Are you questioning your S/4HANA roadmap options?
According to Gartner, "The complexity of the SAP S/4HANA roadmap, lack of clarity in industry-supported functions and the range of deployment options available (both on premises and Software-as-a-Service, or SaaS) mean that customers must spend more time selecting what is best for them, given that SAP has stated that the future is cloud."1
What is the best route for you? While SAP might say S/4HANA is the solution you need to modernize your system and move forward, most SAP customers we serve tell us that they aren't buying into that idea - at least not fully. Two-thirds of SAP customers surveyed by Rimini Street said they had no plans to migrate to S/4HANA or remain undecided about doing so. That's despite SAP's stated intention of ending mainstream maintenance support for the ECC 6 edition of its core ERP platform in 2025.
There are a host of S/4HANA migration issues that may give you pause, ranging from the high cost of migrating an established ERP system to an unwillingness to place full trust in a product that needs time to mature.
For the majority of SAP customers, the near-term business case for S/4HANA just doesn't add up. S/4HANA is arguably the biggest technology change in SAP history. Migrating to it from prior editions of SAP Business Suite means customizations and integrations will likely have to be reworked and retested or discarded. That is an incredibly expensive and time-consuming undertaking, given that the end result is essentially the same system with new plumbing. Although some SAP customers are feeling pressured to move to S/4HANA, many are just not ready or simply not making it a priority. On top of that, the all-roads-lead-to-S/4HANA approach seems to leave customers with only two migration choices: the fast route or the slow route. Here are some key considerations with both:
The fast route: Customers who take a chance on moving to S/4HANA right away risk the pitfalls that come with using a platform that is still maturing and still has gaps in its industry-specific functionality. They may also find themselves faced with high migration costs. Customizations the organization relies on may have to be abandoned or at least significantly reworked, because of the new technical architecture. Several early adopters, including Haribo, have attributed missed sales and supply chain setbacks to "change management" issues related to adopting S/4HANA, while Under Armor publicly attributed many of its financial struggles to its S/4 HANA implementation.
The slow route: Customers who choose to make the most of their investments in Business Suite and hold off on migrating until they're ready for S/4HANA risk paying high and rising maintenance costs, while SAP seemingly delivers lower and lower levels of investment for ERP software that predates S/4HANA. With more funds dedicated to maintenance, they are left with less money to invest in innovation. Less innovation from SAP and less money to invest in innovation mean more risk of falling behind in competitive advantage and growth.
A Third Choice
In fact, there are more than two options. SAP customers can defer indefinitely or don't have to migrate to S/4HANA at all if it's not right for them. Or they can begin a phased transition that allows them to begin to test the value of S/4HANA on a small scale, such as with a particular department or subsidiary.
If your analysis of your company's situation is at an impasse, consider taking advantage of third-party support that will help you optimize your tried-and-true ERP systems while lowering your support costs and risks. This way, you can wait for S/4HANA to mature while investing in that long list of IT initiatives your business has been asking for. Meanwhile, you can keep an eye on the proliferation of born-in-the-cloud enterprise software, watching for the emergence of a next-generation ERP that could be a better fit for your business. Markets and business opportunities are always in flux, so the platform choice you might make in a few years could be different from the one you would make if you were forced to choose today.
On the other hand, if you want to get started with S/4HANA, third-party support of your established ERP can free up money to fund a phased implementation or migration.
Three Customer Roadmaps
To help you figure out which path makes sense for your business, let's look at how three SAP licensees supported by Rimini Street have drawn their own roadmaps. You'll note that none of their strategies fit neatly into SAP's slow or fast migration plans. These customers have made their decisions based on their current experiences with SAP and their clearer understanding of all their migration options.
CF Industries: Getting Started with S/4HANA Cloud
Faced with an aging SAP ERP system, CF Industries of Deerfield, Illinois needed a more flexible platform that could handle new digital requirements. The company believed S/4HANA Cloud could give it the platform it required to grow and innovate, and it successfully subscribed to the system. In time, the company plans to expand its S/4HANA Cloud footprint into logistics and plant maintenance, if and when S/4HANA Cloud proves to be the right long-term solution.
The company also moved its support to Rimini Street in 2016. As a result, annual maintenance costs have been reduced by 79%, with savings of more than $25 million. CF Industries will continue to take advantage of the savings and improved support it's enjoyed since making the move, while assessing how well S/4HANA Cloud is working for it.
"This serves as at least a three-year bridge, during which time we can evaluate things and select the right path," says CF Industries CIO Tom Grooms.
Incitec Pivot LTD: Running Both S/4HANA and ECC Applications
Australia-based Incitec Pivot LTD has relied on its SAP applications for more than 20 years and recently purchased S/4HANA licenses. The company is planning to begin an incremental roll-out and evaluation of S/4HANA to determine whether it's a good fit and whether it offers a sound business case for a full implementation. In the meantime, Incitec plans to continue running its existing ECC applications until its S/4HANA strategy becomes clearer. The company is currently using Rimini Street for support to optimize costs and maximize ROI.
Multnomah County: The "Wait and See" Approach
Several SAP licensees supported by Rimini Street have taken a look at S/4HANA and determined it wasn't quite mature enough for them to consider migrating.
For example, Multnomah County, headquartered in Portland, Oregon, is a government entity that needs to meet county requirements for securely maintaining its system, while closely watching expenditures.
"We seriously evaluate every taxpayer dollar we spend," said Bob Leek, deputy CIO for Multnomah County. "Optimizing costs is of paramount importance."
The county currently runs a highly customized version of SAP ECC 6 with Oracle databases. Not only did it find SAP's vendor support inefficient and expensive, but also, like many other SAP customers, was experiencing a push from SAP to move to the S/4HANA platform. After much consideration and receiving comprehensive support from Rimini Street while it considered its options, the county determined that migrating doesn't make sense at this time.
"When some of the larger SAP customers also refused to pay for that reimplementation in exchange for an immature product, we knew that S/4HANA was not a road we wanted to go down," Leek explained.
Expand Your Options with Rimini Street
Regardless of whether you're ready to move full speed ahead with S/4HANA now, adopt the solution gradually, or hold off on making your decision until the solution and market matures, Rimini Street is on hand to offer the dedicated support and cost savings you need to keep your path viable. We already support clients on S/4HANA and ECC 6 Business Suite who are using their support savings for innovation and growth or to fund their future migration strategy. And based on what our customers are saying, it's clear that you have far more than two choices when considering your move to S/4HANA and the cloud.
1 Source: What Customers Need to Know When Considering a Move to S/4HANA — 2018 Update, Gartner
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Pat Phelan, VP, Market Research
Pat Phelan is VP of Market Research at Rimini Street. Prior to Rimini Street, she spent 18 years at Gartner providing CIOs and IT leaders with research and advice on strategies for managing the ERP/business application life cycle.