The path to SAP S/4HANA

A guide from SNP AG and PAC

PAC Guide
By Frank Niemann and Dr Cristian Wieland
PAC Guide I The path to SAP S/4HANA 2

INTRODUCTION

S/4HANA is the long awaited new product generation from SAP. The successor to the SAP Business Suite is
based on the SAP HANA in-memory platform and is optimised for its use. The software can be operated on
premise as well as in the cloud. In addition, SAP offers a new user experience with SAP Fiori.

SAP S/4HANA is not just a new SAP release. It is a new technological architecture based on SAP HANA.
Switching to the new product is more than just a release upgrade for existing SAP customers. For this reason, the
changeover to the new SAP product requires some consideration.

A number of companies are already discussing the adoption of S/4HANA. A recent PAC study supported by
1
SNP AG and other IT providers (http://products.snp-ag.com/s4hana-study) showed, among others, that around
66% of SAP customers are considering introducing the software; 36% are planning a suitable implementation
project over the coming years and a further 30% are discussing it.

1 The completion and publication of this PAC study was supported by arvato Systems GmbH, Dell & Intel and SNP Schneider-
Neureither & Partner AG

PAC 2016
PAC Guide I The path to SAP S/4HANA 3

Are you planning to implement S/4 HANA in your company?

No, Yes, within the

implementation next 1-2 years,
currently not 17%
planned/
discussed/
relevant, 33% Yes, within the
next 2-3 years,
4%

Yes, within the

next 3-5 years,
15%

No, but we are

discussing it, No, project
29% already being
implemented, 2%

PAC - a CXP Group Company, 2015 n = 100

Investment plans for SAP S/4HANA

Existing SAP customers are now considering whether and how they should introduce SAP S/4HANA. There are
two main approaches:

Greenfield approach: complete reimplementation of existing SAP systems based on SAP S/4HANA.
Brownfield approach: gradual migration of existing SAP systems to SAP S/4HANA (technical or
transformational).

According to the PAC study on SAP S/4HANA, around 60% of SAP customers prefer the brownfield approach,
whereas about 40% favour the greenfield approach (see chart). Both approaches are relevant for customers.
Therefore, system integrators should be able to optimally support both. The choice of migration path always
depends on the individual situation of the customer. This guide is intended as a first step in helping readers
ascertain which path to choose for their companies.

PAC 2016
PAC Guide I The path to SAP S/4HANA 4

Companies that have implemented, plan to implement or are discussing implementing S/4 HANA:
What implementation approach do you prefer?

Brownfield: Greenfield:
Gradual migration of existing Complete reimplementation of
SAP systems existing systems

62% 38%
55% Certain existing SAP systems 39% Certain existing SAP systems

45% All existing SAP systems 61% All existing SAP systems
Single response, n = 67

Project approaches for SAP S/4HANA

(Source: PAC study S/4HANA Relevance for SAP customers, expectations and obstacles)

Aim of this guide

The aim of this guide is to provide SAP users who are considering SAP S/4HANA with considerations in order to
evaluate the pros and cons of the two project approaches.

This guide deals with the basic issues of migration and thus offers a simplified overview.

PAC and SNP AG have worked together to draw up this guide.

PAC 2016
PAC Guide I The path to SAP S/4HANA 5

SAP S/4HANA GREENFIELD APPROACH

Definition

The greenfield approach involves the complete reimplementation of one or more SAP systems. Processes
and systems are fully reconfigured. Primarily the business data of the existing systems is transferred.

According to PAC, SAP begins a new chapter in its ERP history with S/4HANA. SAP customers can take
advantage of it to free themselves from burdensome existing SAP system environments. Thus, S/4HANA can be
a new start for them to align SAP-based processes to current and future process requirements.

The greenfield approach is suitable for SAP customers who favour a migration of existing SAP systems to the
SAP S/4HANA cloud edition.

