Still on ECC? Why Delaying S/4HANA Migration Could Hurt Your Bottom Line

Advantages of S/4 HANA for Manufacturers Looking to Modernize their ERP

1. Real-time inventory tracking: SAP S/4HANA leverages IoT sensors, RFID technology, and real-time stock movement monitoring to maintain accurate inventory levels. By analyzing historical data and live trends, it optimizes stock levels, minimizes waste and enhances order fulfillment efficiency.
2. Enhancing supply chain operations: SAP S/4HANA integrates IoT data to provide real-time visibility and control over the entire supply chain. IoT sensors track the location and condition of goods in transit, allowing businesses to anticipate and mitigate potential delays. This shortens the time of deliveries, optimizes inventory levels, reduces costs, and improves customer satisfaction.
3. Faster data processing: With real-time data processing, SAP S/4HANA eliminates batch update delays, giving decision-makers instant access to reports, live analytics and predictive insights. This enables businesses to quickly respond to market fluctuations, demand shifts, and operational challenges.
4. Friendlier user interfaces: SAP S/4HANA’s modern, user-friendly interface simplifies processes and streamlines workflows, improving user adoption and productivity. Employees can navigate the system effortlessly, enhancing operational efficiency.
5. Cost savings and process efficiency: SAP S/4HANA projects can be used to optimize the manufacturing and supply chain processes and operational costs. It minimizes human errors, enhances procurement efficiency, and reduces waste, leading to improved business performance.
6. Quicker processing of large volumes of sensor data: SAP S/4HANA is built on the HANA in-memory database, which stores data in RAM rather than reading it from disk. This architecture allows it to rapidly process and analyze large datasets, including sensor data generated from Internet of Things (IoT) devices such as manufacturing equipment, vehicles, or smart meters. 
7. Advanced training techniques: The acquisition of a digital adoption platform WalkMe positions SAP to offer a more intuitive and efficient user experience across its platforms. By embedding WalkMe's advanced training tools directly into its applications, SAP enables users to learn and adapt within their workflow, fostering a more agile and responsive workforce.
8. Big data for strategic decision-making: SAP S/4HANA transforms vast IoT-generated data into actionable insights. Advanced analytics help businesses understand market trends, customer behavior and operational performance, empowering smarter, data-driven decisions that drive long-term growth.
9. Advanced real-time analytics: SAP S/4HANA delivers real-time analytics, converting massive data streams into instant insights. In manufacturing, real-time monitoring of production lines helps identify bottlenecks, optimize workflows and enhance efficiency—creating a more agile and responsive production environment.

Common S/4HANA Migration Approaches

Though the advantages of transitioning to S/4 HANA are clear, migrating is no small task, and barriers can seem overwhelming. 

Organizations will make the decision to move to S/4HANA based on its perceived ability to achieve business outcomes at reasonable cost. SAP is having market challenges in the U.S., where its S/4HANA adoption rates have been anemic. It’s worth noting that enterprises that delay adoption may struggle to secure ERP and SAP resources without paying a premium due to rising market demand. This urgency highlights the risks associated with accumulating technical debt, which can leave manufacturers unaware of critical gaps in their systems. 

To address this, SAP offers a “Readiness Check” tool that helps organizations assess whether a “brownfield,” “greenfield” or “a bluefield (hybrid)” implementation is the best fit. Choosing a migration path is the first step in the transformation journey.

S/4HANA Migration Challenges

Enterprises can face challenges when migrating from an older ERP system to S/4 HANA. Common challenges include: 

• Challenging ROI: Manufacturers need to identify the various costs associated with the migration project, such as software licenses, implementation expenses, training and potential downtime—as well as the potential benefits or value that the new system could bring, such as improved efficiency, decision-making capabilities, and cost savings.
• Complexity of transition: The migration process involves significant planning, especially for companies with heavily customized SAP environments. Customizations may include unique workflows, specialized integrations with other systems and bespoke reports or functionalities that they rely on.
• People impact: Migrating to SAP S/4HANA is a major digital transformation that introduces substantial people-related challenges like resistance to new interfaces and workflows, difficulty in transitioning to a new operating model, skill gaps, insufficient hands-on training, user experience disruptions, etc.
• Cost implications: Migration can involve substantial investments in licensing, hardware, training and consulting services.
• Data cleansing: Ensuring data quality and compatibility is critical to a successful migration.
• Skill gap: Teams need to be trained to work with new features, tools and interfaces provided by S/4HANA.

• Downtime risks: Poor planning can lead to business disruptions during the migration.

