Master plan for S/4

Alegri was founded in 2001 by Andreas Emhart. Today he is CEO of the Alegri Group.

Hinrich Mielke is widely known in the SAP community as an experienced manager. He is a director at Alegri International Service and is thus responsible for the entire SAP area at the Alegri Group.

The topics of Hana, S/4 and cloud computing are complex, even if SAP CEO Bill McDermott likes to refer to his "run simple". With Alegri's knowledge and experience, things will get easier for SAP's existing customers.

And at Alegri, they speak from their own experience: Last year, Hinrich Mielke reported on the very successful customizing of Simple Finance in the Microsoft Azure Cloud.

Can there be a master plan for the changeover to S/4? After all, one ERP system - R/3 4.c to ECC 6.0 - is hardly like another.

"The master plan or approach for conversion, i.e., moving an existing system to S/4, will always be similar"

reassures Director Mielke.

At the beginning, a "Hana Readiness Check" including a usage analysis is recommended. This involves analyzing test procedures, test cases, interfaces and the authorization system. Then you have a good starting point for the conversion.

And Mielke adds:

"Customizing an S/4 installation will continue to be as individual as the customers - after all, that's the strength of SAP's ERP solution."

Analyst Frank Niemann of PAC in Munich said in a research note at the end of last year that SAP's existing customers, partners and SAP itself are undergoing a transformation, although the extent of this transformation varies.

What is clear to Niemann is that S/4 and Hana will play a role for everyone. Existing SAP customers will check when the time is right to make the switch and expect support from both SAP and SAP partners.

In addition to solution competencies around S/4, the SAP partner must address the topics of a process and business model transformation.

He/she is expected not only to implement S/4 quickly, but also to accompany and support transformation projects involving IT and business units.

Cloud computing

Hana and S/4 are available as on-premise offerings and in numerous cloud versions. Alegri relies on Microsoft Azure - why?

"Alegri basically provides neutral and independent advice, as we do not sell licenses, but are only measured by the quality of our advice"

explains CEO Andreas Emhart.

"Given our experience with Azure in customer projects and our own use of Azure as a PaaS for SharePoint and Office 365, the integration with S/4 Finance on Azure made sense."

From Alegri's point of view, Microsoft has a strong cloud offering on the market with Azure and is already present at virtually all companies, especially through its Office 365 and SharePoint installations (on-premise or cloud).

"In this respect, Microsoft is an interesting option for many of our clients in order to be able to implement cloud projects in a consolidated manner. Because by releasing an Office 365 environment, the legal and organizational hurdle for SAP on Microsoft Azure is often very low, which benefits the agility in the project.

In addition, Azure offers the option of a German data escrow, so for many of our customers the barrier to entry for the cloud is significantly reduced"

Emhart knows from many successful customer orders.

SAP itself has a broad cloud offering with HEC (Hana Enterprise Cloud) and HCP (Hana Cloud Platform), which has now been combined under the name SAP Cloud. SAP has also given the go-ahead for operation on AWS (Amazon Web Services) and Microsoft Azure.

Where is the market heading from Alegri's perspective? At the end of the day, who will be the cloud winner in the SAP community - SAP Cloud, AWS or Azure?

"Making a prediction at this point would be reading a crystal ball"

says Andreas Emhart in an E-3 interview and describes the initial situation:

"Also, it is not only the SAP landscape that plays a role in this issue in companies, but must be considered in connection with the complete strategy.

In this respect, we can probably assume that there will be no short-term development in one direction or the other here.

When it comes to agility in sandboxes or test systems, AWS, Azure and Google Cloud Platform (GCP) will certainly have an advantage. SAP is more likely to prevail in SaaS and the others will divide the market of IaaS for SAP systems among themselves."

Many existing SAP customers in Europe have successfully built up their own data center structures over the past decades - in some cases with extremely low operating costs. Does the simple path to S/4 and Hana go to the cloud or does one stay in one's own data center?

Hinrich Mielke:

"Current projects and customer discussions show that skepticism regarding cloud applications in the DACH region is fading and many CIOs are taking a serious look at the cloud.

The importance of cloud will continue to grow, but will complement rather than replace in-house data centers for many customers in the medium term."

One advantage with PoCs is the agility in the cloud and also the ability to easily change and adapt an architecture to the state of knowledge.

