SAP’s S/4 HANA has been called many things, but to characterize it as the future of SAP is far from hyperbole. SAP has minced no words in affirming that the path from R/2 to R/3 to ECC eventually leads to S/4 HANA. The question is not an “if”, but a “when.”
When, however, has been the tricky question – when will the customers sign on in droves, when will SAP put in the critical mass of the functionality customers need in S/4 in order for the transition to make sense, and when will S/4 become a significant revenue-maker for SAP? Considering the literally billions of dollars at stake on the SAP and customer side, predicting the answer to when has become the SAP watcher’s equivalent of finding the northwest passage or the Higgs Boson. It’s a complicated question to answer, and precisely because of both its difficulty and value, it’s the number one question looming over SAP and its ecosystem today.
Which is why the recent release by ASUG, the SAP user group, of a comprehensive survey of customers’ attitudes and intentions towards S/4 HANA falls at an extremely propitious moment. That release was made all the more propitious by a peak I was given into SAP’s plans to clean up a major problem that has bedeviled customers’ efforts to plan their S/4 projects: The lack of a clear, well-defined and easily accessible path, based on the current and future state of a company’s SAP landscape, that will lead customers to the S/4 HANA promised land. Based on the briefing I received, SAP has some interesting plans to fix that problem, and those plans could potentially make the next ASUG survey results look very different indeed.
The good news from the ASUG survey is that, at least in North America, SAP customers’ current uptake and intention to buy S/4 HANA is actually higher than many of us, including myself, though it to be. According to ASUG’s data, 61 percent of the customer base will have purchased S/4 HANA by next year, with 40 percent already on board or expected to have been on board by the end of 2016. Only 19 percent said that they are categorically not planning to purchase S/4 HANA, with 20 percent coming under the “don’t know/not sure” rubric.
These numbers are tempered by the problem that has bedeviled SAP’s intentions for S/4 HANA since it was first offered to the market – there’s a big difference between “bought” and “deployed”. Only 8 percent said they were currently live, with another 15 percent in the process of implementing. This has been the story all along – SAP did a good job, maybe too good a job, of selling the first licenses of S/4 HANA. But all too many of those licenses weren’t immediately put to use: for many the S/4 HANA license was used as leverage to get a better deal on other functionality that the customer was more eager to implement, and that meant the S/4 license sat on the shelf.
Assuming there’s a license that’s going to be used, implementing what is the next big question: SAP needs its customers to not just go live, but to go live with as much functionality as possible, or least with as much of the software they actually licensed as possible. The ASUG data shed some light on this question as well: 34 percent are primarily implementing finance, while 26 percent said they were planning to implement the full suite. Other deployments options including supply chain, manufacturing, and HR. Another 26 percent said they didn’t know.
The numbers in the “don’t know” category are important to consider when looking at how SAP plans to help customers discern the correct path to S/4 HANA. With 20 percent of customers not knowing whether they will deploy S/4 HANA, 26 percent not knowing what part of S/4 HANA they plan to deploy, and 33 percent not knowing if they will deploy on-premise or in the cloud – the uncertainty factor looms large in the overall issue of when S/4 HANA crosses that proverbial river to the promised land.
Of course, ASUG asked about the obstacles to S/4 HANA adoption, and their data confirmed what many of us have been saying for a while: S/4 HANA lacks a clear roadmap (15%), details about versions and functionality are lacking (12%), it’s unclear how to get from an existing ECC system to S/4 (13%), and it’s unclear how S/4 can benefit a given company (18%).
Which makes the initiative SAP plans to roll out later this year to help customers figure out the path to S/4 all the more significant, and well-timed considering the ASUG report. The initiative, called the SAP Transformation Navigator, is intended to provide customers with a self-service online tool that lets them define the current state of their ECC 6 implementation and receive recommendations on what the ideal S/4 HANA implementation should look like. The goal is to give a solution architect a starting point for planning the “transformation” based on a qualified assessment of how to get to the optimal S/4 promised land.