SAP S/4HANA cloud edition

Complete reimplementation of processes/

new configuration
SAP ERP

SAP Business
Suite Master and transaction data

Processes/
configuration
SAP S/4HANA on premise edition

Master and
Complete reimplementation of processes/
transaction data
new configuration

Master and transaction data

Greenfield approach

PAC 2016
PAC Guide I The path to SAP S/4HANA 6

Pro greenfield approach

New start with SAP: Using the greenfield approach, SAP customers have the opportunity of a new start. Many
SAP user companies use a long-standing technical infrastructure and process configuration, which is often so
complex that cost and labour intensive adjustments are necessary due to requirements from the different
departments. Companies in this situation now have the chance with SAP S/4HANA to reinstall processes and
thus detoxify their backend. According to the PAC study, reducing the complexity of the system landscape is one
of the biggest challenges for SAP customers.

Challenges of digitisation: Digitisation has accelerated the need to completely align business processes and
even support new business models with SAP software. According to the PAC study, over 70% of SAP users find
it a big or even very big challenge to carry out new business requirements faster. The greenfield approach offers
a way to reconfigure SAP systems to optimally support current business challenges and simultaneously lay the
foundation to be able to meet future requirements.

Restandardisation and upgradability: Customer-specific enhancements (customising) make it difficult to

perform SAP upgrades. Such customising, which has been developed over years, has not always been
necessary since SAP standard functionality offers equivalent or even better alternatives. A complete
reimplementation of SAP software results in a state-of-the-art system. Less customising makes software
maintenance easier and ensures upgradability. In addition, necessary customising is much easier to implement in
a less burdensome software environment.

Risks and project costing: Greenfield projects tend to be easier to calculate than brownfield projects. Since the
implementation of the system architecture and the process of a first installation of SAP software are very similar,
there is no planning and costing for the migration of the existing SAP configuration. This tends to reduce the risk
of cost overruns or that the project does not yield expected results.

It should be noted here that the new start in terms of processes requires coordination between IT, the various
departments and in some cases an external consultancy firm. Under certain circumstances, and there are
practical examples, the coordination effort can escalate, consequently even delaying the project and adding extra
cost. The advantage of the greenfield approach in reducing project risk is thus lost.

Increasing data quality: The basis of efficient processes is high data quality. With the greenfield approach of
complete reimplementation, only the business data of the existing applications is transferred. This results in
reduced data quality. The greenfield approach offers companies the chance to increase data quality before the
actual SAP reimplementation. This option is available in principle with the brownfield approach, but not in the
same way.

PAC 2016
PAC Guide I The path to SAP S/4HANA 7

Companies should however be aware that data cleansing must fit into the time and cost budget of the project.
However, in practice, many companies do not perform data cleansing especially in time-critical SAP projects.

Contra greenfield approach

Low investment protection: SAP users have invested time and money in SAP configuration over the years. This
work and experience is largely wasted with the greenfield approach.

Change management burden: Complete reimplementation of SAP software offers clear advantages. However,
the effort required for change management can be substantial if the SAP software has to be completely
reconfigured. This primarily concerns the relevant process changes for the various departments in addition to the
technical challenges.

Appropriate skills: A complete reimplementation of SAP S/4HANA may require skills that neither the existing
SAP partner nor the internal SAP organisation possess. For example, according to the PAC study, almost 90% of
companies find it important that SAP service providers can deliver S/4HANA innovation to both business and IT.
Thus, it may be necessary to change the IT service provider.

Existing contracts: Companies who operate their SAP systems in external data centres (SAP hosting) or avail of
SAP application management services may have to adapt these contracts or renegotiate. Since a new SAP
application is created through complete reimplementation, the contractual basis changes. In addition, ongoing
leasing contracts for hardware should be reviewed since new hardware generally needs to be purchased to
operate SAP S/4HANA.

PAC 2016
PAC Guide I The path to SAP S/4HANA 8

SAP S/4HANA BROWNFIELD APPROACH

Definition

The brownfield approach involves the gradual migration of one or more SAP systems to SAP S/4HANA. A
distinction is made between technical and transformational migration.

