Looking for a fast and agile way to move to SAP S/4?
A hot topic in the SAP ecosystem is SAP S/4 Transformation where you migrate your existing landscape into the latest ERP by SAP. Most companies look at this migration as an ominous task that will take several years before any value can be achieved. They debate brownfield vs greenfield approaches at length. They struggle to understand which brings higher value, lower risk, lower cost, etc. while lamenting that there is no one size fits all to digital transformation. At Applexus we have thrown out that discussion and have personalized your journey to SAP S/4HANA with our RunWay approach that weighs each of these dimensions and more. One approach to SAP S/4HANA within the overall RunWay approach is a great fit for a risk averse organization that also wants the advantages of SAP S/4HANA quickly. That approach is to use SAP S/4HANA Central Finance Foundation (Central Finance or cFIN).
What is cFIN?
SAP collateral will describe it as “SAP S/4HANA Central Finance Foundation (Central Finance) is an S/4HANA system, installed as a sidecar, receiving financial accounting transactions via real-time replication from one or more SAP or non-SAP ERP source systems.” I view it a little more simply. cFIN is the integration layer that will convert financial data from your legacy system so that it can be loaded into an SAP S/4 Finance system in real time. Even more simply, it is a little black box sort of like a modem that sits between your old ERP and SAP S/4HANA Finance. The box translates the data out of the old system and very quickly moves it into SAP S/4 allowing you to see your current financial data leveraging the power of the SAP S/4HANA platform. When SAP sells S/4 Central Finance, it is usually bundled with S/4HANA Finance, S/4HANA Enterprise Management and SAP HANA (database) all under the umbrella of Central Finance.
How can it help my SAP S/4HANA Transformation?
Looking at the SAP definition, the key words are “one or more”. The predominant use case for the cFIN option is when multiple ERPs need to be brought together to improve efficiency and effectiveness of consolidated financial applications. This approach provides a single view across all ERPs leveraging the powerful analytical tools available in SAP S/4HANA. A related purpose is to simplify consolidations and carve-outs for mergers and acquisitions. This consolidated financial solution also enables centralized shared services for financial operations. The often-forgotten use case which even Gartner lists as their fourth out of four is: “Use SAP Central Finance to Avoid a Risky, Big-Bang Switch to S/4HANA”. This use case is the focus of the rest of this article. For most companies, overhauling your financial system is a very risky undertaking. A former client of mine, a Fortune 25 retailer, selected Central Finance for this very reason. Moving over $100B to a new Finance backbone in one fell swoop is a very risky proposition. I like using Central Finance to not only de-risk an SAP S/4HANA Transformation but to also enable an agile approach whereby smaller portions of your financials get moved to SAP S/4HANA in shorter agile projects. In fact, this approach can be used to migrate to S/4HANA regardless of your source ERP (SAP or non-SAP). The SAP Central Finance transition strategy to S/4HANA harvests many of the business benefits for Finance earlier than any other approach thus improving the ROI of your investment.
Why do I need SAP S/4HANA Finance anyway?
Since the early days of ERP, the consensus recommendation has been to go Finance First. Nothing has changed in that regard. Recently, Gartner recommended a Finance First approach to Digital Transformation. If you need to update your IT platform or feel your legacy environment is choking your organization’s ability to innovate, then a Finance First approach is probably the best path. There are many benefits to be had with S/4HANA Finance with or without the rest of the ERP functionality. Seeing your financial data in the simpler data construct with the powerful tools available from the SAP S/4HANA platform provides some of these key benefits:
- An improved user experience leveraging Fiori to simplify access to Analytics and operational transactions.
- Embedded reporting and analytics which reduce your information to action ratio with live transactional data in a single source of financial truth.
- Continuous close whereby you can make key strategic decisions all month long on real live data rather than waiting a couple of weeks after the monthly close.
- If your Chart of Accounts has gotten bogged down with too many specific bank, vendor or customer accounts or it just has become outdated over time, SAP S/4HANA Finance will enable a reduced and/or lean CoA.
