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Author's profile photo kisan shirke

Building business case for SAP S/4HANA

The digital economy is accelerating exponentially, and digitization is disrupting how businesses operates today. Staying competitive in the digital age requires speed, agility and innovations. 72% of CEOs see the next 3 years as more critical than the past 50 years of their industries. 40% of executives worry that their organization will not keep pace with technology change and lose their competitive edge. Most businesses are aware that they will one day have to change their underlying IT platform to meet digital economy challenges.

According to SAP User Groups (SUG), one of the main reasons why SAP ECC customers are not migrating to SAP S/4HANA digital core is the lack of strong business case. Transitioning an organization to SAP S/4HANA requires considerable investment in effort, time & cost and managing business disruption. Regardless of your starting point and systems, building a professional business case will help secure internal funding and executive sponsorship.

I just thought to pen down in simple words my experience of working with multiple clients for building business case and advising them for value driven SAP S/4HANA adoption strategy.

Approach to build business case

I feel that building a business case for SAP S/4HANA should be a three-phase approach as illustrated below. It’s a 3D Model. First phase is all about discovering business value drivers & challenges, identifying SAP S/4HANA benefit areas & compiling industry benchmark for assessment. Second phase is all about defining potential improvement areas, identifying cost elements and quantifying benefit and cost areas. Finally, we put together cost-benefit analysis and connect all dots of qualitative and quantitative assessment to build professional business case.

I will try to explain each of these steps in detail with some hypothetical examples. This approach is put together using standard SAP tools and accelerators.

Step 1 : Identify Business Value Drivers & pain areas

Building business case for SAP S/4HANA should be top down approach and leadership involvement is absolutely important. The business value drivers are identified and professionally documented after understanding strategy & vision of business & IT leaders.  The strategic discussions are conducted with different LOB owners to assess existing business pain points and identify areas of improvements.

Step 2 : Identify SAP S/4HANA Benefit Areas

Tools & accelerators are used to identify SAP S/4HANA benefit areas like SAP Transformation Navigator, SAP Innovations & optimization Pathfinder, BSR (Business Scenario Recommendations). SAP S/4HANA readiness check also illustrates recommended analytical apps & associated business benefits.

The BVR (Business Value Realization) strategy is built by identifying relevant business KPIs required to track business value drivers and potential improvement areas considering SAP S/4HANA innovations. Heat map analysis is executed to identify significant business value drivers that have major impact on business process improvements and tangible value realization.

Step 3 : Compile baseline Assumptions & Benchmarks

Once you identify SAP S/4HANA benefit areas the next step is to build assumptions and industry benchmarks to quantity benefit areas in $ numbers.   The SAP Value Lifecycle Manager tool is used to compile standard baseline assumptions based on inputs like revenue, COGS, total inventory etc. The tool will also illustrate financial impacted area like revenue, working capital, pre-tax margin etc. Ideally you should set up SAP Transformation Navigator tool and then export analysis into SAP Value Lifecycle Manager.

The SAP Value Lifecycle manager is a benchmarking tool which has multiple proof points with case studies to show how your industry peers of similar size are performing against identified KPIs. 

Step 4 : Estimate potential improvement range

The next step is to estimate potential improvement range by analyzing adopted SAP S/4HANA solution & innovations and Industry benchmarks. These improvement figures may vary from one customer to another depending upon size of organization, maturity of existing applications & business processes. The SAP Value Lifecycle manager or SAP Customer reference flipbook are used to build most “likely” estimate model.

Hypothetical example – your company’s annual sales is $500 m USD and average inventory is about 15% of annual sales and its inventory carrying cost is 20% of that value. Similar sized reference organization’s inventory carrying cost is from 10 to 15 %, then the potential improvement range of most “likely” estimate model is $3.75 to $7.5 m USD. This directly helps to improve pre-tax margins.

Finally, we need to run these findings & data points with different business owners along with value demonstration of potential improvement plan considering SAP S/4HANA innovations & solutions. The “conservative” estimate model is build based on agreement with business owners so that proposed improvements are realistic to achieve.

Step 5 : Identify cost elements of transition

To build CBA (Cost Benefit Analysis), it is important to understand cash outflows for SAP S/4HANA transition. Technical Impact analysis including cloud maturity assessment is needed to put together next five years of platform roadmap. Tools & accelerators like SAP S/4HANA readiness check and SAP Transformation Navigator will help to understand sizing & license requirements for proposed transition roadmap.

Typically, the following cost elements are calculated over a period of transformation (5 years) to illustrate cash outflows:

  • Software licensing and capital infrastructure cost
  • Implementation and integration cost, applications migration cost
  • Maintenance and support cost of applications, hardware and networks
  • Change management, trainings, improvement and adoption cost

Step 6 : Quantify benefits & Cost areas

Next step is to quantify SAP S/4HANA benefit areas and cost elements over a period to illustrate cash inflows and outflows. The timescale depends upon SAP S/4HANA proposed roadmap. Not every benefit will be realized immediately so its important to understand when potential improvements can be realized & start reflecting as tangible outcomes. The “conservative” estimate model should be converted into absolute $ number on proposed timescale.

ROI guidelines from SAP experts:

  • 10-20% of the value of a HANA investment will come from TCO (Total cost of ownership) reductions
  • 30-40% of the value will come from increase in productivity of business intelligence and application development
  • 50-60% of the value will come from improved business processes

Step 7 : Build Cost Benefit Analysis

The important aspect of understanding financial viability of SAP S/4HANA transformation is the cash flow projection throughout the life cycle of the project. As illustrated below, cash inflows and outflows are projected over a period to calculate payback period, NPV (Net Present Value) of project and IRR (Internal rate of returns). This will help securing internal funding and executive sponsorship.

