How Carve-Outs can help in your journey to SAP S/4HANA (Part V)

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By now you should know what a carve-out is, how it differs from standard SAP projects, and the different ways to execute in the event you find yourself in an M&A scenario. If not, please go back and read parts 1-4 of this blog series. Now, what if you’re one of the thousands of companies out there that may never experience something like this? You will be surprised to know that the underlying technology behind complex carve-outs is very similar to what we now call Selective Data Transition also being used for the move from SAP ECC to SAP S/4HANA. Let’s take a closer look why this might also be important for your future projects.

The technology being used for Carve-Outs may positively impact your next projects in two different ways. First, it creates higher value during the Carve-Out by delivering up-to-date infrastructure which can be considered an asset and deliver a higher price for the seller. Second, using this technology for other projects like moving your SAP environment to SAP S/4HANA.

So, let’s start off quickly with defining what Selective Data Transition (SDT) is. In essence, it’s an evolution of the fourth option we discussed in Part III of this series, making the selective extraction and move of data to another system possible. The technology is mature and has been used over almost two decades in M&A related projects and SAP system conversions.

So back to the SAP S/4HANA move: Everyone in the SAP world is familiar with the terms greenfield and brownfield, maybe you know them as New Implementation and System Conversion. But the move to SAP S/4HANA is never black or white. Most SAP customers fall somewhere in the middle. In simplistic terms, SDT covers the wide grey area between greenfield and brownfield. Through specialized transformation software, a few select SAP partners can provide a “data-first” transition approach that is more flexible, less risky, and in a shorter time frame.

You may be asking yourself, what does this have anything to do with carve-outs? Let’s take a step back and put ourselves in the shoes of a company planning a move to SAP S/4HANA.

Greenfield seems like a monumental task, rebuilding your entire SAP infrastructure from scratch without any historical data whatsoever. On the other hand, building a business case through a brownfield conversion may be hard, since you have a lot of redundant, irrelevant data you don’t need cluttering your upgraded environment. As you can imagine, these two one-size-fits-all options had a lot of SAP customers scratching their heads, and, in my opinion, are one of the main reasons behind the relatively slow adoption of SAP S/4HANA.

Now back to what carve-outs have to do with migrating to SAP S/4HANA. Let’s imagine Company X is a large, global enterprise with a massive SAP footprint around the globe. Greenfield is out of the question because it’s too expensive, will take years to execute, and you need historical data in the age of the data-driven enterprise. Brownfield on the other hand is way too risky. No one wants a global big-bang Go-Live, with a multi-day cut-over that will bring the entire organization to halt. Not to mention a long system downtime for the technical conversion with the possibility that the slightest of issues could cause your entire system to be compromised. This would be the ideal candidate for a Selective Carve-Out migration to SAP S/4HANA. Instead of a seller and a buyer however, you have your legacy ECC and target SAP S/4HANA system. Are you starting to connect the dots?

How it works

A selective carve-out migration to SAP S/4HANA allows Company X to mitigate risk and move at the pace of the business by splitting up the otherwise big-bang conversion into multiple steps. Carve-out a specific company code, or region from the legacy SAP ECC system, and covert that into SAP S/4HANA. Use this as a sort of proof-of-concept, make sure all your processes are working the way they are supposed to before migrating subsequent company codes or regions and merging them into your new S/4HANA environment. The beauty of this approach is that it also allows you to leave redundant data behind, making your new SAP S/4HANA system leaner and free of unnecessary or unused data. The result is the same: start with a single (or possibly more) global instance on ECC, end with a single global instance on S/4HANA.

A similar concept can be applied to a smaller company opting for a greenfield implementation. Once they are done setting up the new greenfield system, simply carve-out whatever data you have decided to be in scope and merge it into your new greenfield system. A great example of this is one of my most recent customer projects in 2020. Initial situation was not exactly this one, as they had just acquired a business in 2018, and decided to use this as a proof-of-concept for SAP S/4HANA instead of integrating it into their ECC environment. After their S/4HANA was configured the way they wanted it to, the selectively migrated 15 of 30 company codes, and only 5 years’ worth of data into their new environment. No two businesses are the same, so Selective Data Transition really is an individual, customized approach to migrate to SAP S/4HANA on your own terms.

More on Selective Data Transition

Now that you have heard about this new “magic” way of doing Carve-Outs and even use this for a move to SAP S/4HANA, you’re probably wondering why you’ve never heard of it before and if this is really a technology recommended by SAP that you can trust.

Coming back to what I have said earlier already, the technology has been around for quite some time (almost two decades) and has been used in thousands of projects already. Maybe you know it as “SLO approach” which stands for the SAP System Landscape Optimization services (now SAP DMLT). Or you have heard of other similar approaches with different names coming from SAP partners. They all have one thing in common: every partner offering these services for the SAP S/4HANA move is a member of the SAP S/4HANA Selective Data Transition Engagement Group created by SAP. So, the approach and technology are quite trustworthy and proven.

Historically, SAP offered SLO services – and they were mentioned as a path to SAP S/4HANA in some early slides from SAP with recommended approaches to SAP S/4HANA. On some slides that I saw back in those days it was called “System Landscape Transformation” on some others even “Blackfield”. But suddenly the third option disappeared from the newer slide decks. Honestly, I do not know why SAP did not follow up with the approach on the later recommendations, but finally it was officially back and announced as third option during SAPPHIRE 2019, this time named as “Selective Data Transition” – and now here we are.

This was the last post blog of the series about Carve-Outs - I hope you enjoyed it. If you have further questions, feel free to connect with me directly @lorenzpraefcke