Based on the demo I was shown, there’s a lot going on in this tool to address the obstacles that the ASUG data highlights: after entering the current state of their ECC 6.0 system, customers will be able to see what S/4 HANA alone can cover for them as well as what modules such as Ariba or hybris might do for them. Each proposed new module has a pop-up that defines integration scenarios, a roadmap, other information on functionality and how S/4 HANA can benefit a particular company via information from the module’s “value map.”
On paper – or, more precisely, on PowerPoint – the Transformation Navigator takes a swipe at pretty much every potential obstacle to S/4 adoption in the ASUG survey. Roadmap? Check. Version details? Check. How to get there from here? Check. Benefits? Check. If I didn’t know better (but I do) I would say that SAP took the survey results and then created the tool – no matter that the survey just came out last week and the Transformation Navigator has been in the works for months. Credit ASUG for holding up the mirror, and credit SAP for taking a deep long look.
What the confluence of the ASUG data and the functionality promised by the Transformation Navigator gives the SAP ecosystem is important. On the one hand, the ASUG data show that SAP’s existing customers aren’t opposed to S/4 HANA, but it’s clear they could use a lot more help in making the case for why they need to move from ECC and how to do it. That need more than justifies the development of the Transformation Navigator, and, if it lives up to its billing, it’s going to be a welcome tool in the customer’s decision-making processes. On the other hand, ASUG has now thrown down the gauntlet to SAP, setting a baseline for the problems and prospects regarding S/4 HANA that everyone will be able to use to judge the relative effectiveness of the Transformation Navigator and SAP’s other S/4 HANA efforts.
If SAP hasn’t moved the needle in the next ASUG survey, we’ll know that at least one of two things happened: Either the Transformation Navigator wasn’t up to the job, or SAP failed to fill out S/4 HANA’s functionality enough to align it with customer requirements, or some combination of both. Neither would be a happy moment for SAP. Importantly, Transformation Navigator won’t be enough if SAP can’t meet expectations and eventually flesh out S/4 HANA enough to become the replacement for ECC that it one day must become.
Other things could still go wrong for SAP’s plans: buying S/4 means replacing everything (SAP and non-SAP) with S/4 for 55 percent of the customers, according to ASUG’s data. But only half that many have implemented or will soon implement any S/4 HANA at all, and most of those have just done finance. In other words, the intention is clearly in favor of a broad application of S/4, but it’s a future intention, not a present commitment.
This is one area I’ll be watching closely – if these customers start to fall off the wagon, the repercussions could be serious. The 45 percent that aren’t going full-bore S/4 are planning to do a mix of two-tier and “partial” migrations, both pragmatic strategies that on the one hand make a lot of sense but on the other hand mean that S/4 HANA is not as important or strategic as SAP would like. The ASUG data still show that SAP and S/4 HANA are still clearly important overall, and we don’t know from the ASUG report whether the 11 percent who responded “other” to the implementation/migration question are looking at non-SAP solutions, particularly for tier-two implementations. But if the “other” category grows in size as more customers go from planning implementations to realizing them, or the 55 percent who are going all S/4 start to waiver, SAP’s plans for S/4 HANA will be endangered.
Which highlights the importance of the ASUG report and SAP’s Transformation Navigator. ASUG has an important role in bringing to voice the kinds of problems that SAP hopes to mitigate with Transformation Navigator, and how well Transformation Navigator does in meeting those needs will tell the world a lot about how S/4 HANA is aligning with customer needs. That alignment will improve in time when the Navigator adds non-SAP software to its “before” picture: considering how predominant non-SAP software is in the SAP customer base, showing what S/4 can do to replace and, maybe, improve on the functionality of a heterogeneous environment will be a further boost to SAP’s plans, and provide more fodder for ASUG’s surveys as well.
2017 is turning out to be one of those pivotal years when SAP has to consolidate a lot of new products and technology, along with a logjam of acquired products, and show its customers how the sum of the parts is greater than the whole. Transformation Navigator is just one piece of the puzzle, there’s much more work to be done. But if all SAP did in 2017 was solidify the S/4 HANA story and route to adoption for its customers, and they responded with their dollars and euros, it would be a watershed year.
According to ASUG’s data, the die is cast. What’s on the other side – as S/4 HANA matures and Transformation Navigator starts to do its job – we can only guess.
Until the next ASUG survey comes out.