Step 8 : Build & Validate Business Case

Finally, you should be able to connect all dots together consolidating qualitative and quantitative assessment and bind it together in leadership consumable format. Focus should be on business value drivers, challenges on hand, high level improvement areas & realistic achievable targets for improvements. The business owners should validate business case before leadership readout.

Building business case is a summarized output of multiple qualitative assessments like business process impact analysis, applications & data impact analysis and technical analysis.

What is of interest to me is Business capability transformation & heat map strategy and I will cover the same in my next blog.

Thank you and have a nice day ahead!

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      Author's profile photo Ravi Bajaj
      Ravi Bajaj

      It is true Next era of competition in digital transformations with machine learning and cloud based applications and SAP has wide range of products to give business a winning edge.

      Author's profile photo Jitendra VICHHAWAWALA
      Jitendra VICHHAWAWALA

      This is very useful information on different challenges all businesses are facing today in their digital transformation journey. This write up also clearly define solution and step by step approach to handle  those challenges.

      Author's profile photo Purushothaman Tiruvarur Subramanian
      Purushothaman Tiruvarur Subramanian

      A very detailed write up which explains how the business transforms and the benefit it gets from digitally transforming their existing SAP landscape to S/4 HANA and other applications like Fiori, SAP Leonardo etc.

      Author's profile photo Arulmurugan Veluchamy
      Arulmurugan Veluchamy

      Very nicely & precisely articulated.

      Blog elaborates E2E, "How to" do the "Business Value Proposition" and further "How to" realize the "Business Value Realization" by building the perfect "Business Use Case"  by connecting the dots thru' tools & accelerators while approaching the Customers confidently for their SAP S/4HANA digital/intelligent transformation.

      This is one of the quickwin examples to prove "how to" do the "VALUE" selling  proactively thru' Business Consulting while service partners are struggling to bring/showcase the  SAP S/4HANA benefits across the table to their existing customers and new customers currently.

      Very much useful for SAP S/4HANA Business consultants, Architects,Business Leaders and Aspirants.

      Congrats Kisan!

      Author's profile photo MMPPQM Infra GEWPT SAP

      This blog is awesome!!!

      Which gives the detailed information on building the usecases on SAP S/4HANA, and motivates the Business Conultants to digitally transform from ECC to S/4HANA to get the value addition and to improve the business.

      Great work Kisan!




      Author's profile photo MMPPQM Infra GEWPT SAP

      Wonderful Article.. This blog gives all the required info, starting from the importance of  Digital platform technology.

      Highlights the   digital strategic vision for the customer with planned  Methodologies which brings about clarifying all  the pain points of  the customer in order to migrate to S/4 HANA confidently.

      Provides the intent customer the road map, how best proactively the business can be run to  realize the quick cost benefits.

      Awesome Kisan.. Nice blog



      Author's profile photo Rahul Das
      Rahul Das

      Excellent Blog in a simple language which enumerates step by step approach for building Business case in SAP S/4 HANA.

      Author's profile photo Chandra Kosuru
      Chandra Kosuru

      Fantastic blog in digital transformation. Approach with business cases can recommend to customer on SAP S/4 HANA.

      Author's profile photo mayur bagdiya
      mayur bagdiya

      Nice Blog and Very Good Description!!

      This Business case can be very useful in upcoming approach for S/4 HANA .

      Author's profile photo HP BASIS
      HP BASIS

      Wonderful Article !!

      Right approach and useful for Business case for S/4 HANA.

      Author's profile photo Alok Maury
      Alok Maury

      Well explained paradigm shift from existing ECC to S4 HANA and other applications Fiori, SAP Leonardo.. SAP Digital transformation & its effect on ROI.
      Cost benefit analysis throughout the life cycle of the S4HANA project & later will definitely lure current ECC users & non-SAP ERP users to adhere with S4HANA.


      Author's profile photo Amit Kumar Sharma
      Amit Kumar Sharma

      Wonderful Article ! Kisan .

      This blog is important and really very helpful for build Business Use Case. Its a great example to showcase of S/4 HANA benefits. Very much useful for SAP S/4HANA Sales , Pre-sales . Business consultants, Architects.

      Thanks and congratulations !!!

      Great contribution to SAP Community !

      Thanks & Regards,


      Author's profile photo chandrakant katkam
      chandrakant katkam

      Good work sir

      Excellent case for S4HANA

      Author's profile photo Siba Sankar Panda
      Siba Sankar Panda

      Wonderful Article..

      Fantastic blog in digital transformation

      This blog gives all the required info, starting from the importance of  Digital platform technology.

      Author's profile photo Rajiv.K Tibrewal
      Rajiv.K Tibrewal

      Wonderful Article !!

      Right approach and useful for Business case for S/4 HANA.

      Author's profile photo Prashanth Paramesh
      Prashanth Paramesh

      This is excellent.. Many of the companies are reluctant to go for Migration from ECC to S4HANA.  This article complete picture about AS IS ANALYSIS and Benefit out of it.



      Author's profile photo Venkat Janardhanam
      Venkat Janardhanam

      Very Good Article and it's gives the detailed information on building the use cases on SAP S/4HANA,


      Author's profile photo Gagandeep Basra
      Gagandeep Basra

      Super article Sir. Convincing case for S/4 HANA migration.

      Author's profile photo MMPPQM Infra GEWPT SAP

      Wonderful Article.


      Very god Business approach for S/4 HANA.

      Author's profile photo Atwell Mukusha
      Atwell Mukusha

      This a great article. Would you be able to share with me the spreadsheet you used for the Step 7 Build cost benefit analysis. You can email me the spreadsheet