Thoughts on S4HANA and its Impact on the Customer

[Former Member]

In February this year SAP introduced S4HANA. As the top brass at SAP has put it, this is the most important product from SAP since it introduced R/3 in 1992.

Some of the advantages of S4HANA as highlighted by SAP are:

Massive reduction in data footprint

Transactions are much faster

Simpler configuration

Reduction in DB maintenance

There are several other advantages too as highlighted by SAP which are also available in many other articles.

However,With S4HANA , SAP is throwing a different level of challenge to the various CIOs who are already invested heavily in SAP.

First of all, the scary part is that the infrastructure is going to be indirectly connected to the application. S4HANA , as the name suggests, runs on HANA database alone.For HANA, we can either have RHEL or SUSE linux as the OS. The customers can continue to run business suite on other databases until 2025, but if you need the latest innovations you need to be on S4HANA.This reduces the flexibility that most customers enjoyed earlier. They could choose their own hardware vendors and OS and also the database of their choice. With most customers the choice of database depended heavily on expertise available in-house. If you are a customer who outsources all your IT requirements, then we can argue that it will all be taken care of by the vendor. Even then, the internal IT staff who handles the vendor will be at a big disadvantage. There is also a lack of skill and understanding in the market when it comes to HANA as against the more established databases.

With flexibility being limited, the CIO will be faced with a difficult decision. Once he joins the S4HANA bandwagon there will be no looking back. There is no question of changing the ERP ever, as the infrastructure and database are all linked to the ERP solution. He can only hope that SAP will remain reasonable with the pricing while providing him with all the tools to provide the most suitable solutions to the business.

Secondly , the IT strategy/ road map will have to be changed. For example, I know a customer who is currently planning an SRM upgrade from 5.0 to 7.02. Due to certain complexities, one of their options is to install and implement a fresh system of the target version and then move required changes one by one from the old system to the new system. Additionally, they have also recently started an SCM implementation. With S4HANA, all these systems such as SCM, SRM and CRM are going to be part of the S4HANA system . So the question is , should the customer continue with these upgrades and implementations or should they immediately start thinking about S4HANA? Both these projects are going to run for at least a year if not more. They will result in significant costs to the customer.

In the past SAP has constantly churned out newer and newer versions with enhancements and functionality. Most customers who are several years behind SAP would hardly take notice of the new versions. They would chug along at their own speed and move to the new versions at their own pace, just before their current versions go out of support. However with S4HANA, customers need to change their strategy. They need to consider this right now and make changes in their strategy right now with the future in mind. Otherwise many of the projects that they are working on right now may seem obsolete when viewed from the perspective of S4HANA.

One of the other key aspects of S4HANA is simplification. Although it is true that S4HANA massively simplifies the usage and deployment of SAP, the one question everybody will ask is why the complexity was there in the first place. Wasn't it SAP themselves who got us into this complex landscape in the first place?

Regardless of all this, I believe that SAP has made the right decision. It is a very bold one , but I think it is the right one. While flexibility may be limited, how

many customers actually have the knowledge or the guts to go against a market trend and make a decision purely because he has analyzed and come to the conclusion that his decision will be better for business? I have seen that most customers like to play it safe and simply go with the marketing material that is provided by the ERP software providers to convince the business.It is true that the CIOs will have several new challenges to deal with, but ultimately I think they will stick with SAP and move to S4HANA.

Let us also look at it from another perspective. We constantly blame big companies of not being able to innovate or bring something new to the table. In this case SAP has done exactly that. It might cause some disruption to the current way of working and force the customers to take some tough decisions. However if this same innovation had been brought in by another new company we would have praised their ability to innovate and provide fresh solutions. We need to give credit where it is due. SAP is taking the trouble to change their own application to be simpler and faster. This is not something that most big companies actually have the will to do.

On the whole, these are interesting times. SAP is doing a great job of providing a lot of good material for S4HANA through open SAP courses and other blogs.However there are going to be several questions from customers on a case to case basis due to the complexities that exist specific to each customer.SAP needs to address these specific questions and this would provide customers with greater confidence.Another point that would greatly encourage the customer is if SAP could actually project the improvements to major business processes specifically for each customer. SAP should either provide a tool which partners/customers can use or a service should be created which provides this functionality. For example a customer should be able to determine that the cycle time for a particular activity will definitely improve by a factor of x if he implements S4HANA. This would help create a better business case for the customer to move to S4HANA.

Do let me know your thoughts on S4HANA in the comments section!