Chris: It is a really big deal, Kelly. SAP is the leading vendor in the ERP applications market and has communicated they are going to stop maintenance support of their prevalent current system, SAP ECC, in 2027.
This is going to cause a number of impacts and resulting decisions for existing clients. This is going to force over 20,000 current SAP customers to choose between migration to S/4HANA, paying a higher maintenance charge or moving to another software vendor. The upshot? SAP is forcing software decisions based on their roadmap, not on their client’s business initiatives. Gartner estimates that at 2Q23 67% of SAP ECC clients had not licenced S/4HANA. That doesn’t mean 33% have actually started the migration journey; they could be testing, or evaluating the new system.
Given that functional/ business migration usually takes two to five years depending on the size of the organization the costs and risks of moving to S/4HANA are significant. On top of this, given this huge wave of companies needing to migrate, there will not be enough immediately available expertise to deliver in the timeframe.
An entirely new, innovative approach and thinking is needed.
Role of r4apps in SAP S/4HANA Migrations:
Kelly: Where does r4apps fit in this industry-wide challenge?
Doug: We were actually talking about it earlier today. We really simplify and accelerate that migration and provide a necessary new, innovative approach. Helping the client understand exactly what they’re getting into; accelerating and de-risking the migration journey, helping with the ongoing integration of the new S/4HANA system with the older ECC and other legacy systems, etc. The bottom line is massively improving ROI, reducing risk, and accelerating time to value, all of which transform the business case. We’re helping both clients and the advisors. With many of our clients, we’ve been working directly with the client. With others, we’re working primarily with the major systems integrators and consulting companies.
Chris: There are going to be two situations that ultimately end up with a client moving to a new system. You can move to S/4HANA and r4apps can help with that. Other clients will get rid of SAP and say, “You know what, I’m going to go to a completely new vendor,” and r4apps can help with that. In both cases, r4apps will help with high-risk areas, e.g. complex data migration and integration and can serve as the connective tissue between the new system (S/4HANA or other) and the old legacy or satellite systems.
The migration decision can be postponed for several years by contracting with companies that support the existing versions of SAP, thereby extending the life of their ECC systems. This decision is not without risk.
With either of the move system options, they need to be planning that now. For the largest companies, it’s probably too late already. They’re not going to get it done by the time SAP stops or limits the maintenance.
Advice for Companies Faced with SAP S/4HANA Migrations:
Kelly: What advice would you have for companies who are faced with this challenge, this imminent migration to S/4HANA?
Doug: Kelly, I think their starting point has got to be, what does the business case look like? You might be forced to do it anyway. But how do you minimize the capital costs, how to accelerate the benefits in doing the thing, and for that, you need proper data, you need proper information about the challenges that you’re facing. Most organizations are really struggling with this because it’s a highly complex process.
Chris: The business case challenge is not simple and is driven by a choice of two different strategies. Business model transformation is more complex and is designed to allow the business to shape the way it reacts to changing competitive markets, ways of customer engagement, etc. Business process optimization improves the effectiveness and efficiency of existing processes. These both require significant business commitment and dedicated internal resources. Substantial spend is involved, with options to move cost from capex to opex so executive buy-in is essential.
Doug: Then companies need to figure out how to proceed, look at the different options that are available, are they going to go: Greenfield, Brownfield, some kind of hybrid approach, understand what’s involved in the data and the software moves, and then get in place the right team to drive it forward. Using something like r4apps massively accelerates time to value as it allows for the ability to work through and understand these options and decisions. We are talking about time savings upwards of 60%, which on a multi-year project translates into a lot of money. With r4apps, project teams start working with it, start playing with it and become productive within a few days. It’s a relatively small investment, but it’s going to save huge amounts of time, cost, and risk going forward.
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