SAP S/4HANA migration: A definitive guide

August, 2023

This year, SAP marks 50, but the corporate software pioneer is pushing adoption of its next-generation ERP platform, S/4HANA. It has offered clients till 2027 to migrate from SAP ERP to S/4HANA. 

Moving to SAP S/4HANA isn't only about meeting the vendor's deadline. The benefits of a SAP S/4HANA migration are compelling enough for most clients to actively investigate or plan one. SAP estimates that S/4HANA adoption is increasing at a rate of 18% per year.

Still, a SAP S/4HANA deployment requires significant time and resources and should not be undertaken lightly. 

A migration to SAP S/4HANA is explained in this overview. The links give more information on essential concepts and recommended practises.

  • Why is SAP S/4HANA used?

Deloitte, EY, and IBM say enterprises are shifting to S/4HANA because their old systems are no longer viable or they want a more contemporary ERP system with access to cutting-edge technology. 

Companies with a "real, urgent, burning platform" demanded S/4HANA in the first three or four years after its launch in 2015. 

"Legacy architecture or infrastructure that just didn't function anymore, and different systems that just weren't servicing the day-to-day demands of the business," Rothermel added. 

Demand for S/4HANA was also boosted by M&A activities, he noted. Consolidating separate ERP systems made sense, but entities split out from their parent companies needed a new ERP.

Recently, firms that see S/4HANA as critical to their business strategy have been more careful about long-term planning, Rothermel added. 

"They can align to S/4 and genuinely justify the investment when they want to reimagine their business," he added. 

SAP has set a December 2027 deadline for clients to migrate from Business Suite and its digital core, SAP ERP Central Component (ECC), which SAP expects to discontinue supporting in 2030. According to Keith Costello, IBM's worldwide SAP general manager, S/4HANA is not being adopted for this reason. 

It's not about trusting SAP to meet the deadline. 'We've got a business to operate, and we'll continue to run everything on SAP,' but which version? How does it help our strategic goals? "

  • A S/4HANA migration has several advantages. 

SAP S/4HANA advantages are numerous. Its SAP HANA in-memory database accelerates searches and analyses on potentially enormous pools of internal and external data. All of these systems are faster than traditional databases.

The SAP S/4HANA Cloud's multi-tenant SaaS design and close connectivity with the SAP Business Network and other cloud-enabled technologies, such as AI, also provide a large number of possible benefits.
Among the most significant benefits are:

  • Immediate data analytics;
  • Faster period-end financial closings;
  • Access to cutting-edge technologies like AI, chatbots and IoT;
  • Automated quarterly updates;
  • Process automation;
  • More easily updated business models.

How to migrate to SAP S/4HANA? 

The alternatives available to organisations migrating to S/4HANA depend on the extent of the migration, whether SAP or an implementation partner offers advisory services, and who hosts the ERP in the cloud. 

Here are three examples. 

Greenfield In a greenfield deployment, a new ERP system is installed in a new data centre or cloud. It is sometimes an organization's first ERP. Most greenfield S/4HANA deployments entail moving from another vendor's ERP or an earlier SAP system. The labour required to convert existing business processes to S/4HANA is one major disadvantage. Also, transferring data from the previous ERP and educating personnel are huge hurdles. But this is the only way to achieve S/4HANA's claimed benefits like predictive analytics, AI modelling, process automation, and real-time reporting.

Starting with S/4HANA Finance. Starting with SAP S/4HANA Finance and its integration platform, Central Finance, is a frequent method. Accounting is a back-end process that doesn't alter much, says Carsten Hilker, SAP's worldwide solution owner for S/4HANA Central Finance. Finances may be changed quietly in the background. When you adjust the front end, like logistics, you're talking about customer-facing operations. Finance is usually last. You only need to alter the back end once and the logistics are mounted." 

The S/4HANA Finance-Central Finance transition is a brownfield strategy, which means it keeps certain existing components. The SAP S/4HANA migration discussions can benefit from the SAP greenfield vs. brownfield debate.

