Selective Transformation for moving to SAP S/4HANA® – Having your cake & eating it.
Companies running SAP ECC can transition to the SAP’s S/4HANA® digital core in a way that preserves their existing investments whilst selectively transforming data structures and processes, adopting innovations at a pace that best suits their business.
It is well known that SAP has set a deadline of 2025 (extended to 2027/2030) for the end of SAP ECC ERP maintenance support. SAP has stopped investing in SAP ECC ERP and prioritizing investment into SAP S/4HANA® as the future flagship digital core solution. The majority of SAP’s thousands of SAP ECC customers have yet to start their transition to SAP S/4HANA®. This delay is due to a combination of trepidation around the scale of the investment and the fact that many of these customers are largely happy with their existing ECC system(s) and don’t yet have a compelling business case to justify the transition.
Migration paths to SAP S/4HANA
Companies considering their future digital core solution options have a spectrum of possibilities to transition to SAP S/4HANA®, which are summarised in the diagram below. Understanding the transformation ambition of the company is a critical first step in defining the right transition approach.
The Greenfield approach has been the historical preference for earlier adopters of SAP S/4HANA® looking to genuinely transform their businesses and deliver tangible business benefits. These programmes by their nature tend to be longer, which extends ‘time to value’ compared to other options.
Brownfield technical conversions are delivered more quickly but with often little initial business benefit beyond keeping ERP software on a supported release. Furthermore, they require pre-requisite projects ahead of the conversion and, if the SAP organisation and data structures are not fit for purpose, can require expensive post conversion data clean-up projects. Taking pre- and post-conversion activities into consideration, these programmes may therefore be longer and costlier than initially expected and actually constrain the benefits the SAP S/4HANA® solution can deliver.
We are therefore seeing that a Selective Transformation approach is being increasingly adopted by companies wishing to drive targeted value by modernizing specific aspects of their existing SAP ECC system to better serve the business, drive efficiency or reduce costs. At the same time, these companies are not ready to take on an end-to-end transformation and want to retain certain value adding assets that they’ve built into their SAP ECC systems while removing redundant code and to embrace digital possibilities with the most optimized investment level.
Selective Transformation benefits
The benefits of this approach, compared to Greenfield transformations or Brownfield technical conversions is that it allows companies to:
- Preserve their existing investments whilst selectively transforming business processes to drive standardisation and simplification across the business
- Adopt SAP S/4HANA® innovations, through a roadmap of agile projects that are delivered at a pace driven by business priorities, benefits and the ability to absorb the change
- Have a quicker time to initial value – as they deliver faster than Greenfield transformations and deliver more initial benefit than Brownfield conversions.
- Deploy a simplified and standardized SAP S/4HANA® ERP that will help them move to a “Clean Core” objective Reduce data footprint to save license costs whilst simultaneously improving data quality to support better analytics, decision making and future innovations
- Avoid having to do a range of pre-requisite projects such as Customer Vendor Integration, migration to New G/L and data archiving on their SAP ECC system.
- Avoids migrating lots of old SAP ECC functionality and data that they no longer use – for example many companies have moved old ERP-based HR modules to the cloud and no longer need them in their core platform
- Streamline demand for business and IT resources, building their trust and momentum needed to support further post-migration innovation project
- Smooth cash flows and enable the programme to be ‘self-funding’, such that the benefits realised from early go-lives help to fund the subsequent innovation projects
Selective Transformation approaches
There are a few flavours of Selective Transformation to consider, notably the ‘Shell Conversion’ approach and ‘Mix and Match’ approach. These are outlined below.
Companies that wish to minimise the initial process change, utilise their existing SAP configuration and code. Yet they need to make selective changes to their SAP organisation structures and data best suited to a ‘Shell Conversion’ approach. Typical examples of such structural changes include: adopting new chart of accounts, parallel ledgers, document splitting, asset accounting, cash management, controlling areas, company codes, sales structures and tax codification. Once live on SAP S/4HANA®, they have a programme of small projects that incrementally deliver extra SAP S/4HANA® process change and innovations.
Those companies that need more significant process transformation and benefits with the initial go-live will need greater change their existing configuration, processes and custom code to achieve this. A ‘Mix and Match’ approach is best suited for these companies. Here they start with a Greenfield SAP S/4HANA® system into which they selectively bring across configuration and custom code from their converted ECC system. They then build upon this with additional processes and configuration to deliver the desired transformational solution.
There are a few other areas to consider with a Selective Transformation approach:
- Selective Transformation requires thoughtful planning of which elements of the existing ECC solution should be migrated, which require remediation, and which should be transformed. For the elements which would be migrated, understanding all of the implications and complexities related to data, configuration, custom code, and integrations is critical to the development of a robust migration plan. For elements which require remediation, understanding the degree of remediation required will impact resourcing, timelines, effort, and costs. On the transformation side, identifying the capabilities which will deliver the desired improvements requires careful review of system functionality and processes and whether each should be transformed as part of the migration or as a later innovation project
- The new SAP S/4HANA® system is created without initial data and this data needs to be migrated from the original ECC production system. Just like a greenfield project this can be done using the SAP S/4HANA® Migration Cockpit combined with leading data extraction and transformation tools. If however, historical data also needs to be migrated, then this is best loaded through the use of specialist Selective Data Transformation partners, such as SNP and CBS, which have certified load tools that update data directly against the SAP S/4HANA® database. Companies should carefully consider how much historical data to migrate and in which areas
- In both options, but more easily with the Mix and Match approach, it is desirable to rearchitect custom code onto the SAP Business Technology Platform (BTP) so as to keep the SAP S/4HANA® Core clean and minimise technical debt.
- Deployment can be either as a big bang or business phased. The optimal approach depends upon the company’s ability to absorb the required business change, manage temporary ways of working and minimise business downtime
- SAP S/4HANA® Selective Transformation solutions can be delivered with On Premise / hyperscaler hosted or SAP RISE Private Cloud environments. Selective Transformation, like Brownfield, is not currently supported with SAP RISE Public cloud edition.
Learn more about Deloitte’s SAP S/4HANA® capabilities
With a global network of more than 28,000 business and technology professionals focused specifically on SAP, Deloitte is recognised around the world for our depth, experience and leadership in helping our clients manage their digital transformations. Clients choose to work with us because we combine business insight with technical know-how to deliver practical, results-driven solutions that work in alignment with larger strategic goals.
As the world’s leading SAP S/4HANA® Transformation Partner, Deloitte brings a wide range of experience helping our clients transition to SAP S/4HANA® and SAP BTP via Greenfield, Brownfield or Selective Transformation approaches. Within Selective Transformation, we are experienced in both the Shell Conversion and Mix and Match approaches and working with Selective Data Transformation partners. We also bring deep experience of hosting SAP S/4HANA® on all the hyperscalers and SAP RISE Private and Public cloud offerings. We bring a suite of automated tools to accelerate and streamline the delivery of these SAP S/4HANA® programmes.
Our team is ready to guide your company through the transition options and help you develop the scope, roadmap and compelling business case for change as well as to pilot- or co-pilot you through your SAP S/4HANA® transition. Contact us to get the conversation started and read more about selective transformation here.