pac trend survey - the path to s/4hana

TREND STUDY

The Path to S/4HANA What do businesses in the EMEA region really

think about SAP’s next-generation ERP solution

S/4HANA – Copyr ight CXP Group, 2017 2

The Path to S/4HANA

Frank Niemann

VP, Enterprise Software

January 2017

INTRODUCTION

The big question facing the thousands of SAP customers in the EMEA

region is when do they make the step towards the vendor’s next-

generation enterprise application platform?

SAP S/4HANA represents the most significant evolution of SAP’s core

business suite in a generation. Going far beyond a new release of the

tried-and-tested ERP running on HANA, SAP has fundamentally

transformed how the core system operates.

In this new system layout, satell ite applications do not need their own

instance, which reduces data volumes and complexity . I t also means

that only one single database is needed: SAP HANA. Cloud services

such as the Ariba business network are also integrated into the core

system,

For the vast majori ty, this will not be an easy undertaking. Many large

enterprises depend on SAP to support cri tical processes across their

global operations. The task is made more challenging by the fact that

many companies have accumulated a complex landscape of SAP

applications with different instances and levels of customisation

through years of project development and M&A activity.

S/4HANA was first launched in February 2015, and has started to build

momentum in recent quarters, passing the 4,000-customer mark in the

thi rd quarter of 2016. But how rapidly do the many other SAP

customers expect to start testing or deploying S/4HANA? What do

they see as the key benefits, and what are perceived to be the main

challenges in roll ing i t out?

In order to gain insight into current thinking among the SAP user

community, PAC surveyed more than 200 senior business and IT

stakeholders with responsibil ity for the SAP strategy at large

organisations.

The study provides some fascinating for other SAP decision-makers as

they weigh up or develop the business case for pushing ahead with

S/4HANA. One of the most interesting findings is that companies in

different industry sectors and regions are moving at different speeds

with S/4HANA adoption, and the findings serve as an interesting

benchmark – or reali ty check – to current strategic thinking.

Due to their complex

system landscapes,

the move to SAP

S/4HANA is a huge

step for many large

enterprises.


KEY FINDINGS

38% of large SAP users in the EMEA region plan to start an SAP

S/4HANA project in 2017, while a further 37% are currently

testing the first S/4HANA Basis applications.

This suggests that after a relatively slow start, the next 12

months wil l see real momentum building in S/4HANA

adoption.

59% see improving current business processes as the main

benefit of using S/4HANA, with 58% citing reduced lifecycle

costs a primary attraction.

This i s an interesting finding that may force many SAP users to

rethink the potential businesses case for S/4HANA adoption.

43% of SAP users see the complexity of the existing landscape

as the main barrier to S/4HANA adoption

But more than a third of participants see ski lls i ssues – a lack

of internal know-how and a limited number of experts to

manage migration – as major stumbling blocks to adoption.

Only 28% of SAP users believe that S/4HANA migration will be

a problem-free project that can be handled internally.

The majori ty (62%) expect i t to be either a medium- or long-

term endeavour, while 10% are expecting i t to require

considerable effort.

93% see their SAP platform as being crucial to enabling their

organisation’s digital transformation strategy

Enterprises are faced with an increasingly diverse set of

enterprise application partners in 2017, but SAP customers are

showing a high degree of loyalty.


KEY TRENDS

Key Trends by Stakeholder

Business Leaders See simpler generation of reports and reduced running &

mainteance costs as key benefits; view ack of business case

and lack of understanding of S/4 proposition as main barriers.

IT Leaders View improving current processes and readiness for SAP Digital

Core as important benefits; more concerned about abili ty of

internal team to support S/4 adoption.

Key Trends by Industry

Banking & Insurance Half of FS organisations plan to start S/4 adoption in the next 12

months, with 39% al ready at the testing stage.

Manufacturing 30% believe S/4 adoption will be a long-term project, reflecting

the extent SAP has already been deployed in this sector.

Public & Health The most cautious about S/4 adoption with 17% expecting i t to

require considerable effort and external help.

Retail & Hospitality 24% do not yet have a plan in place for S/4HANA adoption –

the highest rate of any sector.

Services 60% see the complexity of their existing software landscape as

the main barrier to S/4HANA adoption.

Transport, Uti l ities, Telco &

Media

Almost two thirds see improved business processes as the main

benefit of S/4; 97% see SAP as core to their digital strategy.

Key Trends by Region

Finland Organisations in this country are the most positive about S/4’s

potential to reduce cost with 72% seeing this as a key benefit.

Germany 43% cite a lack of internal resources as a main challenge for

adopting S/4; just 16% see cost as a barrier.

