Most organisations using SAP versions ECC6 (or earlier) will be considering whether or when to move to S/4 HANA and will probably be caught between SAP’s enthusiasm and the market’s wariness and warnings. My view is that now is the time to look at the opportunities this can bring to your business and not to be blinded by the stories or the cost: customers should seriously consider moving because, for most, it makes solid sense. It may be time to stop stressing about the pressures from SAP and the resistance in the market and make a solid decision to get planning and preparing.
Why it makes sense
So why do I feel so strongly that it makes sense to move? Well, ask yourself whether your business can really compete and be agile enough based on a 15-year-old ERP architecture (remember ECC was launched in 2004). You will perhaps have implemented sometime between then and now and you will probably have done a few modifications and customisations – but much of the core operation will still be ticking over pretty much as it was when you went live. Your reporting is maybe OK but only because you have tweaked and manipulated it – and whilst it takes a bit of time, it gives the business the basic key information it has to have – but it’s a struggle to get more, to get deeper insights across all the data you now have.
The point is that the world has changed in this time. You don’t need me to tell you about global competition, AI, robotics, low barrier to new market entrants, greater compliance and a more demanding 24×7 market. It follows that now is the time to be looking to jump to better, more efficient processes, to get faster insight and to reduce maintenance costs through embracing simplicity. Just look at your smartphone or tablet. You may be reading this on one of them. Five years ago, they were ok but not quite business ready: now they are indispensable. The devices are capable of allowing you to do any number of business-critical tasks and allow you to read and analyse the latest business KPIs. I say they are capable, but in reality, few businesses have embraced that capability because it’s just too hard and complicated to do it. Or it has been. New cloud technology is usually app enabled which is a game changer in terms of opening up new ways of working.
It is now perfectly feasible to run software securely in the cloud for the day to day running of your business, whereas five years ago it was a case of proceed with caution. Doing so can significantly reduce your internal IT overheads. Have a look at the options available to you now and ask how a managed subscription based on a simplified ERP solution could enable your business to focus on core differentiating activities better.
It’s time to look again at ERP software as an enabler of performance – not as an overhead asset to be sweated: old assets are less efficient, less secure, less compliant, less functional and costlier to maintain. Are you really wanting to run your business based on that?
It’s well worth looking at your upgrade timetable between now and 2025 when ECC6 is due to be left to the breeze: it is likely that you have some Oracle (or other) database upgrades to consider, hardware to replace, OS systems to maintain. You probably don’t have six years at all – maybe three, and probably less before you have to consider some aspect of significant cost and disruption.
Of course, I am not suggesting that you can avoid these costs by doing something different, but you can avoid repeating the costs in a few years’ time. Say you upgrade the hardware and refresh the database version this year or next but keep ECC6 unchanged, then within five years you will probably be writing that investment off before it is fully depreciated and in that time you will still be struggling to embrace the technology your competitors are using, and your cost base gets higher whilst others are reducing theirs.
How does S/4HANA measure up?
There are plenty of options to move to – SAP S/4HANA is perhaps one of the best, but there are other options – customers need to review the various S/4 options and make their own decisions. Depending upon the size of your business there are lots of alternatives to SAP as well. But if you do nothing else, take a close look at the SaaS options from SAP and consider whether, with a review of your business processes, you could simplify and rationalise. The answer is always going to be yes you can, but you have to have the will to change.
Slow take-up and widespread cynicism
Some reports say only 8,000 SAP customers of its 250,000 have moved to date (3.2%). Many Executives recount those stories of costly overruns, awful and abandoned projects, expensive software and maintenance, withdrawn support threats, harsh licensing – and are wary of anything SAP says is good for you – but this misses the majority of outcomes that are successful. It’s the old bad news travels fast syndrome. It’s Catch 22 that the harder SAP pushes for S/4HANA, the more wary customers become. That’s unfortunate as the benefits could be huge – and could be the difference between an agile thriving business in growth, and a cost focused business fighting uphill for survival.
Review your business processes
The dynamics are changing, the old boundaries are being redrawn. For many years people have started projects vowing not to customise, only to give in as the first change request affects a politically sensitive subject for a senior member of the company. Now, however, there is a better understanding that customisation is just an excuse and distraction. The process options in today’s ERP meet most requirements and comply with all the rules and regulations. They may mean your business has to do something differently and you may lose the spreadsheet that you have always used – but your energy will then be focused on building the business not running it.
The point is surely that there is no value added from doing routine tasks like processing invoices or closing the monthly accounts your way instead of SAP’s way. Especially if you are using SAP merely as a backup for your spreadsheets (alarmingly common as this is)! Look at what gives you a competitive advantage – it won’t be by running your finance team in a special way, but it may well be in delivering goods as quickly as possible after the PO was processed. How confident are you that you have charged the right price or given the correct discount for that customer? Did you close the deal fast enough? Did the admin hold up the fulfilment of the order? When things go wrong who cares? How quickly is it resolved?
Where processes move to spreadsheets then the slower all these things become. How can your reports accurately reflect all the data in the spreadsheets? Result – inaccurate business data, throw in some arrogance, ego and intransigence and you have a recipe for decline.
Does this sound extreme? It is out there! Just ensure it isn’t the situation in your organisation – it couldn’t be, could it?
What I have often seen is that because the ERP system is costly to change, over time more and more processes get done in Excel, and if IT resources are limited, or investment constrained, the finance and sales teams end up expanding to accommodate all these off-system processes. So, the accumulation of these workarounds means that your day to day sales reporting and stock management becomes less accurate, closing the period end takes longer as more has to be manually reconciled and the year end takes months. I worked at one client where the period end for the group was only closed on the 25th day of the month. That is no way to manage a dynamic business in the 21st century surely? In the same organisation they realised that their customers had a better grasp of their fulfilment performance than they did themselves. But they had put in SAP back in 2003 and did a technical upgrade to keep it sound so that’s all good, why don’t they get the info they need? Simple, the business had changed beyond recognition in the last sixteen years, but they had never updated their processes.
With the advent of well written secure cloud solutions, whether they be private or SaaS, the argument that it is “IT’s fault” or “it’s too expensive” no longer flies. The business process now takes centre stage in this model: it can’t be changed, it is maintained by someone else but to much higher standards than most organisations can afford to do internally. Enforced improvement results.
Simplify
It is now all about getting the value out of the software by using the standard processes to do the non-value add jobs and gaining the advantage through real time analytics, one source of the truth and well-informed, engaged people.
Don’t waste energy and resource on server maintenance and hardware contracts etc: spend the time and money instead on process review and selecting the best process driven software for your business.
Darrol Radley
Posted by: Edson Consulting Ltd
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