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Penn State graduates from legacy ERP to SAP S/4HANA
Penn State University recently completed a greenfield SAP S/4HANA implementation to replace an old COBOL-based system with a modern, transformative ERP.
Faced with an aging homegrown legacy ERP, Penn State University went looking for a new system that could handle its current enterprise needs and form the core of its modernization efforts.
On July 1, after a rigorous search and implementation process that spanned five years, the university switched on the System for Integrated Management, Budgeting and Accounting (SIMBA), a new cloud-based platform built on SAP S/4HANA ERP.
Penn State is a multibillion-dollar organization and the state's sixth largest employer with 45,000 full- and part-time employees. The university, which has its main campus in State College, Pa., and includes 24 satellite campuses, supports 100,000 students. However, the financial ERP system that supported this enormous operation was old and inadequate, said David Gray, Penn State's senior vice president of finance and business.
"We had been running a homegrown legacy system dating back to the early 1980s that was written in code generation," Gray said. "Maintaining that system was getting increasingly challenging, because most of the people that code in COBOL are either in nursing homes or are not with us any longer, so the university really had an imperative to shift off of that."
Need for a forward-facing ERP system
The need for a modern, forward-facing system eventually led to Penn State's decision to select SAP S/4HANA ERP for its SIMBA project, but the process was carefully considered. The first part of the process began five years ago and consisted of an initiative to painstakingly examine all the university's business financial processes, according to Gray.
"We began to catalog those processes and to think very seriously about how they could be streamlined and improved by acquiring a third-party financial system," Gray said. "Armed with information that we gleaned from that strategic initiative, we developed a (request for proposals) process. We had intended all along to subject this to the competitive marketplace and made sure that we were defining our needs very carefully and very methodically, and then selecting the solution that was best aligned with our enterprise needs."
After evaluating several ERP systems and narrowing its choices to a final three, S/4HANA ERP emerged as the system that was best matched for Penn State's current and future needs. S/4HANA was evaluated as the superior system in 13 out of 14 requirements, Gray explained, and was seen as the one that was best suited for transforming critical business processes like research accounting, procurement and multiyear budgeting.
Security was a prime concern
System security was one of the most important criteria requirements. Penn State is one of a handful of U.S. universities that runs a University Affiliated Research Center (UARC). As such, it conducts several hundred million dollars a year of advanced defense research for the U.S. Department of Defense and U.S. Navy, significantly raising the security requirements for its ERP system. S/4HANA was the only system that met that high bar, Gray said.
"S/4HANA also met a lot of other functional criteria and came across as top-rated across virtually all of those key criteria," he said. "But it certainly would have been a showstopper had S/4HANA not been able to address the very precise security requirements of our UARC."
A partner with S/4HANA ERP experience
The preliminary requirements gathering and vendor selection process took about two years. Once S/4HANA was selected, the SIMBA implementation project began. Penn State tapped LSI Consulting, a firm based in Waltham, Mass., that focuses on public sector projects, for that phase.
Gray described the relationship with LSI Consulting as critical to the success of the greenfield deployment project because Penn State had no experience with S/4HANA or any modern enterprise systems. S/4HANA needed to be integrated with Penn State's other ERP systems, Workday for HR and payroll, as well as Oracle PeopleSoft for student information management.
David GraySenior vice president of finance and business, Penn State University
"We needed an implementation partner that knows S/4HANA inside and out," he said. "LSI was a highly effective implementation partner for us driving a lot of the project management in a collaborative way and making sure that all those integration points were understood very well upfront and engineered properly."
It was also determined that the SIMBA system would be cloud-based and run on Microsoft Azure. This followed an institutional decision to shift away from owning and running its own on-premises servers.
"Educating students and doing leading-edge research is our core business -- not information technology and running server farms," Gray said. "So early on we determined that our preference was to have this system hosted in the cloud if at all possible."
A COVID-19 twist near the end
After three years of work, the SIMBA system was scheduled to go live in early 2020 when the COVID-19 pandemic hit, causing an immediate shift in plans for the final stages of the project.
"We were just about to head into the critical stages of end-user training with a mix of online and face-to-face training modules," Gray said. "But around the second week of March, we closed the university down and went fully remote both for instruction and administration. So, we had to pivot in a New York minute to moving all of the training online."
This was a critical factor in determining the early success of the SIMBA system, particularly because of the change management required to move from the university's legacy system to S/4HANA, said Malcolm Woodfield, global vice president and head of industry business unit education and research at SAP.
"We hear a lot about moving students' learning online, but you sometimes forget that there's a lot of training and employee development going online, and there were 17,000 registrations for the SAP training," Woodfield said. "We often measure a project by its technical success or transformational success, but if users don't accept it, you're dead in the water. So, it was a smart move to invest in the online user training and not wait until the lockdown ended."
Change management challenges
Moving users from the old system that they had worked on for decades was indeed the most challenging part of the project, according to Gray. Part of this was simply getting them accustomed to the modern web-based GUI, but there are also process changes.
The legacy system, for example, had no integration between various modules, and workflow was largely manual.
"With the old system, users had to manually push a process to the next person in the decision chain, whereas with S/4HANA, that's all mapped out when you decide on the number of variables and the processes and how you want to set up them up," Gray said. "We are able to map the workflow out intelligently ahead of time, which has allowed us to streamline our existing business processes and cut out some steps in the approval path."
S/4HANA supports improved processes, reporting
Gray expects that the S/4HANA-based SIMBA system will enable Penn State to transform and improve systems like budgeting and procurement that were difficult or impossible to do in the old legacy system.
"SIMBA's support for multiyear budgeting and enterprise procurement will enable us to move toward strategic sourcing that we were unable to do with our old system," he said. "This is all by itself a major initiative for the university and something we identified as a massive opportunity for cost savings and better efficiencies."
The multiyear budget module will not be ready to go live until next year, but Gray believes it will dramatically improve the university's budgeting process.
"The university was lagging behind a lot of our peers on this, and we feel this will be a transformative step to take to give managers at all levels much better insight into budgetary performance status -- both within the year that they're currently managing and looking into the future," he said. "This will make both the allocation and consumption of resources much more business informed than it was in the past, and the multiyear benefits that this system brings to Penn State University will be massive and transformative."