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Upgrading any enterprise software should never be taken lightly, but as companies embark on reimplementing one of their core enterprise systems, significant problem areas are beginning to emerge, which shows that the upgrade from SAP ECC 6 to S/4 Hana will require plenty of upfront preparation.
For instance, Lidl’s recently joined the ranks of a number of organisations that have reportedly faced major difficulties with SAP S/4 Hana, and last year, reports emerged that sports apparel company Under Armour had serious problems with a new SAP S/4 Hana installation.
In 2016, Under Armour said it was working with SAP to build a single view of the customer. But a year later, the company said it was experiencing “operational challenges from the ERP system implementation and related service levels, which delayed some shipments”.
As Computer Weekly has previously reported, change management plays a big factor in how well an SAP S/4 Hana project runs. A whitepaper from SAP consultant Panaya warned that change requests, requirements, and test and release management processes could be a difficult transition for enterprise IT.
During its third quarter 2017 results last year, when asked about the problems with SAP, chief financial officer at Under Armour, David Bergman, said: “There’s a couple different pieces to it that we’ve been working through. I think one of the aspects was the change management that’s been a little bit tougher than we expected, including working even with our inventory partners, our vendors, trying to get them up and trained on the system as well, and just getting all of the things in place.
“So right now, the system is operating well. It’s stable, but the change management and the learnings and the reporting is what we’re still working through.
“We expect that in Q4, we won’t have the same level of impacts we had in Q3, but they won’t be completely gone yet. We’ll continue to work through it, and then continue to fine-tune as we move into 2018.”
For many businesses that currently run SAP, the clock is ticking. They have until 2025 to upgrade from their existing SAP ECC 6 core ERP implementation before SAP ends support.
This is generally regarded as a completely new ERP implementation, so companies may decide to dump SAP for something entirely different, but for those businesses considering a move from an existing ECC 6 implementation to the shiny new S/4 Hana, there are a number of key decision to make.
In the 2016 report, Early customer adoption of SAP S/4 Hana finance shows promise, highlighting the challenges of the implementation, Forrester analyst George Lawrie wrote: “The data structures of ECC and S/4 Hana are radically different.”
However, Lawrie noted that SAP does provides native data structures built and optimised for the Hana platform to deliver semantic compatibility between legacy applications and the S/4 Hana Finance digital core. It also provides a path for customers on ECC 6 to migrate to Business Suite on Hana.
But the migration story can be a whole lot more complex, especially given the way many SAP systems have evolved since they were first implemented, according to Matt Lovell, CEO of SAP consultancy Centiq.
“Most ECC environments have been customised on multiple SAP editions such as the business started with the ERP, then added manufacturing, sales, logistics, and as supply chain became more important, it supplemented these with real-time fulfilment and logistics management,” he said.
“The problem is that the phasing in of these applications was done as standalone projects, so they are protracted implementations, each with embedded change.”
Read more about implementing S/4 Hana
- The S/4 Hana digital core is an initiative of SAP to help companies turn big data emanating from various sources, such as sensors, into actionable insights.
- S/4 Hana has been touted as the evolution of SAP’s longstanding ERP suite, but with just six years to upgrade, how can businesses avoid an expensive SAP flop?
In Lovell’s experience, what this means is that organisations preparing for S/4 Hana need to look at how business data flows between these applications. “Part of the preparation we would like to see is data maps and the workflows,” he said. “But many organisations have a lack of data policies.”
Many companies would used third parties and contractors during the implementation of the various pieces of SAP software, so they are unlikely to have cohesive documentation, according to Lovell. In his experience, companies often do not have a single owner for the workflows – or even someone who can take individual ownership of a SAP module.
This has consequences that can influence the success of an S/4 Hana project. “Most organisations don’t have the resources to understand how to migrate,” said Lovell.
Given that modules have been added to ECC 6 over time, creating greater levels of complexity, many in the industry feel S/4 Hana offers business a way to re-architect their ERP. In the 2016 report, Forrester’s Lawrie found that interviewees reported the move to S/4 Hana helped reduce complexity in their SAP landscape.
Similarly, Lovell said: “An ECC6 can have thousands of processes. You see a lot of processes that can be simplified. We spend the greatest time looking at processes simplification. That’s where customers can see the benefit.” For instance, a considerable amount of consolidation can be achieved through automation.
Lovell said it is crucial for business to optimise and consolidate all their business processes, prior to embarking on an S/4 Hana project. “You can make use of the processes in S/4 Hana,” he said.
Having a thorough documentation of the data flows and how they feed the business processes can help organisations understand which of their existing business processes can map onto those in S/4 Hana.
Whether or not a business ultimately decides to implement S/4 Hana, Lovell believes a thorough analysis of data flows within the existing SAP system will pay dividends going forward. “If an organisation is looking to adopt a digital core, it should do this as soon as it can,” he said.
Such a digital core could enable the business to streamline old, inefficient or manual processes and thus transform digitally. But without the preparatory work to understand the data flows, a company may end up lacking sufficient information to build a business case for future digital initiatives.