversion” scenario. The system conversion scenario always involves a 1:1 transfer/conversion of your current SAP ERP system to an SAP S/4HANA system. Changes, modifications, optimizations, harmonizations, or similar requirements are not possible in a system conversion. SAP provides a technical implementation path that relocates the existing SAP ERP system physically to a new SAP S4/HANA system environment. Any custom developments are also transferred completely, and historical data is fully preserved. The technical procedure is similar to that used in an upgrade (“upgrade-like” migration).

SAP S/4HANA: What if my system is not ready?

If your SAP ERP system is not completely ready for the transition to SAP S/4HANA, you will need to adjust it first. The type and scope of the adjustments required will depend on the position assessment and can range greatly in severity. If only minor adjustments are required, existing processes and functions can be recalibrated in the SAP ERP system to comply with SAP S/4HANA. Individual companies are responsible for dealing with historical, open, or current data sets, which are often subject to specific criteria with regard to quantity structures and relevance. In some instances, functions and processes have been exported to alternative SAP products. In this case, the checks for the process and data migration must be performed in these products or, where applicable, in third-party solutions. Finally, it is worth looking at SAP’s long-term development roadmap for SAP S/4HANA, since the range of processes and functions available in the current SAP S/4HANA versions will be extended in the coming years. It can sometimes pay off to delay the migration until the time is right.

SAP S4/HANA: When should you consider the greenfield approach?

The greenfield approach involves implementing SAP S/4HANA from scratch and migrating your data from your existing SAP ERP system as if it were any other legacy system. For new SAP customers, the greenfield approach is necessary in any case; for existing SAP customers, it is practically the same as a new implementation. The more complex the current SAP ERP landscape, the longer the list of countries and locations involved, and the higher the degree of integration, the more reluctant companies will be to consider this approach, especially if it is not associated with obvious significant business benefits.

A hybrid migration to SAP S/4HANA combines business and IT requirements

The highly dynamic global economy and the rapidly changing market and competitive requirements it brings often place high demands on IT systems. Decisions must be made about whether to prioritize business requirements or the transition to SAP S/4HANA.

A hybrid project approach allows you to accomplish your sometimes diverging business and IT objectives at the same time. SAP provides special tools to help you achieve your SAP S/4HANA transition in situations like this. The SAP add-on component SAP Landscape Transformation is an expert tool that certified consulting firms can use to implement complex business reorganizations, process migrations, data harmonizations, and data cleansing in a single step—during the transition to the SAP S/4HANA environment. An “object-based transformation” allows custom transformation, mapping, and conversion rules to be used. Historical data sets can also be transferred to the new process environment straight away, while superfluous legacy data sets from specific time periods can be excluded from the SAP S/4HANA migration.

SAP ERP on HANA as an intermediate step: A hybrid approach for digitalization if your company is not yet SAP S/4HANA-ready

If your company is not ready to move to SAP S/4HANA but you are being put under high business pressure to make quick changes, particularly with respect to the digitalization of business processes, it may make sense to perform a hybrid migration to an SAP ERP on HANA architecture in the short term. The same SAP tools are used as for the hybrid SAP S/4HANA migration and the same virtually unlimited customization and transformation options are available. A major advantage of this migration variant is the absence of SAP S/4HANA-based restrictions: All processes and functions are preserved in full. Because SAP HANA is used, the advantages of using this high-speed database as a digital data core can be leveraged quickly. The disadvantage of this variant is that a transition to SAP S/4HANA must follow at a later stage. For this reason, we recommend that you lay the foundations necessary to ensure subsequent conformity with SAP S/4HANA as soon as possible.

System conversion, greenfield, SAP S/4HANA hybrid migration, or an intermediate step with SAP ERP on HANA: Which is the right approach for my company?

The highly dynamic global economy and the rapidly changing market and competitive requirements it brings often place high demands on IT systems. Decisions must be made about whether to prioritize business requirements or the transition to SAP S/4HANA.

If you are unsure about your company’s readiness or the right changeover scenario, professional analysis can help you find answers. Determination of the technical position should be seen as a mandatory prerequisite. If additional strategic business requirements for digitalization, transformation, optimization, or harmonization arise, it may make sense to perform SAP S/4HANA due diligence, for example. This will generate clear implementation recommendations that take into account all existing strategic, business, and IT requirements.