Spain Cost is seen as the biggest barrier to S/4 adoption (54%); but

more than half expect i t to be a problem-free project.

Sweden 71% see improved business processes as the biggest upside to

S/4; 29% see the alck of a business case as the main challenge.

UAE 50% believe they will need external resources to support S/4

adoption; 38% are already in the process of implementation.

UK & I reland 14% are already implementing S/4HANA, with 42% in testing;

47% see complexity of current landscape as biggest challenge


IN-DEPTH ANALYSIS

Businesses are having to reconsider their enterprise applications

strategies in the digital age,

For decades, the main focus has been to extend the reach of ERP

platforms through the organisation in order to support process

standardisation and increase efficiency.

But in 2017, the boardroom is increasingly demanding that the

software backbone of the business has the agili ty and scalabili ty to

accelerate time-to-market with new products and services and

enable more innovative ways of engaging with customers and

partner ecosystems.

SAP customers are no exception. Just under 50% of participants in the

study said that digital transformation is either a matter of li fe and

death to their business today, or will become one in the next three

years. Less than 10% see it as no more than hype that will have a

l imited impact on their business.

I t i s in this context that SAP has launched the S/4HANA platform

through which the software giant seeks to reposition i tself as the

primary enabler of the data-centric, digital organisation. Released in

2015, S/4HANA represents a hugely significant step-change in the

evolution of i ts core product l ine, with i t fundamentally redesigned to

take better advantage of cloud, mobili ty and advanced analytics.

The positive news for SAP is that the vast majority (93%) of i ts

customer base perceives that their SAP platform is crucial to

underpinning their digital transformation strategies (see Fig 1.). This is

an indicator that companies have realized that digital transformation

requires to consider the front office and the back office, the latter

includes the ERP applications. The only two vertical markets where

this level dipped below the 90% mark was in services (87%) and

Fig 1. Do you see your SAP platform as being crucial to enabling your

organisation’s digital transformation strategy?

93%

7%

Yes

No

The vast majority

(93%) of SAP’s

customer base

perceives that their

SAP platform is

crucial to

underpinning their

digital

transformation

strategies


financial services (86%), which are arguably the two industries where

SAP has historically had the least impact. Customers in these

industries often use SAP systems for financial management and HR.

For their core processes, many of them use other solutions or even

home-grown applications. However, financial insti tutions are under

pressure to modernize their applicati on landscape as the

digitatization of their businesses forces them to do so.

But how rapidly are businesses moving ahead with S/4HANA

adoption? The study suggests that as the general understanding of

the S/4HANA proposition fi l ters through the market, and momentum

builds in the number of references and client examples, organisations

in the EMEA region are gaining interest.

Three quarters of participants either plan to start an S/4HANA project

in the next 12 months or are already testing the fi rst applications on

S/4HANA Basis. Companies in the financial services sector – which

tend to have larger budgets to drive innovation – are at the forefront

of S/4HANA adoption, with 89% at either the testing or planning

stage. Companies in the retail and hospitality space (59%) were at

the back of the curve, although more than half are sti l l testing or

planning S/4HANA projects in the short term.

From a regional point of view, i t i s the United Arab Emirates that leads

the way with 38% already having implemented S/4HANA applications.

Companies in this region tend not to face the same level of legacy or

budget challenges than their counterparts in more mature markets.

SAP’s German heartland is also at the front of S/4HANA adoption with

57% planning to start S/4HANA projects in the next 12 months and a

further 32% currently in the testing phase. Organisations in Finland

(87% planning or testing) are on a par with their German peers, with

companies in Spain and Sweden bringing up the rear – 25% of

participants in both countries do not currently have an S/4HANA

adoption plan in place.

Fig 2. What is your company’s current planning status regarding S/4HANA?

3%

10%

12%

37%

38%

We are looking at switching to an

alternative technology platform

We are already in the middle of

an implementation

We do not currently have a plan

in place

We are currently testing the first

applications of SAP S/4 HANA

Basis

We plan to start the project in the

next 12 months

Companies in the

financial services

sector – which tend

to have larger

budgets to drive

innovation – are at

the forefront of

S/4HANA adoption.


One driver for the adoption of S/4HANA is the need for modern

applications. Another is SAP’s product strategy: S/4HANA is the next -

generation application platform. The SAP Business Suite and SAP ERP

will run out of maintenance by 2025. This also forces companies to

consider their next move.

