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Intelligent ERP Update: SAP S/4HANA Cloud 1902 release for service

Customer Service business models are changing. SAP S/4HANA connects the entire enterprise service management business processes across lines-of-business, enabling the organization to create new revenue streams while protecting current business. With 1902 release, SAP S/4HANA Cloud for service enables you to keep a tight control on the service margin through ability to handle service contracts and service orders coming from an external system.

In the video below, I summarize the capabilities of service management introducing SAP S/4HANA Cloud:

With the 1902 release, we enable handling the end to end service management triggered in third party systems. With the integration of orders and contracts into SAP S/4HANA Cloud, you can now handle their service management, follow on process that impact revenue and costs bringing complete visibility over their service margin. To ensure strong customer experience, companies typically have either a contract with their customers or handle one off service, that needs to be quickly attended to, with off service orders.

Service in SAP S/4HANA Cloud enables you to manage your service cycle, from service contracts through processing service orders and service confirmations. We can now synchronize external service contracts and orders with relevant follow up process rolling up to profitability analysis. This includes high level of flexibility including confirmations (with full or partial ) and service order planning (with both time and material and fixed price). With our event-based revenue recognition, we enable you to increase service margin by providing clear insights into cost and revenue drivers.

Service Contracts:

Service contracts enable customers to increase the ratio of recurring, predictable service revenues through long-term relationships. Customer Service Managers can manage these outline agreements with business partners that define the services offered / covered for a list of products and installations over a defined period.

The integration between an external front-end service system provides an API interface for bringing in service contracts into S/4HANA cloud.  Service contract management in S/4HANA Cloud is an integrated end-to-end process including billing, controlling and revenue recognition. Customers can reduce their administrative cost for billing, credit & collections by automatically leveraging the service contracts’ periodic billing plans. Service Managers get a comprehensive view on service contracts revenues. The tight integration into revenue recognition ensures legal compliance and auditability.

Service Orders:

Service orders are short-term agreements between a service provider and a service recipient, in which one-off services are ordered by the service recipient and then billed according to the resources used when the service order is completed.

With 1902 we introduce even more flexibility. You can use a fixed price scenario or a scenario in which the price is calculated based on the individual resources that have been invested to provide the service. You can manually request the creation of a purchase order for spare parts.

With the manage Service Orders, you can display, filter, sort, and group a list of all service orders in the system and can also release and reject service orders.

Service Confirmations

Service confirmations are used to confirm service orders. You confirm the actual consumption of the resources included in the service order. With 1902, you can perform partial or full confirmations. In most scenarios, once a service confirmation (including all items) is set to completed on header and item level, the corresponding service order is also set to completed.

You have the Service Management Overview to view the status of service orders and service confirmations both in detail and at high level. The Service Management Overview app can be used for analytical purposes, for planning purposes, and to monitor the execution of service processes. Moreover, it can serve as the starting point for processing individual service orders and service confirmations.

While, with the Manage Service Confirmations app you display, filter, sort, and group a list of all service confirmations in the system. You can cancel service confirmations. Additionally, you can release completed service confirmations for billing.

Pricing:

Pricing is used for the calculation of prices. The system determines price information when creating a business transaction such as a service order, service contract, or service confirmation. For example, the system automatically determines the gross price, discounts, and surcharges that are relevant for a specific customer or a particular date in accordance with the valid price conditions.

Billing:

You use the billing functions in Service to initiate billing of the following service transactions:

  • Service orders
  • Service confirmations
  • Service contracts

Billing-relevant transaction data is transferred to Sales Billing in the form of billing document requests (BDRs), which are added to the billing due list. You can either trigger billing document creation for these billing due list items manually or schedule it to run periodically without user interaction. Both methods create billing documents that can be posted to financial accounting and sent to customers.

Event-Based Revenue Recognition for service contracts

Finally, Event-Based Revenue Recognition analyzes recognition values for service contracts with customers. Revenue associated with service contract items is recognized periodically based on the referenced billing plan including using IFRS or US-GAAP.

Event-Based Revenue Recognition allows you to manage revenue recognition for service contracts with customers. Once a service contract is released, Event-Based Revenue Recognition calculates and posts revenue based on the billing plan assigned to the service contract items. Revenue is distributed evenly on a monthly basis according to the duration of the billing plan and realized with period-end run. Billing triggers revenue adjustments and reposts billed revenue to deferred revenue. Costs associated with service contracts are posted via assigned service orders. Manual adjustment and accruals of revenue and costs are possible. In Sales Order Actuals, the reporting for realized revenue and costs on service contracts is available.

With this, you can recognize revenue periodically based on billing plan independent of the settlement date, ensure correctness of posted values after period-end closing, with no separate settlement required. This is enabled by automating recognition activities leading to reduce manual effort during the period and at period end closing and avoiding the need for additional reconciliation.

We bring 5 new processes for US and Germany in order to do this. These include ability to handle the financial impact and revenue recognition including IFRS and GAAP. Please refer to:

From our Chief Product owners:
Matthias Barth, Chief Product Owner for SAP S/4HANA Cloud for service, says: “Service Management now becomes an integral part of S/4HANA Cloud, supporting our customers in managing the trend of a “servitization” of their businesses. For example service contract management enables customers to increase the ratio of predictable, recurring service revenues.”
Werner Schmidt, Chief Product Owner for SAP S/4HANA Cloud for service says “With S/4HANA Cloud for Service, release 1902 we move Service Management to where it belongs: into the heart of a tightly integrated ERP system”. 

For more information on SAP S/4HANA Cloud, check out the following links:

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