How to Create a Business Case for SAP S/4HANA & RISE with SAP
What, Why and How?
- Learn how to build a business case for SAP S/4HANA in your organization
- Identify the important parameters (functional & technical) which support the SAP S/4HANA transition path?
- What are the prerequisite projects (CVI to BP, old GL to new GL ) required for SAP S/4HANA?
- How to calculate the TCO & ROI for the SAP S/4HANA transformation
- Which transition path and deployment option to select for SAP S/4HANA transformation
- Which SAP standard tools are available to support in the creation of the business case of SAP S/4HANA?
- Understand what important KPI’s which can be measured to calculate the ROI of the SAP S/4HANA
- Understand the challenges and lessons learned from our assessments
Organizations need to embrace new technologies and adopt new business models to become digital, meet increasing customer expectations and compete against disruptors that influence how markets evolve. The meaning of digital varies from organization to organization as some would like to increase customer satisfaction by building mobile applications or optimize processes by digital automation whereas others would like to focus on improving the employee experience, delivering superior business operations and increasing business agility by moving from legacy ERP to the intelligent SAP S/4HANA
A dilemma facing organization in the digital world is how to replace aging, on-premises business applications or ERP, which are very complex with the ever-increasing intensity of integration, data volumes, change requests, and workarounds. At the same time, business processes designed around the technology limitations of the past keep standing in the way of implementation of new digital technology such as IOT, Blockchain, Real Time Reporting etc. and optimized business processes utilizing Robotic Process Automation (RPA) or embedded AI. Some of the other current challenges facing enterprises include:
- Non-agile supply chains
- Disconnected system
- Siloed and customized business processes
- Lack of real-time information
- Complex IT landscapes
- Out-of-date business models
- Inability to quickly change or innovate
- Lack of real-time, connected systems to serve increasing population of remote workers
SAP S/4HANA is potentially a worthwhile investment to address the above issues. The financial benefits of a simplified digital core, standard processes, harmonized data model are made more attractive when combined with the SaaS qualities and rapid innovation cycles of the product. As we all know, you can only improve what you can measure. but senior leadership wants to calculate the return (AKA ROI) on digital investment which is very difficult. ERP digital transformation is expensive, impacts business and has long implementation timelines so majority of the customer are still working on building the successful SAP S/4HANA business case which tracks the business KPI and shows true Return on Investment in order to get approval from leadership. The other main reason for creating the business case to SAP S/4HANA is the pending deadline of end of maintenance of ECC, which is now one year closer and has put additional pressure on organizations to solidify their business case. The business case should be able to answer the following questions
- How do you perceive your current system?
- Why would it be beneficial to move to SAP S/4HANA?
- Can SAP S/4HANA address my business and IT requirements?
- How does SAP S/4HANA optimize my TCO?
- Which applications should be used to best fulfill the future business requirements?
- How many SAP S/4HANA production systems should be used (for example, global vs. regional production systems separate production system by business sector)?
- Should the existing architecture for other applications remain as-is (for example, standalone SAP Transportation Management) or should certain functions now be co-deployed with SAP S/4HANA?
- Do you want to keep your solution enhancements or your transaction data history?
- Do you need a renewal of your complete ERP solution?
SAP S/4HANA Business Case Parameters
The following parameters such as License, Technical, Functional and Total Cost of Ownership (figure 1) must be evaluated to create a successful business case and helps to decide the SAP S/4HANA transition path i.e., New Implementation, System Conversion or Selective Data Transition (figure 2)
Figure-1 SAP S/4HANA Assessment Parameters
Figure 2 – SAP S/4HANA Transition Paths
- RISE with SAP – SAP S/4HANA Licenses
SAP has introduced RISE with SAP as a business-as-a-service and have since made some changes in the license model (figure 3) i.e., Full Usage Equivalent (FUE), Infrastructure licenses and Digital Access. During business case creation, customer should ask following questions:
- What is the infrastructure SLA’s provided by SAP Rise?
- How do existing SAP ECC user licenses get converted into SAP S/4HANA licenses in the RISE with SAP?
- What will happen to the existing additional licenses such as SAP Transportation Management etc. when landscape is moved to public cloud on RISE with SAP?