When to Start the S/4HANA Migration Process

• Business goals and IT strategy: Organizations should align migration plans with their broader business objectives and IT strategy. Whether the goal is to enhance digital capabilities, improve operational efficiency or expand globally, transitioning to SAP S/4HANA can serve as a strategic enabler.
• Data management and quality: Before migration, organizations should assess the quality of their existing data. Moving to S/4HANA presents an opportunity to clean, streamline and optimize data structures, ensuring more efficient and effective operations post-migration.
• Customization and integration: Organizations must evaluate how existing customizations and integrations will transition to S/4HANA. The platform’s migration approaches—greenfield, brownfield and hybrid as described above—each have unique advantages depending on customization complexity and integration needs.
• Financial implications: Migration costs go beyond software licensing and implementation services. Organizations need to account for migration expenses, potential downtime and long-term financial benefits such as reduced maintenance and operational costs. The shift from a capital expenditure (CapEx) model to an operational expenditure (OpEx) model, particularly in cloud deployments, is a crucial financial consideration. Companies should also explore expected value. 

• Resource availability: With the 2027 deadline approaching, the demand for skilled consultants and service providers is increasing. Early planning and securing the necessary expertise can help mitigate the risk of resource shortages and implementation delays.

Implementation Roadmap for Manufacturing Companies

Over countless projects helping manufacturers manage SAP implementation, we understand the journey.

Each phase should include a clear plan for organizational change management.

1. Strategic Roadmap: The strategic roadmap serves as the foundational guide for an organization’s SAP migration journey, delineating the vision and objectives that align with overall business goals. This roadmap is essential for establishing clear outcomes that the organization aims to achieve post-migration, such as improved operational efficiency, reduced costs and enhanced user experiences. It involves engaging key stakeholders across the organization to gather input and ensure their alignment with these objectives, fostering a collective commitment to the project. 

2. Phase 0 Readiness: Phase 0 readiness is a critical preparatory step that focuses on evaluating the organization’s existing capabilities and overall preparedness for SAP migration. During this phase, a comprehensive assessment of the current state of SAP environments, applications and customizations is conducted to understand the potential impact of the migration. This assessment includes a gap analysis to identify discrepancies between the current capabilities and the future requirements of the organization, thereby prioritizing initiatives accordingly. 

3. SAP Licensing: A vital aspect of the migration journey is fully understanding and optimizing SAP licensing agreements to ensure the organization effectively manages its software costs. This process begins with an assessment of the various license types required for the S/4HANA environment, including user types and consumption models that best fit the organization's needs.

4. SI Selection and Contracting: Selecting a SI is a critical decision in the SAP migration journey, as the right partner can significantly impact the success of the implementation. This process begins with defining evaluation criteria that assess potential SIs based on their expertise, experience and capability in performing SAP migrations. 

5. SAP Activate: SAP Activate is a comprehensive methodology that provides a structured approach for implementing SAP solutions, guiding organizations through the complexities of migration. This framework includes a set of tools and methodologies designed to enhance efficiency and minimize risks. 

6. Ongoing Operations: Once the migration to SAP S/4HANA is complete, the focus shifts to ongoing operations, which are essential for maintaining performance and optimizing the newly established SAP environment. This phase involves establishing comprehensive monitoring and support systems to track performance metrics and address user inquiries or technical issues that may arise. 

• Reducing the six-year S/4HANA subscription cost by ~$5 million.  
• Securing 45-day payment terms, thereby adding another 15-days of days payable outstanding (DPO)
• Securing tiered price protection for incremental license purchases 
• Negotiating custom transitioned assistance 

• Enabling the company to protect its investment in the non-terminable subscription products by allowing to exchange, starting on month 18, any unused software products or other products within its Bill of Materials

How an Advisor Can Help with S/4HANA  

• Industry expertise: Tailored knowledge for effective solutions, leveraging extensive experience in manufacturing processes and best practices.
• Licensing negotiation: Navigating software licensing terms to obtain the most cost-effective agreements.
• Strategic planning: Assessing current systems thoroughly and creating a detailed migration roadmap to ensure smooth transitions.
• Migration strategy: Minimizing disruptions during integration through careful planning and execution.
• Partner selection: Choosing reliable implementation partners with proven track records to guarantee successful project delivery.
• Organizational change management: Preparing impacted stakeholders with effective communication and end user training programs to ensure they are ready to adapt to new systems and processes effectively.
• Training as a Service (TaaS): Post go-live end user training development managed service to always keep your end user training facing materials compliant with your core systems and processes 
• Performance monitoring: Implementing mechanisms for continuous improvement, ensuring that the new system meets performance expectations consistently.

• Risk management: Ensuring compliance with industry standards and managing transition risks proactively to avoid unexpected challenges.

Contact us today to learn more about how we can assist with your SAP S/4HANA migration. Let us help you navigate this critical transformation and drive your business forward.