As we near the end of 2021, several factors are coming together to form a perfect economic storm.

In Britain, the BREXIT agreement and the COVID pandemic have further exposed a number of pre-existing issues for UK Plc, a prime example being a shortage of HGV drivers and the associated supply chain problems. 

If there was ever a time for a “transformational ERP system” to be making waves, it should be now. But SAP’s S/4HANA offering still hasn’t broken through.

Recent research from the SAP Insider Group has found:

• around 40% of SAP customers are still working out what to do about S/4HANA
• 30% further SAP customers have no plans to adopt S/4HANA yet

So most of SAP’s customer base is unsure about its flagship solution. That’s hardly wholesale adoption.

Why is SAP still failing to convince customers of the value of moving to S/4HANA?

Why Are Businesses Reluctant to Move to S/4HANA?

Firstly, the major stumbling block with S/4HANA is that it’s an evolutionary rather than revolutionary improvement from ECC6. The underlying tech is a step change, but what the solution actually does isn’t all that different.  The additional speed and simplicity only has so much real value.

It’s telling that organisations can often discuss how much they’ve invested in SAP over the years, but few can talk in quantitative terms about the payback it’s given them. This isn’t SAP’s fault, but it clearly adds to the aura of these solutions being a cost of doing business rather than a true contributor to growing the bottom line.

S/4HANA doesn’t do much to change this perception. And SAP’s attempt to address this through their Value Engineering recommendations are usually about as credible as promises written on the side of big red buses.

If the real business reasons to implement S/4HANA can’t be crystalised within a couple days of trying, it’s likely there aren’t any. And with budgets being tight and getting tighter, the sheer expense of delivering SAP S/4HANA doesn’t help either.  

You May Not Need to Move to SAP S/4HANA Now

Many of our customers, when faced with this conundrum, are putting S/4HANA to one side and actively considering other ways to extract more immediate value at the lowest possible cost. This isn’t just about kicking the can down the road, it’s about doing the right thing for the business now while getting fit for S/4HANA on their own terms. Given ECC6 is supported until 2027 and a lot can change in five or six years, is there really such a rush to move now?

SAP’s short term strategy of pushing S/4HANA at all costs, while understandable, doesn’t really consider their customer relationships. Surely providing a path to S/4HANA while maintaining revenue from maintenance contracts is preferable to no revenue at all? SAP may argue this is exactly what RISE with SAP is all about, but when one looks into that offering more closely, it’s unclear how it benefits anyone other than SAP.

This may be behind SAP customers beginning to drop SAP altogether. There have been well publicised recent wins for UNIT4 and Oracle over SAP incumbent in ERP selections in the British public sector.

This is wasteful in our opinion, as we suspect pushing S/4HANA for immediate implementation rather than taking a more considered and lower cost extend and innovate approach may have damaged SAP’s chances. Given the projected spend on Oracle, we see this as a lose-lose for both SAP and the British taxpayer. 

At Kagool we strongly believe that SAP ERP is best in class and deserves to be in our customer’s landscape. What we struggle with is single minded focus on S/4HANA at the expense of all other options. And it’s becoming clear customers are struggling with this too.

Alternatives to Upgrading Now: Kagool’s Extend and Innovate Model

So, if we agree there isn’t a rush to migrate to S/4HANA, our view is that investing in capabilities that add value of themselves and making the most of existing assets is an eminently sensible strategy. 

Having S/4HANA isn’t a prerequisite for adding value to your ERP. We can give you all these capabilities without the need for S/4HANA:

• Cloud migrations
• Process improvement and standardisation
• Data quality and management initiatives
• Use of modern data platforms over ERP
• Implementation of automated testing
• Modernisation of integration
• Use of PaaS platforms to host custom code

And once all these are in place in SAP ECC6, you can take the final step to S/4HANA once you’re ready.

This approach avoids the risk of trying to force a transformational shift with a complex major programme that has to be funded up front. It instead allows a roadmap to be shaped around smaller, lower cost and faster moving packages of work which can be funded as needed. This adds an element of agility and flexibility that would be unheard of during a major ERP implementation.

Many of our customers are beginning to agree with this viewpoint as they look to extend the life what they have and take sensible steps to innovate around that core. It’s not a popular view with SAP, but it’s something that must be part of any strategic conversation in this area.

This is exactly the story we see with one of our customers.  After careful consideration of a proposal for a new implementation of S/4HANA provided by a global systems integrator (GSI), they decided the business disruption, time to deliver and cost simply didn’t justify the benefits on offer. 

The strategy is now to sweat their existing ECC6 assets and run a program of continuous improvement of process and infrastructure in the short-medium term.  Part of this continuous improvement will also likely include standardisation of their ECC process wherever possible with an eye on the eventual jump to S/4HANA. This means by the time they get to making the final step, which is unlikely to be before 2025, they can take the lowest cost, least invasive and disruptive route to S/4HANA.

This is a great example of extending and innovating based on existing building blocks. Shaping the S/4HANA campaign to your needs, not that of any outside influencer.

To be very clear, we’re not saying don’t move to S/4HANA. We just believe customers need to work to their own timeline and no one else’s. 

At Kagool, we have the Business, Data and Technical experts who can help shape and deliver your SAP Extend and Innovate roadmap. Our focus is helping our customers deliver real business value from their existing SAP investments, preparing for the next step at their own pace.

If you’re unsure where your SAP journey is headed next and want some independent advice, please get in touch.