- What will the TCO be if you continue with the existing licenses compared to the license converted to RISE with SAP?
- What is the impact of the Digital Access on the current licensing cost? Is the Digital access license required?
Figure-3 – SAP License Model
- Business Process/Functional Processes/Automation
Digital Transformation requires a good understanding of how the business works and what areas require improvement. Being a best run business means making business decisions quickly based on the data and business processes to be integrated, cyclical process instead of siloed, linear process. Below are some of the questions to be asked during the assessment to get more information on the transformation:
- What kinds of innovations (figure 4) could I accomplish if I eliminate manual processes?
- What are the current business processes challenges in the landscape (figure 5)?
- What insights and technologies can I embed at the time of decision making?
- Can existing business processes be implemented without modification?
- Is it more appropriate to redesign business processes to new S4HANA functionality?
- Does S/4HANA introduce new functionality that requires changes to existing business processes?
- What all tasks can be automated to increase productivity, etc.?
Figure-4 – SAP S/4HANA Business Process Value & Benchmarks
Figure-5 SAP S/4HANA KPI’s
Data volumes have been exploding for years. As a result, customers are deploying more data solutions – databases, data warehouses, data lakes – to enable both automation and analytics. In addition, as cloud complexity and costs increase, they are adopting data tiering based on usage and to reduce the license cost and even working on cleansing, archiving that data if required.
Below are some of the questions to be asked in the assessment
- What are the current data challenges and data quality of the system?
- Will the future application have to access or retrieve legacy data beyond what is in the Production System – (ability to access and retrieve archived data)?
- How many years’ worth of data will be converted into the system?
- Will customer maintain legacy data beyond the converted data in an archive system?
- How do we prepare for the required migration of SAP data to SAP HANA?
- What is our plan for legacy data to ensure business performance while reducing complexity?
- How can we ensure data integrity, security, and compliance, especially as we move data to the cloud?
o User Experience
SAP S/4HANA has released SAP Fiori (figure 6) to empower users to be productive and effective—through enterprise applications. SAP Fiori can help businesses provide an attractive user experience for their employees with patterns and approaches, such as powerful ways to include AI and machine learning, while also building trust. Below are some of the questions to be asked in the assessment:
- How many applications can be replaced by Fiori?
- What new standard Fiori application can be accessed by the users
Figure-6 – SAP S/4HANA User Experience
SAP S/4HANA has changed the open insights like never before and companies are looking for fast, agile and scalable capability. The real time analytics can help to optimize business productivity, save costs etc. Some of the requirements are as follows:
- Provide business users with right insights to support their business decisions. by providing KPIs and reports
- Ensure standardization and consistency of key figures across business areas within the company
- Ensure that KPIs and reports are up to date and running
- Ensure correct filtering of data and that KPIs and reports are accurate.
During business case creation, customer should ask following questions
- How can we leverage SAP S/4HANA Embedded Analytics and enhance the operational reporting?
- What will be the impact on the system if embedded analytics is activated on the SAP S/4HANA system?
- Is there any custom report functionality which can be fulfilled by the standard CDS views?
- What is the ROI of the faster real-time reporting, month end report
- Are the current analytic tools compatible with SAP S/4HANA and no other tools like SAP Analytics Cloud are required
- How much effort to spend decommissioning BW reports to be moved to SAP S/4HANA
o Instance Consolidation
Landscape simplification and consolidation is an important parameter during the business case as it can support optimizing business productivity and corporate agility and/or to reduces IT costs. The companies which have de-centralized, non-consolidated, or non-harmonized SAP ERP landscape the transition to SAP S/4HANA can be a good opportunity. During business case creation, customer should ask following questions. For ex – SAP Extended Warehouse Management and SAP Transportation Management can run integrated with the order-to-cash and procure-to-pay processes in one SAP S/4HANA system.
- How far do the processes in scope run globally, across business sectors, across functions, across regions, across sites? That is, are global views or calculations required?
- How far is process harmonization desired and realistic globally, across business sectors, ?
- What is the impact on the IT and Infrastructure cost if there is a consolidation of the landscapes?