The procurement process and also the decommissioning process can be reduced to minutes, this is a decisive advantage e.g. when testing S/4 Hana.

"Here's how to capture shadow IT and run it compliantly"

adds Mielke.

Azure, AWS, SAP Cloud?

"As with any service provider, all of these offer their own benefits"

knows CEO Emhart.

"SAP is positioning itself with a SaaS offering. Microsoft Azure, AWS, and the collaboration between SAP and Google are aimed more at IaaS.

Microsoft and, to a lesser extent, Google offer potential integration into the respective application and platform portfolios. Of course, the respective current situation of the companies plays an important role.

Thus, this issue must also be considered right from the master planning stage and examined along with the individual deployment approach."

An inevitable question when discussing cloud computing in the SAP community: And what should be done with the on-premise licenses? Convert to a subscription model at SAP or go to the AWS, Azure or Google cloud with your own licenses?

"Of course, the licenses play an important role"

explains Hinrich Mielke,

"future use, however, should not be made dependent solely on any licenses, but should be geared to the company's own needs.

With Microsoft Azure, AWS and GCP, the following applies: bring your own license - BYOL - for IaaS. In other words, the same requirements apply here as for on-premise operation in recent years, including the realization that licensing at SAP is always customer-specific. SAP HEC enables BYOL as well as a subscription model."

Obviously, there are many paths to Hana and S/4, so SAP legacy customers are once again facing numerous challenges after switching from R/3 to ECC 6.0: The path toward S/4 and Hana seems to be predetermined for many SAP legacy customers, even if it is not immediately current.

How do you prepare? How do you evaluate the costs and the added value? Hinrich Mielke smiles in the E-3 interview and says:

"Buy in experience you've already had, and buy in external consulting. There are consulting houses for that, you don't have to go through every detour yourself.

It is true that S/4 and Hana will be the future in customers' SAP landscapes. An early examination and evaluation of the new technologies should take place immediately, keyword: Think big - start small!

The right time to make the switch is then determined by various factors such as business value, license costs, ongoing maintenance contracts, upcoming ALM projects, corporate strategy, master plan, etc."

At Alegri, we believe that the right time is crucial - taking into account all factors, identifying them and then implementing the defined strategy.

"Which brings us back to the relevance of a master plan".

adds Mielke. Four years ago, at a presentation in Palo Alto, Hasso Plattner and ex-SAP Chief Technology Officer Vishal Sikka said that SAP can only provide the best technology, but that users must decide for themselves how to use it to their own advantage. Is that true? What is Alegri's experience?

Hinrich Mielke:

"From history, many customers are used to SAP upgrades where SAP specifies the new capabilities in the application and the customer activates and customizes them."

SAP Opinion & Added Value

This made the business case easy to calculate. With S/4 and Hana, SAP is providing a completely new platform that opens up entirely new approaches and possibilities - SAP can only outline these by way of example.

"Ultimately, it is up to the customers to identify and leverage the potential lying dormant in their core business: after all, they are the experts in their respective fields.

In this respect, we agree with Hasso Plattner and Vishal Sikka in their prediction, although SAP now also has weighty arguments up its sleeve for its customers through simplification."

And CEO Emhart adds:

"From our experience, agile companies have an advantage: They can exploit opportunities offered by new technologies for themselves - even if only in sub-areas as lighthouse projects - and thus develop an advantage over their market competitors.

This is easier if the know-how and also the capacities of the employees for this creative process are available and are also actively promoted by the management."

SAP must ensure that customers can evaluate both the technology and the innovation potential of S/4 Hana in relation to their own situation, wrote analyst Frank Niemann in the aforementioned PAC study at the end of 2016.

Among many other things, this includes reliable roadmaps and more flexible pricing models, says Niemann. If existing customers feel compelled to introduce S/4 because the product strategy dictates it, instead of being convinced of the added value, the software group should do its utmost to improve - according to the opinion of the analyst firm PAC.

Dual-vendor strategy

The SAP market is more heterogeneous than it was 25 years ago. Standards and open source, as used by SAP, open up new opportunities: How does Alegri see a convergence of SAP and Microsoft? Is there added value here?

"Many of our clients use a dual-vendor strategy, where each requirement of the business is preferably covered by solutions from Microsoft or SAP"

knows CEO Andreas Emhart.

