SAP S/4HANA: IT users and vendors need to rethink

As more and more companies evaluate SAP S/4HANA, IT users as well as IT service providers are thinking about whether, why and how they should move to the next-generation application platform. The opportunities for both sides are huge – and so are the challenges, as a recent PAC Market InSight report shows.

SAP S/4HANA is the new generation of solutions, which is intended by SAP to support customers in their digital transformation process. It is based on, and optimized for, the SAP HANA in-memory platform. While SAP focuses on the business benefits when marketing SAP S/4HANA, the vast majority of SAP customers believe that SAP S/4HANA will first of all increase the performance of data analysis and of SAP-based processes. Many customers are also convinced that it will improve the usability of SAP applications.

In a recent report, “SAP S/4HANA – Opportunities and Challenges for SI Partners and Users”, PAC analyzes the SAP S/4HANA topic from the IT user and from the IT service provider perspective.

What SAP users should do

When deciding whether or not to migrate to SAP S/4HANA, a number of aspects need to be considered. However, the main question is: “How can I use SAP S/4HANA in my company in order to improve my business (or even create new business models)”? The question here is not about additional functionalities, but about how to change the way the company works and generate a business case from that. The answer is not easy. Also, most pieces of the jigsaw puzzle must come from the business lines rather than the IT department, as was the case in past upgrades. Thus business and IT need to work together in completely new ways. This holds challenges for firms that are bigger than those linked to a technical migration of SAP technology.

SAP S/4HANA is not just an upgrade of existing software, it is a completely new solution which, when implemented, will change both IT infrastructure as well as business processes. This transformation of technology and business processes needs to be enabled by SAP’s partners in cooperation with the IT departments and business lines at SAP customers.

Both for SAP’s existing and potential new customers, there are two major questions to be answered with regard to SAP S/4HANA:

  • Why should my company invest in SAP S/4HANA?
  • What should the migration path look like?

What SAP partners should do

Consequently, IT vendors are facing changing demands from their clients. For SAP partners, this means that they need to transform their existing business model towards services that help to enable the business, combined with the technological know-how. If done successfully, however, the opportunities will be vast.

Meeting these demands in most cases requires changes to the service providers' business models. Changes are necessary when it comes to resources (for example, increasing process-related capabilities and business-oriented consulting methodologies, and introducing more agile approaches to project delivery), the value proposition, and customer segmentation (such as a stronger focus on customer centricity and on business innovation).

To summarize, we could say that there are both opportunities and challenges ahead for the ecosystem:

  • Answering the “why” question is a challenge – the ecosystem has to act as enabler: SAP alone cannot manage to identify, ‘translate’ and execute on business outcome. The ecosystem has to fill this gap to make SAP S/4HANA a success.
  • Answering the “how” question creates opportunities – the ecosystem as executor: The roadmap to SAP S/4HANA offers huge opportunities regarding the migration/ new implementation process.

Bottom line:

Almost all SAP customers will need to evaluate a migration to SAP S/4HANA. However, these companies may not focus on a purely technical upgrade, as important business potential may be lost with this approach. SAP partners must be prepared to answer their questions, help them develop a solid business case, including a realistic cost calculation (including hardware and software fees, technical migration, process redesign and change management).