- Can we implement any SaaS solution for the functionality present in the system forex – customer implement SAP Success Factor instead of HR module in the SAP ERP system?
o Cloud Assessment (Basis & Hosting on on-premises/cloud)
Organizations move existing applications to the cloud for a variety of reasons, such as to replace legacy systems and infrastructure with faster, more flexible, and more scalable hardware; leverage newer cloud- based technologies and solutions that provide features existing systems do not; and leverage the operational expenditure model that the cloud offers. During business case creation, as cloud reduces the IT cost and moves towards Opex instead of Capex, customer should ask following questions:
- Have you selected a platform for hosting the SAP Infrastructure?
- What all SAP & Non-SAP system can be migrated to the cloud?
- What is the cost of migration to cloud?
- What will be the landscape architecture including security, networking, High Availability, Backup Schedule and Disaster Recovery plan etc. on cloud?
- What will be the impact on the integrations if applications are migrated to cloud?
o Custom Code
Custom code helps you to enhance your implementation to fulfill your individual business needs and can help to provide a competitive advantage. However, maintaining custom code can have a significant impact on the total cost of operations for a solution. For example, the time and effort to remediate and test custom objects during a planned maintenance project can significantly increase the costs of the project. Some important questions you need to consider when assessing your custom code include:
- What all custom code can be deleted or moved to SAP Business Technology Platform or any standard Fiori report available in SAP S/4HANA?
- What is the volume, quality & complexity of custom code to be modified in current system?
- What is the quality of existing Technical/Functional documentation?
- Is the move to HANA already occurred?
- What is the usage of the custom code in the current landscape?
o Add-on’s & SAP Partner Solutions
Add-Ons are individual self-contained software components that sit together with the core ERP component to serve a customer-specific, industry-specific, or country-specific functionality. One of the main reasons that system conversion/upgrade projects get thwarted is because the customer has not prepared well for handling the Add-Ons (figure 7) in his system. You need to truly understand the impact add-ons during the assessment on implementation of SAP S/4HANA by asking:
- What is the business process dependency on unsupported industry solution?
- What is the business processes dependency on unsupported Add-Ons?
- What are the current business functions not supported on the SAP S/4HANA
Figure-7 SAP ERP Add-ons
• Total Cost of Ownership
This model (figure 8) outlines some of the key costs related to your SAP S/4HANA project including hardware, software, implementation, and ongoing maintenance costs (including continuous improvement projects). Initially the cost of the SAP S/4HANA will seem high but when you start looking at accelerators and positive impacts to core business processes such as the financial close and MRP, the equation begins to look more favorable. For example:
- By retiring legacy software and hardware and ultimately replacing legacy solutions like SAP ECC, savings can be created through the discontinuation of license payments, support contracts and even by consolidation of aging skill sets — about headcount, recruiting, and hiring
- Understand the business KPI’s that can be positively impacted by the move to SAP S/4HANA. The KPI’s will be finalized as per the business requirements and could include the following:
- Reduction in days in inventory
- Reduction in manufacturing cycle time
- Reduction in customer churn
- Reduction of order management cost
- Reduction in manufacturing cycle time
- Increase in MRP performance
- Reduction in order lead times
Figure-8 – SAP S/4HANA TCO Model
SAP S/4HANA Prerequisite Projects
As we already know, there are three transition paths to SAP S/4HANA. If you choose either System Conversion or Selective Data Transition you will have to implement some of the following projects. These are initiatives that you need to explore with your assessment partner (figure 9) along with other prerequisite requirements:
Figure-9- SAP S/4HANA prerequisite projects
Automation Tools that can Assist with SAP S/4HANA Business Case Creation
Creating the business case for SAP S/4HANA can take significant time particularly if all the tasks are performed manually. This is why the majority of partners have created intelligent automation solutions to support the assessment and reduce the effort and costs . Below is the information on some of the SAP standard tools which will help in the assessment. Many partners already have additional tools and methodologies to guide you.
• SAP S/4HANA Readiness Check
Checks the readiness of multiple aspects of the running SAP ERP 6.x system to migrate to SAP S/4HANA. This tool assesses the functional and technical aspects of an implementation of SAP ERP, including custom-code compatibility, system sizing, add-on, extractor compatibility, and more.
