Lack of viable business case holds back S/4 Hana projects

A study has warned that many organisations are failing to put together a compelling business case to upgrade their SAP systems.

The report from Resulting IT estimated that up to 42,000 organisations are still running SAP ERP Central Component (ECC). But SAP has publicly stated it is only committed to supporting this software until 2025.

SAP wants organisations still running ECC to migrate to its in-memory enterprise resource planning (ERP) system, S/4 Hana, but the research forecast that the industry would need to spend in the order of £100bn on SAP consulting to migrate.

According to the data published in the Resulting IT report, between 38,000 and 42,000 organisations are still running ECC. Although SAP claims that 20% of these (9,500) have already licensed S/4 Hana as of October 2018, the report found that the number of live customers is a little harder to establish.

“SAP claims 1,500 customers are live with S/4 Hana, and an 80% penetration of licensed-to-live customers (at the time of the report, 7,900 had licensed S/4 Hana),” the report stated.

Former Gartner analyst Derek Prior, who co-authored the report, said: “SAP S/4 Hana has lots of nice stuff, but it is different. You spent decades bedding in ECC, then it all changes with S/4 Hana, which is quite different.”

While it offers Fiori, a new user interface, and the ability to process in real time thanks to its in-memory Hana database capabilities, Prior said customers of SAP were holding back migrating from ECC to S/4 Hana because it was much harder to put forward a business case for the project.

Prior also felt there were not enough customer references to enable organisations planning a migration to see how it is done. “ECC is mission critical,” he said. “The people running it are not paid to take risks and there is a lack of proof points of big companies that have done the migration.”

Another challenge organisations face is that, compared with ECC, S/4 Hana is still relatively new – and it’s evolving.

Based on a nine-month S/4 Hana migration, the research estimated that if every organisation migrating to S/4 Hana hired an average of 15 SAP consultants per project globally, 108 million days of consulting effort would be needed to complete the migration of the 42,000 SAP customers still on ECC.

“At a rate of £925 per day (which is an average), that equates to £100bn of consultancy costs – in addition to the software licences,” the report warned.

The study reported that a large majority (75%) of SAP customers expect to move their current ECC systems to S/4 Hana by way of a migration. “This implies SAP customers feel a technical migration is the simplest route and therefore intend to carry over most of their existing master data, configuration and custom code,” the report stated.

According to the study, opting for a brownfield implementation of S/4 Hana implies the majority of SAP customers are not using the migration as an opportunity to simplify and standardise their business process.

The report warned that the danger of a brownfield approach is that it is possible to end up doing the wrong things quicker. “SAP customers should avoid the easy option of viewing the move to S/4 Hana as an upgrade project and kicking the real process improvements into the long, green grass.

“A good example is enterprise structure, which may have been compromised previously as a workaround in the original implementation of R/3. Plenty of SAP customers have these kind of issues, which are a result of changes in the business over time or bad advice from the original system integrator,” the report warned.

“You have to do what is right for the business,” said Prior. “You may have a very good ECC system which you may have customised. Now everyone is using it and you are squeezing the benefits. Can you justify the spend?”