3 Reasons Why You Should Reconsider Your S/4HANA Re-implementation From SAP ECC
If you use SAP’s Enterprise Resource Planning (ERP) software, SAP ECC, and you don’t use S/4HANA, you’re on a deadline. SAP’s unpopular decision requires its customers to migrate to S/4HANA by 2027, which puts them in quite a predicament. The migration means complete re-implementation where customers will lose all their customization on SAP ECC and will have to redo all of them in the S/4HANA environment.
In this article I share my own views on why continuing with SAP ERP is a bad decision, what existing customers say about SAP and what are your migration options before the 2027 deadline.
So let’s start with the reasons why sticking with SAP ERP is a bad decision:
#1 No mainstream maintenance for SAP ERP Central Component (ECC) after 2027
SAP will only provide mainstream maintenance until end of 2027. SAP will not support its legacy ERP software after this deadline, which means that customers will no longer receive any official updates.
However, customers needing support for their SAP ECC in longer conversion phases to SAP S/4HANA can choose the extended maintenance offering. This comes with a premium of two percent points on the maintenance basis for all support offerings for the scope of SAP ECC. It will be available for three years from beginning of 2028 until end of 2030.
Those businesses that want support from SAP would need to migrate to SAP’s flagship ERP software, S/4HANA.
The process of re-implementation is neither easy, nor cheap. That is why you should take this decision very seriously and plan the time and resources for this re-implementation, testing, and users training properly.
If the current SAP set up is not excessively customized, then it makes sense to convert to S/4HANA. If not, then a full re-implementation might be necessary. Or it may even be an opportunity to move from SAP to another ERP provider, such as Oracle, VIENNA Advantage or Microsoft.
#2 You won’t get to choose the database on which your SAP ERP will run
After the 2027 deadline, all SAP’s systems will be built to exclusively run on just one single database — SAP’s own database, HANA. Previously, SAP’s software worked with a number of databases, including Oracle, but businesses migrating to the new system will also need to migrate their entire database.
But that’s not all! S/4HANA requires HANA as a database, which in return requires Linux, the only operating system that runs HANA.
HANA is an innovative database, but it is nowhere near as mature as other solutions. So you may feel, quite rightly, to prefer the mature, reliable database options to SAP’s HANA database.
Having in mind that the company serves over a quarter of a million businesses, it’s understandable why SAP is so keen to make its customers use HANA. Whit this decision SAP is hoping to get a bigger chunk of the database market. But what’s there for you, as a SAP customer? Less options, less freedom, higher maintenance and license costs, and lots of headaches.
#3 Nine out of ten existing SAP customers wouldn’t move to S/4HANA
According to one Nucleus Research, which focused on analyzing the experience of SAP customers, 6 out of 10 existing customers wouldn’t buy the same solution from SAP again. When asked if they would consider a future solution, those same respondents indicated they would not consider SAP’s future offerings.
Even more interesting fact from the same research is that 9 out of 10 customers indicated they would not consider a future investment in S/4HANA and appear to be following a slow tapering-off strategy as they evaluate other opportunities in the market.
Some of the interviewed SAP customers said:
“The first time we tried to deploy BusinessOne, it totally flopped.”
“SAP gets a B for support. Their partner gets D. There’s no support. It seems like they get the account and then shove you under the rug.”
“If Boeing tried to build an airplane wing like that, it would never fly. After several failed attempts we had to demand that they all come to our office and fix it.”
All these comments are expected, having in mind so many SAP implementation disasters we’ve all heard about, over the years. Here are some of the most recent ones:
Revlon
After acquiring Elizabeth Arden, Inc., Revlon decided to go with a new ERP provider, SAP HANA, by December 2016. Both companies have had positive experiences with ERP rollouts in the past — Elizabeth Arden with Oracle Fusion Applications, and Revlon with Microsoft Dynamics AX.
Almost 3 years after this decision in march 2019, SAP’s rollout was disastrous enough to essentially sabotage Revlon’s own North Carolina manufacturing facility, resulting in millions of dollars in lost sales.