• Process Discovery Report (Business Scenario Recommendation)
The report offer specific insights for up to six lines of business(finance, sales, supply chain, procurement, manufacturing, and asset management) helping enterprises to identify areas in their system that could be simplified to boost overall performance, including recommendations covering the apps and extensions most relevant to achieve business goals, as well as data that highlights the specific ways that upgrading to SAP S/4HANA would improve operations
• SAP Fiori Apps Recommendation Report
The report provides recommendation on the Fiori apps to be activated in the SAP S/4HANA system based on the usage in the system.
• SAP S/4HANA Benchmarking Assessment/SAP Value Life Cycle Manager (VLM)
With the new Value Lifecycle Manager, you can measure, monitor, and optimize the expected value of your SAP S/4HANA initiative with benchmarking surveys and business case tools. A personalized dashboard makes it easy to manage your progress and allows you to continue where you left off. The SAP S/4HANA Benchmarking Assessment is based on SAP Value Life Cycle Manager.
• Transformation Navigator
This tool analyzes the goals of your project and builds a technical business case including a roadmap on where to go in the future with SAP S/4HANA. It uses the information about the existing SAP system landscape to create a recommendation for a new SAP S/4HANA-centric landscape with the latest SAP solutions.
• SAP Roadmap Explorer
This tool provides a comprehensive list of innovations to be launched by quarter. It describes future SAP S/4HANA features and can be accessed based on products, processes, and industries.
• SAP Innovation and Optimization Pathfinder
This tool provides a list of SAP innovations based on business KPIs. It is available for ECC 6.0 and S/4HANA. Business and IT recommendations are delivered across a single report. The report covers six lines of business from a functional perspective.
• SAP Best Practices Explorer
This is the next-generation web channel that enables customers to search, browse, and consume SAP and partner best practices. The Explorer enables users to find the appropriate best practices and rapid deployment solutions. In-depth guides are also available, which can be used to set up best practice content including predefined master data and configuration settings. This tool also contains process flow diagrams and test scripts.
• SAP Quick Sizer
SAP quick sizer tool can be leveraged to size your SAP HANA database and SAP S/4HANA application layer. It is especially relevant for enterprises interested in implementing greenfield projects.
• SAP Business Process Intelligence Report
This is the report from SAP Signavio which provides information into your existing process inefficiencies, ongoing improvement opportunities and tailored recommendations for improvements in business processes.
• SAP Sizing Report
This tool is generated for enterprises already using SAP ECC systems and wanting to migrate to SAP S/4HANA. It is more relevant for conversion projects, i.e., brownfield/selective data migration projects.
• Spotlight by SAP
A lightweight cloud-based solution that help operations & transformation leaders prioritize transformation efforts, know their operations baseline, identify what needs attention, look beyond their silo & company, stay on top of what is changing, and close the feedback loop.
• SAP S/4HANA Customer Story Finder
The momentum towards SAP S/4HANA is strong and accelerating. The Customer Story Finder provides a wide range of success stories from customer who already moved to SAP S/4HANA.
• SAP S/4HANA Value Advisor
The value advisor tool provides a quick and simple way to measure the potential value of SAP S/4HANA for your business
Business Case Report
The finalized business case report will have some of the following sections (figure 10) which will contain information obtained from the above parameters and will support leadership in making an informed decision:
Figure-10 – SAP S/4HANA Business Case Report
The business case of SAP S/4HANA will help you establish KPIs and understand the potential return on investment and impact to your business and IT landscape. If done correctly and thoroughly will build a stronger understanding of both costs and benefits such as:
- The cost of SAP licenses over next three to five years
- The cost of infrastructure to host S/4HANA and the shift from Capex to Opex i.e. subscription license
- Cost of staff to design, build, and manage transition to SAP S/4HANA
- Increased productivity of IT organization employees with better user experience and automated business processes in SAP S/4HANA such as SAP Fiori, SAP iRPA
- Increased revenue from functionality enabled by SAP S/4HANA such as early period close
- Increased customer experience, retention, and satisfaction due to capabilities enabled by SAP S/4HANA.
A majority of the partners including SAP have built automated tools which can be leveraged to create the business case in an accelerated and cost-efficient way reducing efforts and duration. Hence you should fully explore the different tools to be utilized during the assessment.