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To avoid becoming a footnote in the ERP implementation failure hall of shame, taking the right approach to an S/4HANA migration is a must.
To that end, here are six critical -- and too easily overlooked -- steps CIOs and their teams can use to successfully move forward.
1. Go into the ERP discovery phase with the right mindset
CIOs and others on the ERP buying team should use the discovery phase -- the first stage of the ERP selection process -- to conduct an initial determination of the business case for a new ERP and whether S/4HANA can fulfill those needs.
Organizational leaders need to answer some initial questions to determine whether to go forward with an S/4HANA implementation, said Denise McGuigan, a principal at Deloitte Consulting who focuses on S/4HANA Finance, the finance and accounting module. These include determining what they hope to gain from an S/4HANA implementation -- for example, problems they'll solve or opportunities they'll pursue.
Scrutinizing S/4HANA's capabilities is an important part of discovery that many companies gloss over, said Eric Kimberling, CEO and founder of Third Stage Consulting Group.
"I think they just kind of assume they can take SAP at their word or take it at face value that S/4HANA does all [these things] that they might have been able to do in R/3 or ECC [ERP Central Component]," Kimberling said. "We're finding that that's definitely not true."
Talking to SAP sales reps about S/4HANA capabilities is helpful, but that's just a starting point, Kimberling said.
2. Conduct a gap analysis on S/4HANA
The discovery phase is also the time to scrutinize S/4HANA's strengths and weaknesses.
"Don't think of it as necessarily 'discovery,' as though it's a foregone conclusion that you're just going to jump right into S/4HANA, Kimberling said. "I view it more as like a gap analysis."
Eric KimberlingCEO and founder, Third Stage Consulting Group
For companies that do choose to go forward with an S/4HANA implementation, a gap analysis will serve them well in deciding which parts they can realistically deploy first, versus less mature components they can defer or deploy with full awareness of the risks.
"You are going to expose some gaps, and that's OK," Kimberling said. "In fact, you should be exposing gaps because there are lots of them, and if you're not, there's probably a lot [about S/4HANA] you don't know."Though S/4HANA and its predecessor ECC do share some program code, an S/4HANA migration is an entirely new implementation, Kimberling said. It's critical to treat it as such, he said. Many CIOs and IT teams that understand it's a new implementation realize they might as well broaden their search to other vendors, such as Microsoft and Oracle.
As part of the discovery phase, CIOs and their teams can turn to the S/4HANA migration roadmaps provided by SAP and systems integrators (SIs). These all start with processes to help an organization decide what it wants or needs from an ERP system, then investigate whether S/4HANA can do the job.
To further help decide whether to move and identify reasons why, look to SAP Movement, a webpage with a link to a "manifesto" called Solution Brief that makes the case for S/4HANA with case studies and a feature overview, said Sven Denecken, senior vice president for SAP S/4HANA. The page also has a link for submitting SAP ECC production system data and transaction workloads to receive a report showing how certain processes might benefit S/4HANA. It also includes a readiness check request.
SAP sources are good but should be put in perspective, Kimberling said.
"Just because something exists doesn't mean that it exists to the level of maturity or capability that you might need," he said.
The machine learning in S/4HANA's accounts payable function, for example, exists but isn't necessarily appropriate for all organizations, Kimberling said. Rather than making a yes-or-no decision, a good analysis might involve rating the feature on a 1-5 scale of how well it matches real-world requirements.
3. Turn S/4HANA roadmaps into concrete plans
SAP provides online documentation about its release roadmap for S/4HANA, which can help companies prepare their own roadmaps for an S/4HANA migration.
Anyone can view SAP's online product roadmaps. The one for S/4HANA shows updates and module releases through 2024. Registering provides access to SAP Activate, the vendor's deployment methodology and services, to build a roadmap and project plan and access trial copies of the S/4HANA Cloud and on-premises versions.
In the client labs, Deloitte has clients identify customizations, such as custom fields and other enhancements in their current ERP system. Special tools let them see the corresponding S/4HANA extensions and attributes. Details come later, in the design phase, from much more in-depth discussions of how requirements will be met.