Haribo
In late 2018, Haribo, a German candy manufacturer, began transitioning to S/4HANA converting 16 candy factories spread across 10 countries away from the heterogenous enterprise resource planning systems used in each region-some of which dated back to the 1980s. But they quickly began experiencing supply chain and manufacturing disruptions. This ultimately affected sales (25% decline), causing revenue to decrease after go-live.
Lidl
You have probably heard about this one. What started as a prideful project between two great German companies, ended up as one of the biggest SAP disasters of all time, resulting in €500 million loss.
The two companies began working together on a transition away from Lidl’s creaky in-house inventory system since 2011. But by 2018, after spending nearly €500 million, Lidl scrapped the project.
So, what are your choices before the 2027 deadline?
Even though 2027 seems quite some time away, it is recommended to start preparing now. Smaller businesses may be able to wait a year or two, but larger enterprises and multinational corporations need to act now. Depending on your company size, the current SAP setup and the level of customization you have 3 choices: migrate gradually (Brownfield Migration), re-implement (Greenfield Migration), or migrate away.
Re-implement (Greenfield Migration)
Key points that you should take in consideration when evaluating the Greenfield Migration approach:
- Not all standard features are available in S/4HANA yet
- No migration path for customization
- Complete and expensive re-implementation
Migrate Gradually (Brownfield)
Key points that you should take in consideration when evaluating the Brownfield Migration approach:
- Migrate to S/4HANA database and gradually migrate modules to S/4HANA
- No migration path for customization
- Complete and expensive re-implementation
Migrate Away
- Re-implement to a different solution
- No migration path for customization. Complete re-implementation
- Economical options available ⚠️
All options require similar effort and time… so is it still worth sticking with SAP?
Could enterprise open source ERP solution be a serious alternative to S/4HANA?
Enterprise open source solutions have evolved greatly over the past decade and now offer a serious alternative to proprietary solutions. We’ve already witnessed the growing excitement in the open source space: Red Hat is being acquired by IBM for $32 billion; MuleSoft was acquired after going public for $6.5 billion; MongoDB is now worth north of $4 billion; Elastic’s IPO now values the company at $6 billion…
But back in the days, the original open-source projects were not really businesses, they were revolutions against the unfair profits that closed-source software companies were reaping. Microsoft, Oracle, SAP and others were extracting monopoly-like “rents” for software, which the top developers of the time didn’t believe was world class. So, beginning with the most broadly used components of software — operating systems and databases — progressive developers collaborated, to author great pieces of software.
Today, proprietary ERP solutions are at the similar scale as SAP, in terms of high dependency and cost, as well the need to customize. They provide fewer options, less freedom and higher maintenance and license costs. But luckily there are a few enterprise level open source ERP solutions that really excelled their product offerings and have become a serious competitor to the proprietary EPR solutions.
One shining star in the enterprise open source ERP market is VIENNA Advantage ERP/CRM, an enterprise level open source ERP/CRM with inbuilt document management system and powerful business intelligence.
The company has received numerous awards and recognitions in the past few years, to name a few: Most innovative ERP solution awarded by Initiative Mittelstand, 20 Most Promising Open Source ERP Solutions in the World recognized by “The ERP Insights Magazine”, Great User Experience and Rising Star Award by Finances Online.
But maybe the highest acknowledgement for the company is the number of successful SAP replacement projects they’ve recently done at: oil and gas company from Middle East, publicly listed diversified business and a cable manufacturer in Malaysia, consulting services provider from Kenya, health care equipment manufacturer from Germany, etc.
Conclusion
SAP customers are right to feel angry because they are pressured into giving up their existing ERP system and move on to another, just because SAP can use this to grow its business. Although S/4HANA may offer some advantages to its users, it should be the customer’s choice whether to move, after evaluating those advantages against the disruption.
As SAP stakes its future business on the success of HANA and its various cloud initiatives, there appears to be a disconnect between its marketing message and the customer reality. One thing is clear: there was no SAP customers in the Nucleus Research that think of “SAP” and “simple” in the same sentence. Across its product portfolio, SAP has a lot of work to do to convince customers that their future will truly be better and simpler with SAP.
In the meanwhile, more and more large corporations are exploring enterprise level open source ERP solutions as an alternative to the proprietary ones. The industry leader VIENNA Advantage Open Source ERP/CRM has successfully started and finished a numerous SAP replacements.
