The S4HANA innovation dilemma

Why are SAP customers are not viewing S/4HANA as the only way to innovate?

The S4HANA innovation dilemma

Shifting to third party support gives organisations more time to plan their strategies and provides the savings to reinvest in innovation

CIOs all over the world are grappling with the innovation dilemma that has arisen as a result of the digital era. Businesses must move faster and with greater agility to fend off competitors, but the resources are not available for wholesale change. So how does the CIO prioritise where to innovate, maximising the productivity gains for the business while remaining within budget constraints?

Ultimately, CIOs need to be able to implement a strategy of innovation agility, applying their people, resources and time most effectively to drive improvements while ensuring the judicious allocation of budget. Sounds obvious, but this is even more challenging for SAP customers, who are being told the best (and only way) they should innovate is implementing S/4HANA.

Of course, SAP is only doing what every traditional ERP vendor is doing – scrambling to push customers onto their latest platform to convince Wall Street their future Cloud revenue streams will be as rosy as past on-premise ones! However, that does not help their customers, who face a real dilemma about upgrading. So what choices do they really have?

>See also: A guide for CIOs: how to drive digital business and mobility

In April 2017 we surveyed a group of SAP customers – CIOs, CTOs, IT VPs and directors and managers from a broad range of industries and company sizes across North America, Europe, Latin America and Asia-Pacific.

Overwhelmingly 89% said they plan to continue running their proven, SAP ERP releases given the rich functionality that more than meets their business needs without the cost, disruption and risk of migrating to S/4HANA.

A further two-thirds (65%) of licensees said they had no plans to, or were currently not committed to, migrate to the platform. It is clear many do not yet see the business case for S/4HANA and are worried about the cost implications. This is backed up by our survey:

• 57% don’t see a strong S/4HANA business case and/or clear ROI.
• 35% cite high migration and implementation costs.
• 56% estimate an S/4HANA reimplementation would cost between $10 million and $100 million.

>See also: Driving digital business and mobility: guide for CIOs

Based on these findings there four options for SAP customers wanting to drive innovation.

• Migrate to S/4HANA: there are some major companies who have such a deep relationship with SAP that it would be far too disruptive to consider anything other than moving to S/4HANA.

This is understandable, but it should also come with a health warning. Moving to S/4HANA is a re-implementation job, not a migration. Customers will have to switch to new code and in many cases the code has not been written yet, so it will not happen overnight.

SAP licensees who choose to migrate to S/4HANA would be advised to build out a strong business case and ROI before proceeding, and are advised to map out all potential disruptions to the business as budgets and timelines will be higher and longer than anticipated.

• A planned migration: some will want to move to S/4HANA, because longer term it suits the future direction of their business. They may not switch overnight, but they will begin to map out their path to the new platform and make a commitment to get there. As above careful planning is critical.

• Choose a hybrid path: in our survey 30% of respondents, who plan to remain on their SAP platform, are already adopting a hybrid IT strategy to drive innovation and meet business needs now, not years down the road. This will see them innovating around core SAP ERP with agile, cost-effective cloud applications rather than a wholesale shift to S/4HANA.

>See also: Digital transformation brings new challenges for CIOs

• Wait and see: Most licensees seem intent on a wait-and-see approach, with the option to upgrade if and when S/4HANA proves to add value to their businesses. This creates an unwelcome challenge for SAP, whose priority is to demonstrate to its shareholders that it is maintaining its sales momentum.

Standing in SAP’s shoes for a moment there are several ways to encourage customers to switch to S/4HANA. They can extol the virtues and capabilities of the future platform.

They can use testimonials to show the benefits. Or they can warn (some might say threaten) customers that support for existing products will be reaching end of life. We already know that support for ECC6 is scheduled to end in 2025, so it makes sense for businesses to consider planning for a future on S/4HANA.

However, it does not have to be that way. Customers on existing versions of SAP’s software can stay on their existing platforms without fear of losing access to high quality support.

The answer is switching to third party support. Naturally, you would expect me to say this, but our survey questions the value of the support that SAP customers receive today, so there is an urgent need for an alternative solution. Just 8% feel that support fees are “well worth the value” they receive. 47% say they’re paying too much or describe costs as “way out of control.”

>See also: 5 tips for CIOs leading digital transformation

In addition to the costs, 36% say it takes SAP support too long to resolve issues, and 33% complain about SAP’s lack of support for customisations.

Returning to the start point for this piece SAP customers should not feel pressurised into considering S/4HANA. We know many who are charting their own course, remaining on their existing applications and innovating at the edge as their businesses demand.

Shifting to third party support gives organisations more time to plan their strategies and provides the savings to reinvest in innovation. This way the only dilemmas CIOs will face are positive ones, because they will have the time to plan their strategies at their own pace and the budget choose where to focus.

 

Sourced by Hari Candadai, group vice president Product Marketing and Strategy, Rimini Street

 

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