With technical migration, a software update to SAP S/4HANA is carried out and the new
infrastructure platform based on SAP HANA is introduced.
With transformational migration, the software update is combined with the SAP transformation.
This may include, for example, the consolidation of systems or the harmonisation of SAP-based
processes.

Most SAP customers prefer the brownfield approach. However, it is still worth providing the arguments for and
against this approach.

SAP ERP
SAP S/4HANA on premise edition
SAP Business Suite

Processes/
Technical migration
Existing processes/configuration on new
configuration technology
Master and
transaction data
Master and transaction data

SAP ERP SAP S/4HANA on premise edition

SAP Business Suite
Transformational
Processes/ Consolidated and harmonised processes
configuration
migration
and configuration on new technology
Master and
transaction data
Consolidated and harmonised master and
transaction data

Brownfield approach

PAC 2016
PAC Guide I The path to SAP S/4HANA 9

Pro brownfield approach

Manageable effort: Technical migration is relatively easy to perform with little associated risk since it is simply a
software update. The configured SAP-based processes remain untouched but run on the new platform after
migration and thereby benefit from its advantages.

Combining upgrading and consolidation: Transformational migration is well-suited to companies who want to
consolidate their SAP system landscape and harmonise SAP-based processes in various functional areas in the
changeover to SAP S/4HANA. Companies are interested in combining software upgrading and SAP
consolidation: according to the PAC study, over 60% of companies implementing SAP S/4HANA want to invest in
the optimisation of their SAP environment.

Integration with external systems: Companies often use a number of other internal applications and external
systems from customers, suppliers or partners in addition to their SAP systems. The integration of third-party
systems must, as a rule, be maintained after switching to SAP S/4HANA. In this respect, the brownfield approach
can be advantageous since the integration interfaces need to be reinstalled with complete reimplementation
(greenfield approach).

Legal requirements (compliance): Depending on the sector, companies must meet various legal requirements
such as documentation requirements in the pharmaceutical sector, the delivery of reports in the financial sector,
and the maintenance of data history in the IT sector. With complete reimplementation, there tends to be a risk that
compliance requirements cannot be fully met. Therefore, the brownfield approach may be the better choice for the
relevant SAP systems.

PAC 2016
PAC Guide I The path to SAP S/4HANA 10

Contra brownfield approach

No opportunity for new SAP start: With the brownfield approach, especially with a technical migration, the
existing SAP history is largely maintained. Thus, there is no opportunity to realign the SAP processes with the
new software generation. Although SAP processes run faster after migration, a new user environment (SAP
Fiori) is introduced and excess customising may have been removed, the same old business processes are still
maintained.

Difficulty in estimating the cost and effort involved: According to the PAC study, the greatest obstacle for
companies with regard to using S/4HANA is the difficulty in estimating the cost and effort involved in the
changeover to SAP-based processes. This is exactly the case with the brownfield approach, where existing
processes are switched over. Since there have only been a few S/4HANA installations to date, experience is
limited.

The results of the study speak for themselves. However, the complex estimation of cost and effort need not be a
fundamental obstacle to brownfield implementation since S/4HANA projects can be calculated with greater
accuracy using the appropriate skills and tools as well as the support of an external project partner.

PAC 2016
PAC Guide I The path to SAP S/4HANA 11

CHECK LIST: WHAT TO TAKE INTO ACCOUNT WHEN CHOOSING THE

GREENFIELD OR BROWNFIELD APPROACH

The decision to opt for the brownfield or greenfield approach when implementing SAP S/4HANA is based on a
number of criteria. The following check list includes some criteria, which we feel are relevant for SAP customers
when deciding between greenfield and brownfield.

PAC assumes that, in practice, many companies combine both approaches, especially where several SAP
systems cover a number of different task areas.

