Tag Archives: transition

SAP sees S/4HANA migration as its future, but do customers?

The first part of our 20-year SAP retrospective examined the company’s emerging dominance in the ERP market and its transition to the HANA in-memory database. Part two looks at the release of SAP S/4HANA in February 2015. The “next-generation ERP” was touted by the company as the key to SAP’s future, but it ultimately raised questions that in many cases have yet to be answered. The issues surrounding the S/4HANA migration remain the most compelling initiative for the company’s future.

Questions about SAP’s future have altered in the past year, as the company has undergone an almost complete changeover in its leadership ranks. Most of the SAP executives who drove the strategy around S/4HANA and the intelligent enterprise have left the company, including former CEO Bill McDermott. New co-CEOs Jennifer Morgan and Christian Klein are SAP veterans, and analysts don’t think the change in leadership will make for significant changes in the company’s technology and business strategy.

But they will take over the most daunting task SAP has faced: convincing customers of the business value of the intelligent enterprise, a data-driven transformation of businesses with S/4HANA serving as the digital core. As part of the transition toward intelligence, SAP is pushing customers to move off of tried and true SAP ECC ERP systems (or the even older SAP R/3), and onto the modern “next-generation ERP” S/4HANA. SAP plans to end support for ECC by 2025.

Dan LahlDan Lahl

S/4HANA is all about enabling businesses to make decisions in real time as data becomes available, said Dan Lahl, SAP vice president of product marketing and a 24-year SAP veteran.

“That’s really what S/4HANA is about,” Lahl said. “You want to analyze the data that’s in your system today. Not yesterday’s or last week’s information and data that leads you to make decisions that don’t even matter anymore, because the data’s a week out. It’s about giving customers the ability to make better decisions at their fingertips.”

S/4HANA migration a matter of when, not if

Most SAP customers see the value of an S/4HANA migration, but they are concerned about how to get there, with many citing concerns about the cost and complexity of the move. This is a conundrum that SAP acknowledges.

“We see that our customers aren’t grappling with if [they are going to move], but when,” said Lloyd Adams, managing director of the East Region at SAP America. “One of our responsibilities, then, is to provide that clarity and demonstrate the value of S/4HANA, but to do so in the context of the customers’ business and their industry. Just as important as showing them how to move, we need to do it as simply as possible, which can be a challenge.”

Lloyd AdamsLloyd Adams

S/4HANA is the right platform for the intelligent enterprise because of the way it can handle all the data that the intelligent enterprise requires, said Derek Oats, CEO of Americas at SNP, an SAP partner based in Heidelberg, Germany that provides migration services.

In order to build the intelligent enterprise, customers need to have a platform that can consume data from a variety of systems — including enterprise applications, IoT sensors and other sources — and ready it for analytics, AI and machine learning, according to Oats. S/4HANA uses SAP HANA, a columnar, in-memory database, to do that and then presents the data in an easy-to-navigate Fiori user interface, he said.

“If you don’t have that ability to push out of the way a lot of the work and the crunching that has often occurred down to the base level, you’re kind of at a standstill,” he said. “You can only get so much out of a relational database because you have to rely on the CPU at the application layer to do a lot of the crunching.”

S/4HANA business case difficult to make

Although many SAP customers understand the benefits of S/4HANA, SAP has had a tough sell in getting its migration message across to its large customer base. The majority of customers plan to remain on SAP ECC and have only vague plans for an S/4HANA migration.

Joshua GreenbaumJoshua Greenbaum

“The potential for S/4HANA hasn’t been realized to the degree that SAP would like,” said Joshua Greenbaum, principal at Enterprise Applications Consulting. “More companies are really looking at S/4HANA as the driver of genuine business change, and recognize that this is what it’s supposed to be for. But when you ask them, ‘What’s your business case for upgrading to S/4HANA?’ The answer is ‘2025.’”

The real issue with S/4HANA is that the concepts behind it are relatively big and very specific to company, line of business and geography.
Joshua GreenbaumPrincipal, Enterprise Applications Consulting

One of the problems that SAP faces when convincing customers of the value of S/4HANA and the intelligent enterprise is that no simple use case drives the point home, Greenbaum said. Twenty years ago, Y2K provided an easy-to-understand reason why companies needed to overhaul their enterprise business systems, and the fear that computers wouldn’t adapt to the year 2000 led in large measure to SAP’s early growth.

“Digital transformation is a complicated problem and the real issue with S/4HANA is that the concepts behind it are relatively big and very specific to company, line of business and geography,” he said. “So the use cases are much harder to justify, or it’s much more complicated to justify than, ‘Everything is going to blow up on January 1, 2000, so we have to get our software upgraded.'”

Evolving competition faces S/4HANA

Jon Reed, analyst and co-founder of ERP news and analysis firm Diginomica.com, agrees that SAP has successfully embraced the general concept of the intelligent enterprise with S/4HANA, but struggles to present understandable use cases.

Jon ReedJon Reed

“The question of S/4HANA adoption remains central to SAP’s future prospects, but SAP customers are still trying to understand the business case,” Reed said. “That’s because agile, customer-facing projects get the attention these days, not multi-year tech platform modernizations. For those SAP customers that embrace a total transformation — and want to use SAP tech to do it — S/4HANA looks like a viable go-to product.”

SAP’s issues with driving S/4HANA adoption may not come from the traditional enterprise competitors like Oracle, Microsoft and Infor, but from cloud-based business applications like Salesforce and Workday, said Eric Kimberling, president of Third Stage Consulting, a Denver-based firm that provides advice on ERP deployments and implementations.

