From R/3 to S/4HANA – 2015 Mid-Year Observations

 

The SAP Announcement of SAP S/4HANA on February 3, 2015 is argued to be the most significant announcement by the company in 20 years. What started as a series of business improvements in analytics, database, user experiences and functionality, has now converged into a completely new product release and code-set. What’s more, this product convergence is going to occur in an environment much different than the days of the R/3 release in the early/mid-1990. Non-disruptive migrations and flexibility of architecting platforms to be deployed on-premise or in the cloud are now expectations in the world of consumerism in which we live. The achievements of harmonizing transactional entries across the organization are now met with questions on how to consume and analyze all the data that is available to us. Organizational growth must occur not only through the sheer number of customers, but also in the productivity gains that can be attained.

Understandably, organizations are looking at this environment very carefully and with a high level of introspection.  Questions like, ‘How can we deploy SAP S/4HANA without interruption?’, ‘What value are we going to obtain through an S/4HANA deployment?’, ‘When is the right time to deploy given SAP’s development cycle?’, and ‘What risk am I taking on being on the leading edge of this product offering?’ are all legitimate questions and ones with answers that will evolve as we move into the weeks and months ahead.  To that end, three observations have been witnessed when engaging customers in the chemicals and life sciences industries:

Companies in the industry are taking a conservative approach to adopting SAP S/4HANA:

Many customers in the chemicals and life sciences industries have deep seeded roots in SAP’s ERP software package.  In fact, SAP’s first customer in the 1970s ICI Chemicals was in the chemical industry.  Given that these companies have decades of ERP utilization, and have actively participated in the SAP product roadmap for a long time, these companies have much at stake (and much to consider) when looking to  a migration to SAP S/4HANA.  There is a sentiment that they clearly understand they want to make the move to SAP S/4HANA; it is a matter of ‘when’ rather than ‘if’.  The challenge is that these customers are taking an approach where they want to be on the ‘leading edge’ not the ‘bleeding edge’ of this product development.  While there is a clear maturation of the SAP S/4HANA package (particularly with SAP Simple Finance), many customers in the industry appear to be looking at deployment of this package starting in 2016.  In the meantime, the focus is on readying the landscape for the move to SAP S/4HANA.

Companies are focusing on securing gains from SAP Suite on HANA before going to SAP S/4HANA

While many companies in the chemical and life sciences industries are taking a conservative approach toward SAP S/4HANA, they are certainly not idly standing by watching the technological landscape evolve.  There has been a witnessing of obtaining value through a move to the SAP HANA database, specifically around gains associated with speed of in-memory computing and a personalized user experience that is now ‘SAP consumer grade’.  Many chemical and life sciences organizations that have moved to the SAP HANA platform have seen tremendous gains in speed as a result of the in-memory technology.  MRP runs can be completed in seconds, not hours.  Reports occurring in nightly batch streams can now be executed in real-time, and provide more up-to-date information and move from reactive to predictive operational execution.  The ability to analyze procurement information more quickly and with a greater subset of data has helped companies lower their raw material costs and alleviate margin pressures on their products.  Optimizing organizational planning through deployment of integrated business planning and/or business planning and consolidation are helping businesses aggregate and ‘slice and dice’ data to provide accurate information from the boardroom to the shop floor.  On top of all of that, the Fiori user interface enables quick consumption of this information with a focus on delivering these key organizational performance indicators on any device, anywhere, and at any level of detail.

Companies are looking carefully at hybrid deployment approaches available (cloud/on-premise)

The advent of cloud computing and the viability of taking a subscriptive approach to software investment is very intriguing for companies in the chemical and life sciences industries.  Transforming these obligations from a capital expense to an operating expense provides financial benefits to an organization and limits the organization’s exposure to asset investments.  These ideas; however, are carefully being considered by these organizations due to the trade off of privacy and security risks.  There is still a concern by many companies of information security in the public cloud.  Many of the companies in the industry want to have tangible control over their information which a public cloud offering cannot provide.  The approach taking hold seems to be a hybrid approach, parsing out certain parts of business information into the cloud (such as HR information through deployment of SuccessFactors) while keeping other information on-premise or in a private cloud.  It seems that this hybrid deployment approach will continue for the foreseeable future and companies will take a pragmatic, slow-but-steady approach to deploying more information in cloud-based solutions.

Concluding thoughts

It is an exciting time to be in the technology industry and to see the advent of all of the new innovative product offerings SAP has brought to market.  The SAP S/4HANA platform, as it continues to mature, will provide a foundation for organizations to grow their technological investments in a non-disruptive fashion and seize the capability of analyzing the digital world in which we live.  As companies realize the value of SAP HANA, the compelling influence to move to SAP S/4HANA will accelerate and enable organizations to realize the richness of information available to them in the digital world.

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