Can you afford to wait 3-7 years again to modernise your company’s core?

The huge ERP implementations of the 2000s and 2010s took forever. In the post-corona reality, fortunately, better options are available, and speed is of the essence.

The 2000s were an exciting decade for the business world. The new millennium brought huge optimism, the creation of global value chains, widespread digitalisation of business models and cross-border collaboration – but also the erosion of old value streams, failing IT experiments and, as I remember particularly in my career, huge ERP projects that lasted for years and years.

Today, things are looking very different in the world of core enterprise systems. SAP has recently announced that it is discontinuing development on its flagship ERP, only providing mainstream maintenance for SAP Business Suite core applications towards the end of this decade. This also means that many large companies have already started planning for the change to S/4 HANA, essentially future-proofing their businesses as they quickly evolve into the uncertain digital future.

Why move?
As an SAP expert at Deloitte, I speak to many large companies about the move to S/4 HANA – both companies that have started the transition already and those that have decided they want to wait. Like with any big decision, what I tell them is that they should only move if there is a good business case; the technical case alone for SAP is seldom good enough.

There is no doubt that the move to S/4 HANA is a sizeable investment. To fully unlock the possibilities, you need to ensure that you take the opportunity to move to a ‘clean’ ERP, thereby removing the customisations that you were forced to make in your previous ERP platform. In addition, this means revisiting old business processes and perhaps even outdated organisational structures. A flexible cross-functional digital platform requires material business transformation if it is to set the business up for the future – and of course, that transformation costs money.

On the other hand, we cannot close our eyes to the fact that, in many industries, markets and client expectations are evolving at a huge speed, pressuring companies to have digital solutions to complement their current products and services. Some companies have coped by building digital towers, seemingly detached from their core business platforms. Although this might work in the short run, it is seldomly a long-term solution when digital products and channels become mainstream rather than peripheral.

As a consequence of these trends, companies who have taken the decision to move to S/4 HANA have typically found that having a digital core to support their overall business agenda largely overshadows the investment. Rather than seeing obstacles, they see many possibilities associated with the new S/4 HANA functionality, including real-time analytics, demand driven MRP, production to individual customer specifications, support for product servitisation and intelligent digital back office functions in finance and HR, just to name a few.

Are we repeating the past?
What it all boils down to is the question of whether the implementation of S/4 HANA is really just a repetition of the huge ERP implementations of the 90s, the 2000s and the 2010s, only in a new disguise. The brief answer to this question is no!

Here is why:

• First, companies today are looking for solutions that cost far less than the large-scale projects of the last decades and require time to value much shorter than the 3-7 years that they took for their original ERP journeys.
• Second, companies implementing SAP in previous waves were corralled into replacing many of their core application with a monolithic, one size fits all, ERP solution – something which is far from the case today. What many people refer to as the SAP monolith, has shrunk since the arrival of HANA and significantly since the rearchitecting of SAP S/4 HANA. SAP has massively rationalised its table structure and module relationships, optimising data access in real-time and increasing flexibility.
• Third, across all sizes and shapes of companies, cloud technologies provide advanced functionality to solve business challenges in a standardised way. In the world of SAP, this means that the core application is much smaller than before while industry-specific and functional area solutions are now typically launched as cloud-native-satellites around the core, connecting via open APIs. Implementing a digital core solution like S/4 HANA thus allows companies to maintain a robust backbone for their business operations while giving them the flexibility to develop new solutions to respond to changes in market conditions or to adopt intelligent cloud-based solutions. Again, this differs significantly from the ERP projects of the past.

Here to stay
Although moving to S/4 HANA is a large investment for any size company, when adopted as part of a business transformation for the right reasons, it can definitely allow an enterprise to leap into a more cost effective and flexible position compared to its peers in the industry and position it better for the next wave of digital influence.

S/4 HANA can provide a core digital platform for a much more responsive, intelligent, kinetic enterprise, with data that is unlocked, and available in real-time to manage the business in a more timely manner or combined with other business data to support the launch of new digital products or efficiently support the management of their digital businesses with digital intelligent technologies.