Strategic advice for SAP ECC customers in 2021
In 2021, current SAP customers will need to make a decision on whether to stay with ECC, migrate to S/4HANA or consider alternatives. Here's what to consider.
2020 taught IT technology professionals that the near future will be mobile, cloud-based and digitally transformed.
Or will it?
While there's plenty of evidence that suggests some organizations fast-tracked digital transformation projects in 2020 to deal with the fallout of the global pandemic, others slowed transformation work to a crawl because of a lack of certainty.
Since the introduction of SAP S/4HANA in 2015, SAP customers have known that they'll need to move from SAP ECC someday. Until SAP extended its support deadline for ECC a year ago from 2025 to 2027, that day loomed large.
If you're a current ECC customer, you might think you have more time to wait. I suggest you don't. As I see it, you will need to make one of three choices in 2021:
- Sit tight with ECC for the time being.
- Make plans -- if not take action -- to migrate to S/4HANA.
- Consider options, including SAP alternatives.
Here's a deeper look at the realities of each option and why I believe you'll need to make a decision sooner rather than later.
Staying on ECC
Despite SAP's messaging, conversion programs and migration tools, a significant portion of the SAP installed base remains firmly planted on ECC. However, at the beginning of 2021, the number of S/4HANA subscribers came in at around 16,000.
From one perspective, it's perfectly understandable why some customers are delaying making a decision to migrate. Many have made significant investments in their existing ERP software. Furthermore, they were told at the time of purchase that their investments would provide them with "one version of the truth." They were told that SAP ECC would be a single digital system that provides accurate information on operations, including sales, procurement, manufacturing, distribution, service, quality and accounting.
No one would give that up if they didn't have to, and companies that focus primarily on processes inside their four walls don't have to. They can continue to use SAP ECC for the time being. In other words, they can safely tread water.
However, if your company deals with a significant number of outside suppliers, contractors, business partners and customers, you need to consider the changes afoot in many fields. For example, automobile manufacturers are going through their biggest transition in a hundred years due to the rapid advancements in battery technology and self-driving vehicles. Retailers are massively retooling to offer omnichannel experiences. Healthcare providers are dealing with more drugs, regulations and customers than ever before.
Workers in each of these fields need greater visibility into product inventory, pricing, sales and compliance, and similar changes are underway for millions who work in other industries. The world has become smaller, faster and more integrated thanks to Zoom, cloud hyperscalers and applications like SAP Cloud software. Business leaders everywhere must define strategies that account for business trends and advances that weren't around when SAP ECC was first conceived.
Yes, ECC is still sound, functional and capable of running the business inside customers' four walls. But it's not optimized to take advantage of the new realities millions of us face in 2021.
Moving forward with a conversion
Today, companies are doing their best to manage their investments in uncertain times, but the world continues to move on. Having a competitive advantage leads to many revenue opportunities.
Consider other tradeoffs ECC customers are making: For most of them, custom code plays a role in their SAP landscape. Over time, the value of custom code erodes as systems, tools and standards change. There's also the ongoing cost of maintaining old technology that provides little value.
Other considerations for ECC customers include third-party applications and interfaces. Today, many companies use third-party applications such as Vertex or specialized interfaces for shipping. Others depend on customized EDI platforms. These technologies' developers are constantly updating their software in an attempt to gain competitive advantages and new sales opportunities. In some cases, the updates are very compelling.
Staying put limits your ability to take advantage of new functionality and capabilities. Take operational reporting. While ECC is pretty good at operational reporting, it was not optimized for business analytics. By contrast, S/4HANA provides for embedded analytics and access to new tools. It also accommodates Fiori and other interface options that offer a true step-change in functionality.
If you are among those struggling with a conversion plan, it's worth considering a new option that's available from SAP called SAP RISE. SAP RISE bundles S/4HANA and advanced technologies into a single cloud offering. You can realize the value of their investment sooner with SAP RISE, with projections of up to a 20% reduction in total cost of ownership over five years for the SAP S/4HANA Cloud private edition compared to a more traditional ERP deployment.
What's more, you don't have to move to the cloud when converting from ECC to S/4HANA if you have hardware in your data center that's capable of supporting the application. However, most customers make the move to the cloud at the same time to save money and reduce organizational stress.
Given how fast economic conditions and industry dynamics are changing, converting can also insulate your organization from competitive challenges and business obsolescence. As the saying goes, if you're not leading in your field, you could soon be lagging.
Seeking out alternatives
A third option that you may be considering in 2021 is swapping platforms altogether.
Every SAP ECC customer will have to address cost and change management before moving to another platform.
Sticking with SAP generally gives you a lower initial cost of conversion. You can save on maintenance costs if you use SAP HANA as your underlying database rather than using Oracle database technology.
However, a maintenance base cost is actually cheaper when using Microsoft SQL instead of the HANA database. Obviously, this is a moot issue if you move to S/4HANA, which requires using SAP's HANA database.
You must also consider organizational change management. Moving to S/4HANA may require some minor changes to existing processes, but a wholesale change in an organization's ERP application can have significant impact.
Before any move, you must consider the total impact on your organization. You should think about your existing business processes that are tied to existing ECC capabilities and limitations, your sunk investments into templates, best practices and talent.
Ask yourself the following questions:
- How much will it cost to retrain our people on a new software platform?
- How many business processes will have to be remade to comply or conform to new software standards or limitations?
- How many of our suppliers, business partners and customers use the new platform?
- Will I have the required level of support from internal constituents for a successful major platform change?
- Will a move provide a true competitive advantage and how long will it take to secure that advantage?
If the answers to these questions aren't clear, then ask yourself why you're considering a platform change.
If you still believe some change is in your organization's best interest, then do your homework and fully evaluate other applications against S/4HANA's enhancements. These enhancements include an open-designed architecture, familiar and capable APIs and a thriving ecosystem of partners. S/4HANA also has a proven track record, vertical market expertise, a comprehensible and realistic product roadmap and a successful history of acquisitions and alliances.
Something else to keep in mind: You should pick a partner with a commitment to diversity, inclusion and economic success. Today, these qualities matter more than ever.
Why you should think long-term
I started my career in the mainframe era, lived through the client-server phenomenon and am now enjoying the great migration to the cloud that mobile technologies have made possible. If I have learned one unyielding truth about technology, it's this: Always think long-term. That may sound paradoxical at a time when product cycles, budget periods and economic booms all seem compressed, but it's true nonetheless.
For example, those who feel comfortable "sitting pretty" on ECC Enhancement Pack 6 today are actually nine technology versions behind. Soon they will be not just behind but out of date. No one can afford to operate that way for long.
About the author
Brad Hiquet is an accomplished ERP strategist and SAP integration architect. He is vice president of client engagement at Dickinson + Associates, where he is responsible for the company's S/4HANA Movement program.