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Few -- if any -- enterprise technology decisions are clear-cut and that's especially true for decisions about whether or not to move to S/4HANA.
As SAP's 2027 deadline for mainstream support of its ERP Central Component (ECC) creeps ever closer, SAP customers are deciding whether to move to S/4HANA or stay put but rely on third-party support. The right decision requires each company's leaders to examine the pros and cons of S/4HANA in light of that company's needs.
Here's a look at some of the benefits and limitations of S/4HANA and the choices some companies are making as a result.
The real-world benefits of S/4HANA
S/4HANA offers a number of benefits.
"[The benefits of S/4HANA] are going to be around ERP modernization, having a more flexible adapted system, having something that younger employees want to work with, something that has built-in analytics, more self-service reporting, all those kinds of things that modern systems really offer," said Liz Herbert, vice president and principal analyst at Forrester Research Inc.
S/4HANA's embedded analytics gives companies more real-time data to make decisions more quickly, she said. For example, it can better predict inventory shortages so companies can take action to deal with those shortages.
Those modern capabilities, as well as AI modeling and process automation, are typically the major draw for many companies that make the move to S/4HANA.
Vistaprint, a provider of print and digital marketing products to small businesses and individuals located in Venlo, Netherlands, decided the benefits of migrating to S/4HANA were well worth the effort. Vistaprint went live on S/4HANA in April 2020.
After running SAP ECC for 13 years, Vistaprint found that the legacy ERP was unable to handle the number of sales transactions it was generating, said Mukul Agrawal, director of technology at Vistaprint. Leaders also wanted to enhance the experience of the company's internal users as well as its customers. The company was able to achieve those objectives and more by moving its finance, supply chain, sales and analytics functions to S/4HANA, Agrawal said.
The migration also enabled Vistaprint to retire several third-party analytics applications. The embedded analytics in S/4HANA lets users run reports directly on the ERP, a capability ECC does not have, he said.
In addition, with access to real-time data, the company can make faster decisions to meet customer needs, according to Agrawal. And Fiori -- the company's platform for delivering modern, web-based apps -- offers Vistaprint's users a more modern, role-based user experience across all devices and business tasks, such as creating sales orders, he said.
Graham, a construction company based in Calgary, Alta., has also moved to S/4HANA.
After running ECC since 2013, the company migrated from ECC to S/4HANA in the spring of 2018, said Matt Gramblicka, vice president of IT and enterprise applications at Graham. The main reason for the migration was to ensure the company was staying current with the latest technology that SAP offered.
S/4HANA has increased the accuracy of the company's billing system and reduced delays, Gramblicka said. The construction company had been using SAP Business Warehouse to generate reports from the data collected from ECC. Creating an invoice -- a task that might be required every day for certain projects -- was a laborious, time-consuming process that could take up to two hours. Now, running a report in S/4HANA takes minutes.
Support and roadmap issues
The issues of support and roadmaps factor in heavily to the S/4HANA vs. ECC question.
On the ECC side, using software that's destined to become increasingly out-of-date comes with risks. These include not having any support from SAP, including security patches. In turn, financial data, HR data and other regulated data might be vulnerable.
S/4HANA also has issues when it comes to support.
SAP supports S/4HANA Cloud with implementation or transitioning roadmaps to help customers move from ECC to S/4HANA, said Ilona Hansen, senior research director at Gartner at the time of this article.
To this point, some customers are turning to Rise with SAP, a subscription service that packages managed cloud infrastructure and managed services into one contract.
Another reason large companies might opt to migrate to S/4HANA is that they'll have the opportunity to work with SAP to influence the roadmap of the product and get more of the features and functionality they want delivered more quickly, according to Rebecca Wettemann, a principal at Valoir, a Virginia-based research firm.
Cons of moving to S/4HANA
S/4HANA has some downsides, and for some companies, staying on ECC may seem like the wiser choice.
Here are some commonly expressed S/4HANA drawbacks:
- While S/4HANA's financials and logistics are the most mature, some of the functionality is not as mature as that of SAP ECC.
- Implementation is complex, time-consuming and expensive.
- S/4HANA can only run on the SAP HANA database.
T-Mobile is one company that is delaying an S/4HANA migration.
Around 2018, T-Mobile leaders decided not to move from ECC to S/4HANA, said Keith Siegfried, senior director of product and technology at T-Mobile at the time of this article. The company ended its contract with SAP and turned to Rimini Street for ECC third-party support.
Although the expense of moving to S/4HANA was a factor in T-Mobile's decision to stay on ECC, it wasn't the main driver, he said.
"One of the driving factors for us not making a move was that we were on our run-up to an eventual execution of our merger with Sprint," Siegfried said.
The disruption an S/4HANA migration would have caused during a merger was just not something T-Mobile was able to undertake, Siegfried said. T-Mobile also decided to stay with ECC because of the large number of code customizations it had made in the environment.
"A large number of our tickets were opened with SAP involving custom code, which SAP doesn't support," Siegfried said. "We were paying a lot of money for support that wasn't really able to address where some of the issues lie because it was custom."
That was a major risk for the business, especially since the company was paying for a service it couldn't use because of the custom code, Siegfried said.
However, a move to S/4HANA or another ERP is certainly possible in the future, he said.
Migrating to a new ERP requires new business processes -- and that can be hard to sell.
Some organizations continue running ECC because reinventing business processes and revamping an ERP isn't simple and building the business case is a challenge, Hansen said. And as with any technology, there's a significant financial investment consideration to factor in.
S/4HANA can only run on the HANA database, while ECC can run on HANA -- called Suite on HANA -- and on third-party databases, such as Oracle, she said.
The expense of migration is a major factor for organizations that have chosen to stay on ECC.
Some organizations, particularly larger enterprises, just can't afford to move to S/4HANA because of the expense, Herbert said. The migration can cost those companies tens of millions or even $100 million.
And some companies might not benefit from having a more adaptive, real-time modern system, such as S/4HANA, including those whose industries are pretty stable and whose users are happy with ECC, she said.
The lack of maturity is another factor.
Organizations may not want to implement S/4HANA, as it's still a relatively new application with a developing roadmap, Wettemann said. It doesn't have the same maturity and breadth of capabilities as ECC.
Like T-Mobile, the Metropolitan Water Reclamation District (MWRD) of Greater Chicago chose not to implement S/4HANA. Around 2018, the MWRD decided to stay on ECC and moved to third-party support with Rimini Street, said John Sudduth, CIO of the MWRD at the time of this article.
Before MWRD ended its maintenance contract with SAP on June 30, 2018, Sudduth had had a chance to migrate to S/4HANA.
"SAP was pushing us in the direction [of S/4HANA] but based off what we were seeing, the product wasn't mature enough," Sudduth said. "There weren't enough people within that market that had made that migration, and being a public entity, we only have one shot when going for a large-scale implementation."
Another reason the MWRD decided not to migrate to S/4HANA was that because MWRD had heavily customized ECC, the migration would have been very difficult, Sudduth said.
Move to S/4HANA or support ECC?
While it's clear that SAP is making huge investments in S/4HANA, the challenge for organizations is deciding if and when migrating from ECC to S/4HANA makes sense for them -- a complex decision at best, according to Wettemann. Consequently, each company would do well to balance its need for modern technologies as well as the benefits S/4HANA will provide against the cost of implementing the new system and the disadvantages of such a migration.
Linda Rosencrance is a freelance writer and editor in the Boston area. She has written about information technology for more than a dozen years.