Using Rise with SAP. Rise with SAP is a suite of tools and services designed to help clients swiftly adopt S/4HANA Cloud and its larger ecosystem, which includes SAP Ariba procurement and intelligent business process reengineering. AWS or Google Cloud Platform are hyperscalers that operate the ERP on SAP's public cloud. These include Capgemini, Deloitte, EY, IBM, and PwC. It's everything done under one contract to streamline administration and vendor cooperation. 

There are other ways and tools that consulting firms use to get SAP S/4HANA up and running.They can test ERP code to see what can and should be moved to S/4HANA. They also have S/4HANA prebuilt for specific sectors.

  • The best S/4HANA migration strategy

In the design phase of planning the implementation, while setting the strategy and roadmap, you normally choose between S/4HANA Finance and other brownfield approaches.

SAP and its partners provide rigorous strategy and planning procedures for determining the appropriate migration technique. It's also known as phase zero and coincides with SAP's Activate approach. However, the basic processes are as follows:

  • A system evaluation. An ERP system's data and the business operations it impacts are assessed, frequently with statistics to evaluate their efficiency. Users express their concerns about licencing and maintenance fees. IT inventories bespoke code and master data.
  • Examine the plan. You pick which of your existing ERP modules and business activities to migrate to S/4HANA and which to leave behind.
  • Examine the future. This stage envisions what the new ERP should perform based on user, department, executive, and other stakeholder needs. This includes cost reductions from combining ERP systems or creating a new e-commerce firm. The data feeds the ERP business case, generally the next stage.
  • Options for S/4HANA implementation:

SAP has long maintained that S/4HANA is a 400 million line rework of the Business Suite. Despite SAP's marketing promises and contradictory messaging, the on-premises version of S/4HANA does not currently include all of Business Suite's core functional areas. That includes human capital management, which SAP says will only be accessible on SuccessFactors, an older SaaS HCM package, or a future "sidecar" based on previous-generation SAP HCM that will operate on HANA. 

Since the first launch of Finance, Sales and Distribution, Production Planning, Sourcing and Procurement, and Supply Chain Management have all been introduced. 

Determining S/4HANA's capabilities is vital since the gap between on-premises Business Suite and on-premises S/4HANA can be critical for many companies. The choice is often between long-standing modifications and S/4HANA's established procedures, best practises, real-time analytics, and cutting-edge technology. 

S/4HANA Cloud, the version that operates on the purest form of the cloud: multi-tenant SaaS, differs even more from classic SAP ERP. S/4HANA Cloud is a simplified, generic, and non-customizable version of S/4HANA. When selecting whether to acquire S/4HANA Cloud, knowing what it does and doesn't do is critical. 

In the last five years, Rothermel said, it has matured beyond his expectations, but it is still aimed at smaller businesses that can utilise software out of the box. It also works well in two-tier ERP, when a company already has ECC at its headquarters and wants to quickly add SAP to a new market or business unit.

According to IBM's Costello, the choice to acquire S/4HANA Cloud is frequently based on the company's size, complexity, worldwide operations, and industry. 

"The SaaS version has been highly beneficial in professional services firms and, presumably, others where it has been adopted," Costello added. "It's not built for that yet." 

If implementing multi-tenant SaaS ERP isn't your objective, or if S/4HANA seems too risky, SAP has another solution for SMBs: Business ByDesign. It has over 11,000 users, according to SAP, which keeps updating it and publishing a roadmap of anticipated changes. Before committing to S/4HANA, compare SAP Business ByDesign vs. SAP S/4HANA to save time and money. 

When buying SAP S/4HANA is not a priority, look at alternatives. Oracle Fusion Cloud ERP is a competitor.Oracle, along with Workday, is a leader in full-featured SaaS ERP. Other Oracle products include NetSuite, aimed at SMBs, and E-Business Suite and JD Edwards, all of which have huge manufacturing install bases and are still viable solutions. Epicor, IFS, Infor, Microsoft, QAD, and Unit4 are among the other notable companies that maintain on-premises manufacturing and supply chain suites that compete with SAP and Oracle while investing heavily in SaaS. 