I. Ongoing SAP transformation: If your company is currently going through an SAP transformation
project, it is advisable to check whether and how SAP S/4HANA can be integrated into the ongoing
project. It is possible that the properties of the new SAP system are beneficial to the intended
transformation. But perhaps it also offers the opportunity to rethink the transformation strategy so that
certain systems are not transformed but rather newly rebuilt.

II. SAP Business Suite end-of-maintenance date: Every SAP customer will eventually have to introduce
SAP S/4HANA at some point since the maintenance window for SAP Business Suite terminates in 2025.
There is therefore still time to carefully prepare a migration and benefit from the experience of other
projects that have already been implemented. Companies can use the time to decide which systems
they want to transform or completely redesign.

III. Migration to the cloud: There are basically two options for companies using SAP S/4HANA when
migrating to the cloud: either switching to the SAP S/4HANA cloud edition or the SAP S/4HANA on
premise edition, which is operated in the SAP HANA Enterprise Cloud. Companies must decide whether
SAP systems can be transformed and then migrated to the cloud or whether a complete SAP
reimplementation should be carried out as part of a cloud switchover.

IV. Project risks: The risk that a project takes longer and turns out to be more expensive than planned
tends to be higher with migration than complete reimplementation. There is little empirical data on the
cost, effort and time-limit of a migration.

V. International rollout: If a company is faced with the task of rolling out SAP solutions to other
international locations, it should consider whether this could be used as an opportunity to establish a
globally standardised SAP system environment.

PAC 2016
PAC Guide I The path to SAP S/4HANA 12

VI. Alignment of SAP processes to business requirements: If the implemented SAP systems
insufficiently meet business requirements, the situation in the coming years will only deteriorate rather
than improve. In such cases, a company should assess whether a completely new start could achieve
more than an attempt at a transformation.

VII. Strategic importance of SAP systems: According to the PAC study, SAP systems play a central role in
digital transformation for around 60% of companies. In these companies, the SAP system is not just a
backend where an upgrade to SAP S/4HANA is carried out in order to stay in standard maintenance.
Rather, these SAP users will consider how they can support the digital transformation on an SAP level
through transformational migration or complete reimplementation.

VIII. Assessment of the entire IT environment: Companies who use many other business applications
such as BI and data warehouse systems in addition to SAP software should consider whether they want
to upgrade the SAP programme with SAP S/4HANA or whether they want to replace part of the external
system with SAP S/4HANA. The latter would be an SAP transformation, including the replacement of
third-party applications.

IX. Evaluation of existing customising: Before starting the migration, it is beneficial to evaluate the
existing modifications of the SAP system with respect to their future need. This analysis will give the
extent of required re-standardisation.

PAC 2016
PAC Guide I The path to SAP S/4HANA 13

ABOUT THE CXP GROUP

Founded in 1976, Pierre Audoin Consultants (PAC) is part of the CXP Group, the leading independent European
research and consulting firm for the software, IT services and digital transformation industry.
The CXP Group offers its 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, the CXP Group supports ICT
decision makers in their digital transformation journey.
Further, the CXP Group assists software and IT services providers in optimizing their strategies and go-to-market
approaches with quantitative and qualitative analyses as well as consulting services. Public organizations and
institutions 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,
the CXP Group provides its 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. The CXP Group consists of
three branches: Le CXP, BARC (Business Application Research Center) and Pierre Audoin Consultants (PAC).
For more information please visit: www.pac-online.com
PACs latest news: www.pac-online.com/blog
Follow us on Twitter: @PAC_Consultants

CONTACT

Frank Niemann
Vice President Software & SaaS
Markets
T: +49 (0)89 23 23 68 15
M: +49 (0)173 6620192
E: f.niemann@pac-online.com

Dr Cristian Wieland
Vice President BAS Services &
Consulting
T: +49 (0)54 18 60 13 62
M: +49 (0)162 2986507
E: c.wieland@pac-online.com

PAC 2016