- Moving to S/4HANA is also the perfect time to begin a transition to the cloud thereby significantly reducing your TCO for your ERP solution.
So, how do you do it?
The key is moving quickly by standing up Central Finance in a sidecar model where your legacy system remains untouched. The built-in real-time replication of cFIN will move all your detail financial data from the legacy views into the new S/4 HANA Finance system that can enable new and powerful new views into your data. This is a great opportunity to not only simplify your Chart of Accounts but also other aspects of your organization structure including profit and cost center hierarchies and profitability segments. These changes will provide you an improved way to see your financial data without messing with your legacy system. Following SAP Activate or Applexus RunningStart project methodology will help support a fast-paced project by adapting agile principles while staying as standard as possible. Most of the work in the Explore Phase will be focused on designing your new financial structures and mapping the old to the new. To help keep this project short, quick and with no risk, you will want to keep the data moving one direction from your legacy system into cFIN. Many a cFIN project has been derailed by trying to do too much too soon. Keep it simple. When additional financial processes get enabled in SAP S/4HANA Finance, they will often require the dreaded back posting to the legacy system. It seems like it should be simple, but it somehow usually becomes a problem. Your focus in this first phase of your SAP S/4HANA digital transformation is to get visibility to your financial data leveraging the new tools available and to construct the way you want to see your evolving company into the future without being bogged down by where you have been.
I did the work, what do I have?
So, what do you have at the end of your first S/4 project using cFIN? Well, you have gotten started on your S/4 HANA Digital Transformation journey. You have your data in a state-of-the-art financial system that enables all types of analytics and different ways to view your business. Live customers have reported to SAP that they achieved an 18-24% decrease in planning, forecasting, and budgeting costs. Those same customers reported cFIN helped reduce their financial close time by up to 50% and further reduced the cost of analysis and reporting on business and operations. If you are drawing from multiple ERPs, you can finally have a consolidated view of your organization at a much more granular level than provided by traditional consolidation packages and you are set up to incorporate a new acquisition in as little as six weeks. If you have multiple ERPs, ideally you would establish Central Finance to consume data from all your ERPs in this fashion to get consistent visibility across all of them.
You have not risked any part of your ongoing operations as you have not touched any of your legacy solutions except to extract real time (or the best you can get) data. You have enabled a roadmap to SAP S/4HANA that is agile allowing you to move your Financial Operations in smaller logical chunks into SAP S/4HANA Finance as you feel appropriate. This part will take some analysis so that the functionality you move to SAP S/4 HANA will come over intact and hopefully avoid the need for back posting. The agility of this approach allows you to move as slow or as fast as you want and allows you to adjust as conditions dictate. We all know how budget limitations, economic conditions, people availability and a myriad of other things can impact plans. The great thing is that each project can be kept small with a lower risk, and each will create business value for your organization. You still have the current 2027 deadline to get off SAP ECC if that is your legacy platform. However now you have a much more flexible approach to achieve that longer term goal.
Wrap it up please.
Now, you see there are benefits to getting started on your SAP S/4HANA digital transformation. You agree that going Finance first is the best approach. You see there is a quick and agile approach to use something like Central Finance to get you there. Now, why would you select this approach?
- It is virtually no risk to your current Finance platform.
- It gets you started on the digital transformation journey with a smaller project that gets your feet wet.
- As you move your remaining financial processes to SAP S/4HANA you can do it in smaller lower risk projects.
- The smaller projects add agility to your roadmap that allows you to change direction later if your business environment changes.
- Once Finance is all on SAP S4/HANA, you can add additional ERP modules on to the powerful SAP S/4HANA platform in smaller agile projects.
- After you have completed your migration, you can keep the cFIN integration layer to facilitate future acquisitions.
There you have it. A smart, fast, agile, low risk way for a Digital Transformation to an SAP S/4HANA platform. If you would like to discuss this approach further, please reach out to me or my colleague Shiraz Cooper. We would welcome any comments, thoughts, or contrary opinions on this approach.