The enterprise applications market has never been more competitive,

with the advent of cloud opening the doors to a new series of

challengers in areas such as HR, financial and CRM platforms. I t is

interesting that just 3% of participants state that they are looking at

switching to an alternative technology platform, which again

underl ines the loyalty of the SAP customer base. The proportion was

highest in the UK and I reland, with 10% weighing up the competition.

The relatively strong presence of SAP’s US-based competitors is in this

region is l ikely to be a factor here.

Given this growing level of interest in S/4HANA, what do SAP

customers perceive to be the main benefits? Improved business

processes comes top of the pile with more than half of participants

citing i t as the biggest attraction. Businesses want to support the

existing processes better rather than developing new ones,, and this

also suggests that their current SAP system landscape does not

support their needs.

Reduced running and maintenance costs are seen as another benefit

that is almost equally important. , I t is interesting to see cost ranked

so highly, given the investment that is required to make the switch,

but this underl ines that most SAP users can see the longer -term

benefits of moving to a less complex system landscape as well as a

more flexible and scalable architecture. In PAC’s view, another

important topic here is the removal of customization that can be

replaced by default features that become available with S/4HANA.

Fig 3. Which of the following benefits do you expect from using S/4HANA?

12%

17%

32%

35%

42%

46%

58%

59%

Flexible alignment with internal

customer requirements

Personalized user interface

Creating a platform for digital

business models

Holistic real-time access to

information

Becoming ready for the Digital

Core announced by SAP

Simpler and quicker generation of

reports

Reducing running and

maintenance costs

Improving current business

processes

Those companies

developing and

reviewing business

cases for S/4HANA

adoption need to

consider a wide

range of factors in

the decision-making

process


There are some interesting differences on this point between business

and IT stakeholders. The former group (which includes CEOs, CFOs

and other Lines of Business leaders) see reducing running costs (60%)

and simpler and quicker generation of reports (50%) as key

advantages, whereas IT leaders are sl ightly more bullish on how

S/4HANA can create a platform for digital business models (33%) and

to lay the foundation for SAP’s Digital Core – essential ly repositioning

SAP as the key enabler of digital transformation.

Perhaps the main takeaway from responses to this question is that

SAP customers see a wide variety of potential benefits from S/4HANA,

with one thi rd of respondents also stating that gaining real -time

access to information and creating a platform for digital business

models are key advantages. This suggests that those companies

developing and reviewing business cases for S/4HANA adoption need

to consider a wide range of factors in the decision -making process.

S/4HANA is not just a cost play, or an improved functionality play,

and business and IT stakeholders see sl ightly different upsides to

adoption. In PAC’s view, i t is important for the success of S/4HANA as

a strategic solution that both, business leaders and IT managers

regard S/4HANA as a platform that can support digital business

models.

Transforming or modernising an SAP landscape represents a

potentially significant undertaking for most enterprise customers. It is

rare to find a major SAP user that is running a single instance

throughout the organisation. Different si los may have added layers of

custom development to support their specific requirements . One

global manufacturing business had accumulated more than 50

different instances of SAP ERP through an aggressive programme of

international M&A activity. Moving to S/4HANA will not be a

straightforward journey.

This is reflected in the findings of the study. Only 28% of participants

believe that S/4HANA adoption will be a problem-free project that

can be handled internally. Interestingly, i t is the country that is at the

earl iest stage in S/4 adoption – Spain – that is most confident, with

54% expecting a relatively easy ride.

Fig 4. How would you describe your attitude to SAP S/4HANA migration?

10%

20%

28%

42%

It will be a project with

considerable effort involved that

will require support from an

external partner

It will be a long-term project that

needs planning but can be

managed internally

It will be a problem-free project

that can be handled internally

It will be a project of medium

complexity that can be handle in

stages

The large majority –

62% - expect

S/4HANA adoption

to be either a

medium or long-

term, complex

endeavour


The large majori ty – 62% - expect S/4HANA adoption to be either a

medium or long-term, complex endeavour. Those regions expecting

the toughest transition are Sweden and Finland, where 14% and 21%

of participants expect the journey to S/4HANA to require

considerable effort that will require support from an external partner.

From an industry sector perspective, i t i s organisations in the public

and retail sectors that are most optimistic about the transition with

38% of respondents in both sectors preparing for a problem -free,

internally driven transition. But these two markets are polarised, as

they also have the highest rates of participants (17% and 10%

respectively) expecting a long-term slog. This reflects the different

levels of understanding and preparedness that companies even

within the same sector.

Another point of interest is the differences between responses from

business and IT leaders. The former are generally more optimistic, with

29% expecting a problem-free, internally driven transition (versus 27%

of IT leaders) and just 7% expect i t to be long-term project requiring

external support (versus 13% of IT leaders). This suggests that IT

leaders perceive greater challenges in overcoming technical and

resourcing challenges – that they will be tasked with overcoming.