So Office, often Office365, is already set, as is SharePoint for collaboration and structured document storage - Active Directory has also been established for years.

SaaS solutions based on Microsoft Azure are also finding their way into corporate IT. And Emhart is convinced that the paradigm shift at SAP will show a high benefit if these existing solutions from the Microsoft world are seamlessly integrated without media disruption, thus increasing productivity and effectiveness.

How does the existing SAP customer realize potential added value? Big Bang or Evolution?

Hinrich Mielke:

"In order to realize the potential of the change to S/4, the conversion from ECC 6.0 to S/4 and Hana is a project for business process optimization, and possibly even for business process redesign.

The use cases that are possible and profitable as a result are customer-specific and always require a group strategy on the goals and intent of the project; after that, it can be approached in a goal-oriented manner.

Coordination with the business side leads to the first use cases. Then, for example, a start is made with accounting or with a business unit that acts as a beacon.

The credo is always: Think big, start small. The big bang will rarely fit the customer situation."

Frank Niemann of PAC has ascertained that SAP's existing customers are divided into two camps with regard to S/4: For some, SAP's new product generation is strategic for transforming their business processes and supporting new business models as well as further developing their SAP landscapes.

Another group of companies sees S/4 merely as the next release from SAP, which they will have to introduce willy-nilly. They are primarily concerned with a technical migration of their current systems to S/4.

Mielke says following the new paradigms and implementing S/4 in its entirety changes the business and work process itself. These new workflows are no longer transaction-oriented, but are based on the process and user requirements:

"A change in thinking is required here, especially for experienced users"

Mielke knows from his professional experience.

Even though the number of S/4 projects started as well as planned is increasing according to PAC, the uncertainty among companies still seems to be high.

Even those who would like to transform their processes wonder how much effort it will take. Companies rely on external support for both planning and implementation, and especially for new topics such as the introduction of the new general ledger and the migration of SAP databases to Hana.

PAC is convinced that the greatest challenges on the way to S/4 will be less technical in nature. The transformation of SAP-related processes and the associated organizational changes are even more demanding and risky.

Facing these challenges will only succeed if the IT or SAP organization, business departments and management all pull together.

Hana 1 or 2

"Hana 1 will get bug fixes but will not get any new features. It is the stable release, so to speak."

Mielke explains the latest innovation from Walldorf.

"Hana 2 is the next step here, taking the Hana platform to a new level, ready for new business requirements like IoT and technology efficiencies like Active/Active-Read-enabled scenarios.

The highly engaging Hana Cockpit 2.0 comes with Hana 2 and is a significant advance, according to research by Alegri."

"With the launch of Hana 2, SAP is setting an industry milestone as the platform represents the next generation of Hana that will help customers embark on a successful digital future"

explained SAP Chief Technology Officer Bernd Leukert at TechEd in Barcelona at the end of 2016.

As an innovation platform, SAP Hana 2 will deliver enhancements twice a year to support agile development. What does Alegri recommend and why - Hana or Hana 2?

Hinrich Mielke:

"For Suite on Hana, Hana 1 is currently to be used. Projects currently running with S/4 are generally still built on Hana 1 and will not change a stable basis in the short term without a compelling reason.

However, since there will be no SPS13 for Hana 1, customers will be required to switch to Hana 2 in the medium term anyway. Thus, number 2 should be the choice in newly starting S/4 projects.

In future releases of S/4, Hana 2 will be required as a substructure."

Hana 2 is the next technological step, builds on Hana 1 and is backward compatible. Hinrich Mielke explains the details:

"The change is analogous to upgrading a new PLC for the Hana DB. The technological risks and steps are identical, as is the testing effort. B

n older source systems, an intermediate step to Hana 1 SPS12 can make sense. However, since the data center service points are no longer required, the right time and the right package for the change must be determined individually for productive environments."

Licensing

And what are the license differences between Hana 1 and Hana 2 and how can the existing SAP customer come to a decision?

"Hana licenses depend on the type of use and the database and SAP application features used"

Hinrich Mielke explains.

Hana 2 does not in itself require a different license than Hana 1, however, with Hana 2 comes new uses in the integration area that may require additional licenses.

As a rule of thumb, Mielke recommends: What is included in Hana 1, SPS12 will not require further licensing for Hana 2. The needs and benefits of licenses for Hana 1 or 2 can be determined based on a corresponding preliminary investigation.

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