Eric KimberlingEric Kimberling

“They aren’t direct competitors with SAP; they don’t have the breadth of functionality and the scale that SAP does, but they have really good functionality in their best-of-breed world,” Kimberling said. “Companies like Workday and Salesforce make it easier to add a little piece of something without having to worry about a big SAP project, so there’s an indirect competition with S/4HANA.”

SAP customers are going to have to adapt to evolving enterprise business conditions regardless of whether or when they move to S/4HANA, Greenbaum said.

“Companies have to build business processes to drive the new business models. Whatever platform they settle on, they’re going to be unable to stand still,” he said. “There’s going to have to be this movement in the customer base. The question is will they build primarily on top of S/4HANA? Will they use an Amazon or an Azure hyperscaler as the platform for innovation? Will they go to their CRM or workforce automation tool for that? The ‘where’ and ‘what next’ is complicated, but certainly a lot of companies are positioning themselves to use S/4HANA for that.”

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Dynamics 365 CRM can help drive the digital transformation process

ORLANDO, Fla. — Companies of all sizes in all industries are currently in a state of transition: Either update those legacy systems or risk being left behind.

But successfully enacting a digital transformation process can be time-consuming, costly and difficult, depending on the workforce. Yet, as consumers demand personalized customer experiences and services, the companies that can adapt will continue to thrive.

“Personalization is becoming the de facto standardization,” said Winston Hait, senior product marketing manager for Microsoft. Hait was speaking at a session on Dynamics 365 for retail at Microsoft Ignite. Dynamics 365 CRM had a substantial presence at the conference, with Microsoft CEO Satya Nadella highlighting the potential for Dynamics 365 CRM moving forward.

Over the past year and a half, Microsoft has brought together its ERP and CRM systems into Dynamics 365, while also releasing industry-specific Dynamics software, including Dynamics 365 for retail, for talent, for service, and for finance and operations — and with an eye toward more industry segregation.

“Retail used to be one of the solutions within Dynamics for finance and operations,” Hait said. “But we began to break out the different workloads — and this is just the beginning. We’ll have a finance-specific [product], we’ll have an operations [product] and a warehousing [product].”

And to help keep up with that modern digital transformation process, Dynamics 365 products will also see an artificial intelligence (AI) influence embedded into the software, according to Nadella.

“It’s not about building individual tools, but creating that platform to drive digital transformation,” Nadella said. “When you create such a rich data asset, what you enable is AI-first workloads.”

Updating legacy systems

At one of the sessions focusing on the digital transformation process, there were representatives from four different companies — two in the public sector, one in food services and one in finance — all of which were going through some digital transformation process.

It’s not about building individual tools, but creating that platform to drive digital transformation.
Satya NadellaCEO, Microsoft

“We’re moving from a legacy-based Siebel system to a cloud-based Dynamics 365 platform,” said Pierre Nejam, program director at New York City’s Department of Information Technology and Telecommunications. “We have some difficult customers — New Yorkers — and we’re always trying to find better ways to do things.”

Others, like Richard Wilson, head of single customer view and CRM product for Wesleyan, a financial services company based out of the United Kingdom, is tasked with updating decades of legacy systems.

“We’ve been around for 176 years,” Wilson said, “and so has some of our technology.”

For Wilson, the financial industry tends to adopt technology slower than other industries due to complex processes and strict regulations. But when modernizing its platform to benefit its customers, the company had to look outside the scope of financial services for its digital transformation process.

“Everyone’s expectations are changing,” Wilson said. “We have to stop comparing ourselves to other financial companies. You have to compare yourself to what everyone is doing.”

Transformation ‘is a permanent effort’

Digital transformations aren’t a one-time IT project or objective that is ever really completed, according to Nejam.

“In a city like New York, transformation isn’t something you do once or twice; you do it all the time,” Nejam said. “It’s a permanent effort.”

This is why Microsoft has continuously updated and modernized its business applications products, offering hybrid Dynamics 365 options and cloud-based Office suite products.

“It’s a matter of taking the customer relationships and changing the current business model and enhancing new technology,” said Kathy Piontek, global Microsoft executive for IBM’s global business services. “We hear that folks are drowning in data. There’s an explosion of data, and we want to take it and leverage that data and use it to make decisions moving forward.”

And while data and the mobility of cloud technology are key drivers in a digital transformation process, the focus, according to those going through the transformation, should remain on the customer.

“People have no patience for being behind or slowed down,” said Mary Alice Callaway, vice president of sales and marketing for ABC/Interbake Foods LLC, which is a manufacturer of Girl Scout cookies. “There’s really no choice on the business side for much longer.”

‘Not for the sake of change’

While a digital transformation process can sound like fun to the IT department and act as a potential source of job security as the new processes are put into place, there needs to be a purpose to the project, not doing it only for the sake of new technology.

“We’re doing a transformation not for the sake of change, but to meet our needs,” said John Harrison, director of information technology for New Jersey’s Department of Community Affairs.

When approaching this project, Harrison said he had familiarity with Salesforce, but ultimately chose Dynamics 365 after comparing several CRM platforms.

“With Dynamics, we can keep modernizing,” Harrison said. “It’s an evergreen system and is constantly updated.”

Dynamics 365 CRM pricing varies depending on the product bundle and whether your company is looking for a business or enterprise edition. More pricing information can be found at Microsoft’s Dynamics 365 website.