The complexity very much depends on the scope of the projects. If

companies plan a system conversion, meaning that an existing

system is migrated to the new technology without changing

processes, the complexity and the associated risks are low. If

companies plan to transform processes, the complexity as well as the

project risks are higher.

This brings us to a discussion on the main challenges to S/4HANA

adoption. The study found that the single biggest concern over

adoption – cited by 43% of participants - is the complexity of the

existing landscape. As discussed earlier, very few enterprises have a

truly consistent and standardized SAP environment, which makes the

challenge of migration much more complex.

Fig 5. Which of the following do you perceive to be the main challenges for

starting an SAP S/4HANA implementation project?

9%

19%

27%

31%

34%

37%

43%

User adoption

Lack of business case

Cost

Lack of understanding of S4 HANA

proposition

Lack of internal know-how

Limited number of internal skills to

manage migration

Complexity of existing landscape

The single biggest

concern over

adoption – cited by

43% of participants -

is the complexity of

the existing

landscape


PAC has identi fied that trends indicate that i t i s often the smaller SAP

customers with only a few SAP systems that are faster in adopting

S/4HANA. This includes companies that migrate from non-SAP-Systems

to S/4HANA.

Ski l ls challenges are also high up the l ist of perceived obstacles, with

37% stating that l imited numbers of internal ski l ls to manage migration

is a major challenge. This is particularly the case in he services sector

(47%) where organisations tend to have relatively thin internal IT

delivery capabil ities. New ski l ls are needed as S/4HANA comes with a

new technology core that needs to be understood in terms of

integration, configuration and operations. This includes skil ls for the

migration from an existing SAP system.

Again, there are some intriguing differences in perspective between

business and IT leaders. Perhaps unsurprisingly, IT executives see the

complexity of the existing landscape as a much bigger challenge

(49%) than the business decision-makers (36%), as they are the ones

at the coal face with a strong appreciation of the fragmented and

inconsistent nature of the current environment.

However, i t is business leaders that perceive ski lls and resourcing to

be a more significant challenge. 50% see l imited numbers of skil ls to

manage migration and 41% cite lack of internal know -how as key

stumbling blocks versus levels of 26% and 29% among IT stakeholders.

This suggests either a lack of faith from the business in the IT

function’s abili ty to deliver complex transformational projects . I t also

suggests that business leaders may believe that a migration to

S/4HANA requires not only technical ski lls but also ski lls for changing

business processes that are even harder to find.

But perhaps the most significant takeaway here is that less than one

fi fth of SAP customers in the EMEA region perceive a lack of business

case to be a significant barrier to S/4HANA adoption. This underl ines

the general view from this study that real momentum is building, and

for the majori ty of SAP users, i t i s a case of ‘when’ – rather than ‘i f’ –

they make the move towards S/4HANA.


CONCLUSIONS

Momentum is clearly building – i t has taken 18 months for

organisations to take a close look at what S/4HANA means and what

i t can do for their organisation.

Building the business case is not the primary challenge – i t is more

about managing the migration of today’s complex SAP landscapes

and concerns over the capacity and abili ty of the internal IT function

to deliver.

For those SAP users not already planning their move towards S/4HANA

or starting to test the water – they are in the minority. The rest of the

market is starting to move at a faster pace than many thought.

We suggest that companies harness the innovation potential that

S/4HANA can provide to transform their business processes.

Companies should not just consider S/4HANA as simply the next SAP

release.

Therefore, companies may not be faced with just a technical

migration project. Instead, l ines of businesses and IT stakeholders

should define together the strategy to transform processes on the

basis of S/4HANA. SAP partners can provide advisory in designing

such projects. Also, they often have a growing body of experience

from past S/4HANA transformations.

S/4HANA offers an opportunity to eliminate many of the shortcomings

existing in today’s SAP landscapes. In some cases i t might be

worthwhile to implement completely new SAP systems, in order to

create new infrastructure and processes free from existing faults and

l iabil ities.


A FUJITSU VIEW

Most SAP customers carrying a huge suitcase of complexity with them. With

this freight they are not well prepared to the journey into the digital world.

Fuji tsu help them to get rid of this and guide them into the new world. Fuji tsu

has great experiences in SAP Services and is recognized as a leader for SAP

HANA Services.

The Fuji tsu offering for those customers is Simplify & Transform!