S/4HANA is available in three deployment models: on-premises, S/4HANA Cloud, and Any Premise.All three execute on-premises S/4HANA code on cloud infrastructure. Most of the differences are based on whether they are hosted in SAP data centres or by a third-party cloud provider.

  • Common migration issues 

According to a survey by PwC and LeanIX, complex legacy landscapes, a lot of customisation, and dirty master data are the top three problems with moving to SAP S/4HANA.

Determine whether the platform has the ERP functions the firm needs at phase zero. Procurement, supply chain management, and accounting are examples of business modules that can be mapped to S/4HANA. 

Business adoption and change management are the top issues for Deloitte Consulting's Chip Kleinheksel, principal and global SAP CTO. Because companies are stretched thin across multiple initiatives, it's critical to focus on adoption and change management to ensure value and digital transformation. 

Typically, organisations struggle with data and integration because legacy IT architectures can be exceedingly complicated, including on-premises, SaaS, and private cloud applications. 

"A common data model and an inclusive integration layer are required to break down silos across applications for integration to and from S/4HANA ERP," he said.

  • How to Migrate to SAP S/4HANA Successfully

Every S/4HANA project must follow the aforementioned stages for deciding on a migration strategy and a deployment choice. Kleinheksel gave them the following high-level advice:

  1. Have a plan. According to Deloitte's early-stage approach, "taking the time to execute a phase zero to coordinate on scope, business involvement, future state technological landscape, and deployment is tremendously useful." "It doesn't have to be rigid. It's OK if it evolves to match corporate goals."
  2. Don't dwell on the past. For example, older ERP systems tend to collect technical debt, which includes neglected infrastructure, training, and documentation. Preconfigured industry apps, "accelerators" and automated procedures — items Deloitte and rivals supply — may help S/4HANA users leave that behind, he added.
  3. Avoid repeating past errors in S/4HANA. Kleinheksel warns that S/4HANA may lead to future technological debt. Determining where software extensions fit best, not just in S/4HANA but also in other sections of the SAP ecosystem, including the Business Technology Platform, from which S/4HANA draws much of its mojo, is important from the start. This will result in a more agile technology stack and prevent S/4HANA from becoming a development platform burden.
  • A few more suggestions for successful relocation 

The following are some pointers from Costello to help with your SAP S/4HANA migration: 

  1. Don't be afraid to use what's already there. A S/4HANA expansion purchased rather than created saves time and money in the long run. 
  2. Think about the future. If you think about what you might need in a few years, S/4HANA can help you avoid being tied into an inflexible paradigm that demands overengineered, specialised systems if you think about it. 
  3. It is best not to customise. According to Costello, S/4HANA migration efforts for certain IBM clients aim to have zero customisation. A willingness to employ out-of-the-box features is often required. 
  4. Put a time restriction on the discussion. In the past, ERP installations have taken a long time, so aiming to complete one in a year can make you nervous. Some sections of the company may be up and operating on S/4HANA in six months or less thanks to prebuilt templates offered by SAP and its partners. It's important to have a solid change management plan in place that includes training users on how to use the programme within a year.
  • Choosing a S/4HANA partner

Many installation partners have worked with SAP for decades, even before S/4HANA. Choosing the best one for your company takes time. Experts agree on this:

  • Look for a wide range of deployment, testing, and data migration tools.
  • Request a list of all project personnel, including those working only for you.
  • Examine SAP S/4HANA certification for proof of knowledge and competence in S/4HANA installation.
  • Ideally, they should be references from the same industry.
  • Ask what type of post-launch assistance is provided and whether it is charged.
  • Insist on assurances against lateness and cost overruns.
Close communication between your internal project team, SAP, and its partner may help ensure a successful S/4HANA rollout.