Realizing the Value Proposition of S/4HANA – Three Key Value Levers for Improved S/4HANA Adoption

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Key Takeaways

⇨ S/4HANA comes with an array of deployment options, including on-premises, public cloud, private cloud, hosted cloud, and hybrid environments which enable businesses to choose a deployment that best suits their security, compliance, administrative, and cost needs.

⇨ S/4HANA is not just a stand-alone product. It is an ecosystem of developers, tools, platforms, systems integrators, partners, and many other resources available to optimize the platform to get full value from it.

⇨ S/4HANA has a clear value proposition for the clients, but realizing that value requires careful planning and execution.

SAP released S/4HANA4 (Suite for HANA i.e., High-performance ANalytic Appliance) in early 2015 calling it the most important product in the company’s history. SAP S/4HANA which is the successor to SAP ERP Central Component (ECC) is an ERP application based on the SAP HANA in-memory database that enables companies to perform GL (General Ledger) transactions and analyze business data in near real time. The release of S/4HANA included rewriting 400 million lines of ECC code, utilization of the in-memory architecture for faster analytics, better UI/UX (over SAP GUI of ECC), consolidation of many SAP ECC tables, migration to the cloud, and more.

But what do the changes or value propositions given by SAP mean in simple terms? In business terms, there are three key elements or benefits in S/4HANA’s value proposition.

  1. Flexible Deployment Options. S/4HANA comes with an array of deployment options, including on-premises, public cloud, private cloud, hosted cloud, and hybrid environments. These flexible deployment options enable businesses to choose a deployment that best suits their security, compliance, administrative, and cost needs.
  1. Better Analytics. S/4HANA runs on SAP HANA database that combines GL transactions and analytics in the in-memory platform. This is technically called embedded analytics, which is the convergence of OLTP (OnLine Transactional Processing) and OLAP (OnLine Analytical Processing) solutions. For instance, the Universal Journal table ACDOCA and the Material Document table MATDOC in S/4HANA leverage the granular data to reduce data footprint by eliminating data aggregates and reducing the dependency on batch processing. The OLTP and OLAP capabilities convergence significantly reduces the cycle time associated with data engineering and data cleansing and thereby offering faster IFRS (International Financial Reporting Standards)/GAPP (Generally Accepted Principles and Practices) financial reporting. SAP reports that SAP HANA is 3600 times faster than traditional databases, gives insights to queries in less than 1 second, scans 3.5 billion records per second per core, and can do 15 million aggregation per second per core [1].
  1. Improved User Experience (UX) and Advanced Capabilities. S/4HANA functions are rendered via the Fiori UX (the platform for delivering personalized web-based apps) and can be easily accessed across various devices, including desktops, tablets, and mobile phones based on the security roles. In addition, S/4HANA offers advanced capabilities including RPA (Robotic Process Automation), ML (Machine Learning), AI/LLMs (Artificial Intelligence/Large Language Models) and more.

At the same time, S/4HANA has some drawbacks and challenges especially when compared to ECC. S/4HANA runs only on the SAP HANA database, unlike ECC which can run on many databases including IBM DB2, Oracle, Microsoft SQL Server, and more. Implementation or migration from ECC to S/4HANA is complex, time-consuming, and expensive especially if there are many ABAP code customizations in the ECC environment. Last, but not the least, S/4HANA is a relatively new application with a developing roadmap. The product still doesn’t have the same maturity as ECC.

What do these S/4HANA benefits listed by SAP mean to the client? How can clients leverage these benefits?

In this regard, the value proposition of S/4HANA from SAP’s perspective must be mapped to the needs of the clients to see if the benefits for the clients outweigh the costs and risks. There are three key S/4HANA value proposition elements applicable for clients to drive improved business outcomes.

  1. Culture. Companies need tools to report, measure, and improve business performance reliably and quickly for operations, compliance, and analytics. S/4HANA is a holistic platform that can be used to manage GL transactions on Finance, Logistics, Asset Management, CRM (customer Relationship Management), Sales, PLM (Product Lifecycle Management), HR (human Resources), and more. At the same time, S/4HANA is also an OLAP platform. The one integrated “OLTP + OLAP” solution handles both data capture of GL transactions and the data analytics to explore, analyze, and visualize data and insights. This integrated platform in turn will enable standardised business processes, reduce data footprint, and derive reliable insights to consistently measure and improve business performance. Basically, measurement provides visibility, and visibility drives business performance, and S/4HANA will bring a culture of performance and change in an integrated manner.
  1. Education. Education i.e., Digital Literacy is the ability to understand and communicate the business processes, data sources and constructs, analytical techniques applied, insights derived, and the resulting business value. Again, this can happen effectively when the entire organization is trained to use, communicate, and collaborate on the same platform. S/4HANA with its integrated business processes, consolidated data model, and easier and friendlier Fiori UX will make it easier for the adoption of the S/4HANA platform in the organization. The improved adoption in turn will bring positive change in the organization.
  1. Quality Data. Mckinsey research says that organizations that invest in data see a 6% increase in profits. MIT says that digitally mature firms are 26% more profitable than their peers [2] Considering the enormous amounts of data companies are capturing and storing these days, achieving, and sustaining data quality is very complex and challenging. One of the reasons for poor data quality in many enterprises is data silos and the associated costs of data integration and data engineering. Ultimately this will adversely affect operations, compliance, and analytics. S/4HANA will reduce data silos by serving as the SoR (System of Record) for the entire enterprise and provides an authoritative data source i.e., the Golden Record that can be used on all the stages of the DLC (Data lifecycle).

Aristotle once said – “The whole is greater than the sum of the parts.” The biggest strength of S/4HANA is integration; SAP has packed S/4HANA4 with lot of features and functions. This includes the integration of functional areas like Finance, Supply Chain, HR, and more with a strong OLTP application. The OLTP solution is further integrated with OLAP and analytics using the in-memory platform for deriving descriptive, predictive, and prescriptive insights reliably and quickly. These insights can be quickly integrated to optimize the business processes and GL transactions in OLTP applications as part of embedded analytics or these insights can be used in AI/LLM applications.

Figure 1: Key S/4 Value Levers for Business Enterprises

Basically, S/4HANA is not just a stand-alone product. It is an ecosystem of developers, tools, platforms, systems integrators, partners, and many other resources available to optimize the platform to get full value from it. SAP is the largest ERP vendor, both in market share and revenue. So, SAP invests heavily in research and development for S/4HANA. As SAP’s 2027 deadline for mainstream support of ECC is coming closer, companies have a big decision to make on S/4HANA. While S/4HANA has a clear value proposition for the clients, realizing that value requires careful planning and execution. This needs to be done by balancing the benefits S/4HANA against the cost and risks associated with of implementing the S/4HANA. If not done well, companies might leave some important benefits of S/4HANA on the table including missed opportunities to lost profits and wasted resources.

References

  1. https://www.sap.com/canada/products/technology-platform/hana/what-is-sap-hana.html
  2. Southekal, Prashanth, “Data Quality: Empowering businesses with Analytics and AI”, John Wiley, 2023

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