Why is Simplify SAP Applications necessary:

• 70% of IT resources allocated to “keep the lights on”

• Complex projects to integrate new technology

• Accelerated technologies LiveCycle

• Globalization demands 24x7 and multil ingual support

• Compliance regulations increase processual complexity

• Move of budgets from operation to innovation#

How Fuji tsu can help

• Reduce complexity by consuming SAP Systems as a Service

• Manage Service based on valuable KPI´s (e.g. end-to-end availabili ty, performance,

workload, …)

• Takeover operational efforts to release resources

• Reuse proofed standards to accelerate implementation of new technologies

• Replace inflexible License-models with Pay-per-use models

• Reuse predefined Industry Templates to accelerate rollouts

• Transform CAPEX into OPEX and reduce TCO

Why Enable digital Transformation is necessary:

• Effort in the past was focused on make existing processes more effective, but this has

reduced flexibil ity

• Future digital Business Models are sti l l unclear, processes must get agile again to enable fast

reaction on changes

• Outdated SAP Software prevent usage of modern approaches

• Leak of transparency about implications of process changes

How Fuji tsu can help

• Achieve transparency of existing Business Processes via process mining

• Identi fy inflexible processes and define Roadmap to flexible them

• Turn data into value with analytical and predictive services to support data driven business

models(e.g. fraud prevention for retail)

• Combine traditional deployment Models with SaaS models

• Modernize SAP Software to set the base of being agile

S/4HANA is more than a new technical release of SAP ERP. Data structures and data models, business

processes and application landscapes are affected by this transformation. Together, we evaluate the

potential of S/4HANA and work out a project approach based on our excellent SAP HANA

competence. An easy start i s Fuji tsu XPressWay discovery workshop for S/4HANA! With this workshop

Fuji tsu provides customers a brief introduction to S/4 and its new processes and also an evaluation of

potentials savings.

Contact:

Michael Straub

SAP services proposit ions

EMEIA region

Tel.: +49 / 7132 366 1142

[email protected] i tus.com


METHODOLOGY

This study is based on interviews with more than 200 senior decision-

makers with responsibili ty for driving SAP strategies at large

organisations in the EMEA (Europe, Middle East & Africa) region. The

study was completed during the fourth quarter of 2016. Here is a

more detailed breakdown of the participants:


ABOUT FUJITSU

Fujitsu is the leading Japanese information and communication

technology (ICT) company, offering a full range of technology

products, solutions, and services. Approximately 156,000 Fujitsu people

support customers in more than 100 countries. We use our experience

and the power of ICT to shape the future of society with our customers.

Fujitsu Limited (TSE: 6702) reported consolidated revenues of 4.7 tril l ion

yen (US$41 billion) for the fiscal year ended March 31, 2016. For more

information, please see http://www.fujitsu.com.

About Fujitsu EMEIA

Fujitsu enables customers to capitalize on digital opportunities with

confidence, by helping them to balance robust ICT and digital

innovation. Fujitsu’s full portfolio of products, solutions and services

gives its customers a competitive advantage in the era of digital

transformation. In Europe, the Middle East, India and Africa (EMEIA) the

company employs more than 29,000 people. For more information,

please see http://www.fujitsu.com/fts/about/

ABOUT PAC

Founded in 1976, Pierre Audoin Consultants (PAC) is part of CXP Group,

the leading independent European research and consulting fi rm for

the software, IT services and digital transformation industry.

CXP Group offers i ts customers comprehensive support services for

the evaluation, selection and optimization of their software solutions

and for the evaluation and selection of IT services providers, and

accompanies them in optimizing their sourcing and investment

strategies. As such, CXP Group supports ICT decision makers in their

digital transformation journey.

CXP Group also assists software and IT services providers in optimizing

their strategies and go-to-market approaches with quantitative and

quali tative analyses as well as consulting services. Public

organizations and insti tutions equally base the development of their

IT policies on our reports.

Capitalizing on 40 years of experience, based in 8 countries (with 17

offices worldwide) and with 140 employees, CXP Group provides i ts

expertise every year to more than 1,500 ICT decision makers and the

operational divisions of large enterprises as well as mid-market

companies and their providers. CXP Group consists of three branches:

Le CXP, BARC (Business Application Research Center) and Pierre

Audoin Consultants (PAC).

For more information please visi t: www.pac-online.com

PAC’s latest news: www.pac-online.com/blog

Follow us on Twitter: @PAC_Consultants

PAC - CXP Group

15 Bowling Green Lane

EC1R 0BD London

United Kingdom

Phone: +44 207 251 2810

Fax: +44 207 490 7335

[email protected]

www.pac-online.com

http://www.fujitsu.com/fts/about/

pac trend survey - the path to s/4hana

Devices & Hardware