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Digital transformation goals spark new S/4HANA migration momentum

S/4HANA upgrades form the core of digital transformation for SAP organizations, but many underestimate the challenges, such as complex legacy systems, bad data and customizations.

More SAP organizations are making strides toward an S/4HANA migration, but they may be greatly underestimating the complexity of the move. This leads to overly aggressive and unrealistic timelines for the projects, according to a new report from LeanIX in partnership with PwC.

Overall, the report indicates that SAP organizations are making an S/4HANA migration the core of their digital transformation strategy and a significant number are making progress toward that goal. The report stated that 20% of respondents have already completed an S/4HANA migration, while nearly half (49%) said they planned to complete the move by 2020. These timelines fall well within SAP's stated end-of-life date for SAP ERP Central Component in 2025.The apparent optimism for S/4HANA migrations was a somewhat unexpected finding of the survey, according to Andre Christ, co-CEO and co-founder of software vendor LeanIX, which targets SAP migrations among its architecture work. LeanIX, based in Bonn, Germany, has a SaaS enterprise architecture tool that maps a company's business processes to its applications and connects this to the underlying architecture landscape. The tool can be used to find out who is responsible for applications or where there are dependencies to other applications, according to Christ.

There are three main challenges for SAP S/4HANA migrations.
SAP S/4HANA migrations face three main challenges, according to a new survey from LeanIX and PwC.

Counternarrative for S/4HANA migrations

The report runs somewhat counter to other recent surveys that indicate a reluctance to move to S/4HANA, but Christ believes that the conditions that make a migration more feasible have changed in the past year.

Many companies are talking about digital transformation and they're betting that S/4HANA will help them to accelerate in this space.
Andre Christco-CEO and co-founder, LeanIX

"That was the most interesting part as it's contrary to what you read in the press about issues with those S/4HANA migrations," Christ said. "So it was also interesting for us to see that [these companies] have ... [these] aggressive timelines."

One of the reasons why companies want to undergo an S/4HANA migration sooner rather than later is that the migrations are tied to digital transformation programs. Christ explained that unlike previous migrations, which were done for purely technical reasons, the migrations now have much more solid buy-in from the business side. There's also more emphasis on how much value the migration will generate, rather than just accounting for support costs.

"If you approach it more from a value perspective rather than from a risk perspective, many business departments are actually waiting for innovative solutions, for more user-friendly interfaces," he said. "You could say that SAP is doing a good job of marketing and selling these goods, so people from the business side are jumping on it, but I think that so many companies are talking about digital transformation and they're betting that S/4HANA will help them to accelerate in this space."

Underestimating S/4HANA migration complexity

These aggressive deadlines may be ambitious and underestimate the complexity of an S/4HANA migration. The majority of survey respondents (60%) are operating legacy SAP landscapes that are more than 10 years old, which accounts for much of the complexity, according to Christ.

"It's a massive effort for a whole project [of updating those legacy landscapes]," he said. "There are very few that are operating now in a greenfield rollout, most of them have to deal with a brownfield approach when going through the upgrade."

Organizations also face a host of challenges that need to be resolved before making such a move. The survey respondents cited the top three S/4HANA migration challenges as complex legacy landscapes (60%), high levels of customizations (59%) and unclean master data (51%).

"These are the top three areas where companies are struggling," Christ said. "In my experience it was mainly unharmonized business processes, but then there are typical project risks like stakeholder buy-in, lack of skill and knowledge, lack of functionality."

Greenfield vs. brownfield vs. selective implementations

The report indicated that there are also several different implementation strategies for an S/4HANA migration. These include a greenfield approach, where no existing systems are replaced; a brownfield approach, which uses parts of existing systems; and a selective approach, which minimizes business disruptions during the migration. The report stated that among the respondents who have not yet migrated, 44% plan to use the brownfield approach, while 42% intend to use a selective greenfield approach and consider the value of existing systems. Organizations appear to be wary of a complete rip and replace. Only 14% of respondents selected a full greenfield approach.

Whatever the implementation strategy, SAP customers are starting to take serious steps in preparation for an S/4HANA migration and this can have benefits beyond improving their ERP, according to Christ.

"It shows that there is a momentum for many companies which can be leveraged and can be an opportunity to get digital transformation projects implemented," he said. "It's also seen as a chance to clean up the legacy landscapes, and it supports getting the architecture under control as a critical prerequisite for it. Having transparency over it is important, but there's a lot of room for improvement in getting that transparency."

The LeanIX and PwC survey was completed in summer 2018, with 60% of respondents from Europe, 20% from North America, 12% from South America and 7% from APAC. A majority of the companies were large enterprises with 25% having at least $20 billion in revenues, and 50% were above $1 billion. Respondents were primarily enterprise architects (60%) and C-level executives CEOs/CTOs (27%).

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