How should top management approach the question of moving to SAP S/4HANA?
Analysts, such as Forrester, point out that most companies are struggling today to build the business case for making the move from SAP ERP to S/4HANA. One main reason is that companies, and their consultants, are unable to design up-front the killer use cases using HANA’s much-promoted capabilities to justify the move.
But top management has, I believe, a viable three layer approach to make the case for this decision, create an agile environment that motivates talented people, and drive digital transformation.
Firstly, cost play. It may be boring, but it is a solid basis to lay a foundation. Indeed, the recent Centiq 2018 edition of the annual SAP HANA survey in the UK shows that IT infrastructure cost savings is joint first in the top 5 realized benefits of HANA, with business cost savings coming in a close third. Given the fact that SAP S/4HANA allows considerable rationalization of the landscape, plummeting costs of HANA hardware, and lower licenses than Oracle database, this is a realistic and sound start especially when the switch is planned alongside an already due IT infrastructure refresh.
The second layer needs a bit of digging to get to. Twenty years ago, when the first round of ERP-fication gripped the business world, the most ambitious top management teams asked us an extra question after signing off on the business case. The answer to that is the second layer of today’s business case. The question was this: “what’s in it for me, personally, as top management (CEO / CFO / CxO)?”
The general answer used to be better transparency and reports for decision making. But we took a step further than that. We looked at what top management teams valued from their IT.
ERPs, including S/4HANA, are the platform on which modern businesses run. But it is management that must steer the business to meet current and ever-growing expectations from stakeholders. ERP, by its very nature, lends itself to not only being the platform on which the business runs but also the mechanism by which management may observe performance, control outcomes, and steer their business into the future.
Therefore, we said, we would design their ERP not just as a “run” platform, but top-down and wrapped around by a management system of cascading KPIs connecting business performance at every level and to top management targets. Once such a system was up and running, management could measure current performance, set baselines & targets, and drive the company in the direction they wanted. Here is how it looked for a media customer with whom we worked (few sample KPIs only shown for illustration).
Such an integrated system to run and steer business is exactly what ambitious and proactive management teams wanted. Because they saw clearly what was in it for them, they actively drove the project and overhauled business practices and process as well.
While this was a big improvement to what was before, there were technical limitations. ERPs, including SAP ERP, are built on transaction processing database technology meant to run business. But the KPIs had to be pre-defined and built up in a separate BW, or “Business Warehouse”, system designed for reporting. Once built, such BW systems are difficult to change as business needs change. It is also impossible to drill down from low-res KPIs in BW to high-res data in ERP to get better insights and undertake “what-if” analysis.
SAP S/4HANA is the only ERP where these limitations have been removed. The HANA database is simultaneously transactional and analytical. As business hums along, every transaction is instantly made available for analytics in the same in-memory database. Management can quickly drill down from KPIs to the most granular of transactions to understand what is impacting the KPI and so take real-time decisions, as well as gather business insights for designing and steering the business over the longer horizon. They can also ask questions – what would performance look like if we took a certain decision over another? Finally, changing KPIs as business evolves, or getting ad-hoc KPIs, is far simpler and quicker.
The third layer lies deepest. As SAP S/4HANA puts power and possibilities with its enormous speed and capability to handle data from all kinds of sources and devices into people’s hands, management can use it to drive innovation in their organizations. These are innovations that may not be possible through up-front design or cross-transplanting what others are doing. Management can motivate top talent to turn organizational specific experience, context, and insights into new business models and processes. This will create the positive virtuous loops of agile management practices and motivated talent to transform the organization continuously and prosper in the digital age.
That is the power that SAP’s S/4HANA brings to management today. In today’s highly competitive and fast-changing business world, this is a key capability for ambitious management teams who want to be in control rather than react to disruptors.
- Layer 1 recoups money spent,
- Layer 2 brings you value today, and
- Layer 3 is the future icing on the cake – free for you to drive innovation and growth in the digital age.