Clients typically see multiple iterations of their S/4HANA migration roadmap, McGuigan said. There might be a "foundational" roadmap for an implementation that affects every department and location, followed by individual roadmaps for certain divisions. Each roadmap shows how many releases, the scope of each and its cost.
"Everyone is fully aware, fully understands what the finance transformation roadmap is, so they know what is going to be delivered when, the cost and the value that it's going to bring. And then that roadmap, of course, then translates into a deeper set of activities around resourcing, timing [and] project planning," McGuigan said.
That kick-starts another phase of more detailed Gantt charts and project plans. Lab attendees also use a tool called Capability Edge that lets them drag and drop possible "opportunities" from an S/4HANA migration and their timelines so they can see how dependencies between deployment steps affect the total picture.
4. Realize that data is critical in the early stages of S/4HANA roadmap
Understanding the role of data is critical to a successful S/4HANA migration.
In fact, McGuigan puts data front and center.
"We typically start our roadmap with data, trying to get that accurate and pulling all the financial data together," she said.
Deloitte clients are encouraged to get their data models in order before even selecting software.
The upfront work is necessary to take advantage of the universal journal, a concept SAP introduced in S/4HANA that added more than 300 attributes to the General Ledger (GL), which was meant to enable richer financial reporting, McGuigan said.
Preparing the data model and pulling all of the financial data together in the GL is also usually the first step before adding other S/4HANA Finance features, such as accounts payable and receivable.
"While they're waiting to mobilize the program and get the appropriate funding and approval, they could have their organization working feverishly on things like the chart of accounts and the type of attributes they need to manage their business," McGuigan said.
S/4HANA roadmap best practices
Denise McGuigan of Deloitte Consulting's S/4HANA practice advised the following:
- Have a clear vision and align with key stakeholders in both the business side and IT.
- Strive for business led, but IT enabled. Failure to do so risks having the project rejected after laying the groundwork.
- Anticipate the key challenges from both the business process and technology perspective to help you prioritize with budget constraints. Which module should be deployed first so it can be a foundation for later ones?
- Understand the value of your roadmap and have a detailed breakdown of the costs and benefits of each phase. You'll be prepared when executives ask what they are getting for the money.
- Have a firm grasp of the change management requirements. Is this the right time for this amount of change? If so, do you have the human resources and transformational leaders to manage it? You'll need top talent, and those people will have to take time from their regular jobs.
5. Understand the drawbacks of SAP's Activate methodology
Activate employs the Agile software development methodology, which makes speed a priority by breaking off smaller pieces for quick wins. The approach has its detractors.
"Agile methodology isn't as conducive to SAP strengths as a more traditional Waterfall methodology," Kimberling said. "SAP's strength has always been a standardized, common operating model and global consistency in business processes." The sequential approach of Waterfall, where the entire system is designed, then tested and rolled out, is a better fit.
SAP chose Agile because some companies were taking too long in the design and analysis phases of their S/4HANA migration roadmaps, Kimberling said.
"I just don't think [the Agile methodology is] a good idea," he said, adding the extra time needed for the Waterfall methodology is the price companies must pay to get the standardized processes they want from SAP.
6. Consider whether to use system integrators
Riyadh Cables Group Company, a manufacturer based in Saudi Arabia, hired SAP's services division to work with an internal team to implement on-premises S/4HANA to get a better handle on raw material prices.
The company decided to run the software on SAP's hosting service, HANA Enterprise Cloud, said the company's CIO Yaser Al Jughaiman. He built an internal team of data management, change management and training specialists to work on the implementation.
The project took a year and three months, relatively quick by SAP ERP standards, Al Jughaiman said. The fast implementation and use of internal resources were essential to lowering S/4HANA's total cost of ownership.
S/4HANA migration can pay off with the right talent, controls support and roadmap, he said.
Eliminating the third party -- an SI -- is also key to keeping costs down, he said.