SAP S/4 HANA Finance: Benefits And Migration Options

Historical Overview of SAP

The report is prepared to demonstrate the benefits of the software named SAP S/4 HANA finance for business. This incorporates discussion on historical overview of the S/4 HANA and explaining the difference between this latest introduced SAP solution and current ERP FICO. Furthermore, discussion has been supported by explaining the case studies of companies explaining the issues they have faced while migrating to this generation business suite. S/4 HANA is the next generation business suite of SAP that provides real rime collaboration and support for the process of digitized business while experience greater use on device. The current SAP ERP product will be replaced by SAP S/4 HANA by the end of 2025 and the later forms a part of enterprise management of SAP. A new financial core will be formed by this solution as it helps in responding to the challenges faced by chief financial officer of organization by enhancing the process efficiency, improving the functionality of report in terms of speed and agility and improving the experience of user. Organizations are required to choose between starting a new (Greenfield) and migration (Brownfield) if they plan to implement the real time digital core to business. In areas of an integrated ERP environment, the software provides support in areas such as accounting and period close, financial analysis and planning, collaborative finance operations, financial and treasury risk management, compliance and enterprise risk management.

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Historical overview of SAP S/4 HANA FINANCE:

The history of SAP is dated back when the first product was released onto the market in year 1972. Architecture of first product of SAP that is R/1 was based on what is known as a system of one tier. This indicates that one single system or server has three layers of an ERP system installed in it comprising of application, presentation and application. In addition to this, the two servers had main version of R/2 product installed in it. R/3 is the latest version in the era of SAP tier architecture. The most innovative product in the history of SAP is R/3 until year 2012. However, this has been changed with the introduction of HANA and there is clarified difference between the software’s such as S/4 HANA, S/4 HANA finance and HANA. S/4 HANA finance is the application for management and financial accounting.

With every version of S/4 HANA release, a simplified and new table structure has been transformed by more and more functionality. The first application that was launched by SAP was the S/4 HANA finance for new business suite and the functionality contained in the application helps organization in accelerating, optimizing and simplification of function of finance. Along with other solutions in SAP, S/4 HANA finance has its operation on fully integrated basis and thereby an evolving digital core is provided by SAP.

SAP S/4 HANA Finance Features

There are three different components of S/4 HANA of which the functionality has been discussed in this particular section. Such components comprised of SAP accounting that is regarded essential, SAP BPC and cash management that are optional.

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Overview of S/4 HANA Finance:hattamneni 2016)

SAP accounting- The core functionalities for management and financial accounting are contained in SAP accounting components. Simplification of application logic and data model is the main focus of SAP. The optimized transaction codes of HANA are provided by S/4 HANA

SAP BPC- The solutions of business objects consolidation and planning of SAP helps in supporting the process of consolidation and planning and it comes in wide range of applications. Some of the applications involve BPC 10.1 for NW/MS, Integrated planning (BW-IP) and cloud for planning. With the innovation of this product, it is easier to access the source data required for consolidation and planning in real time and replication of data and the actual figures from the database of HANA can be directly accessed (Nieuwenhuis et al. 2017). 

SAP cash management- A drill down functionality into the real time cash positions and global bank balances is offered by the cash management solution of SAP. The process of managing the bank account is done more cohesively by the cash management and treasury department as they can get the integrated view without switching between different modules of SAP. Liquidity planning, cash management and bank account management are the main areas of S/4 HANA SAP cash management. Such integrated cash management system enables the organization to accurately plan the level of cash at any point in time (Kerr and Houghton 2014).

SAP ERP FICO

SAP/S 4 HANA

SAP FICO is the core functional component of SAP ERP that helps organization in managing all the financial data. It is the most widely used financial and controlling modules of SAP.

It is a comprehensive set of accounting and financial management solutions providing wide range of solutions to business such as financial and accounting close, financial analysis and planning, enterprise and financial risk along with collaborative operations of finance (Kerr and Houghton 2014).

The main objective of SAP FICO is managing and enabling companies to generate financial statements for reporting and analysis purpose leading to effective decision making and business planning. The module of SAP FICO includes SAP controlling configuration, SAP FO configuration, SAP CO user and SAP FI user.

The main objective of SAP application is to enable organizations to accelerate, optimize and simplify the functions of finance. There is a simplified and new transformation to the table structure resulting from more and more functionality.  

There are two modules involved in SAP FICO that is SAP controlling and SAP finances each having special financial purposes. The main focus of SAP controlling is on narrowing down of monitoring and planning costs and SAP FI on other hand deals with the overall accounting and financial reporting. Originally, both the modules were released as separate modules and now they are integrated so tightly making people view it as one single model.

There are three different finance components depicting the functionality of application. It comprises of SAP accounting, SAP BPC and SAP cash management. The new data management of S/4 HANA finance is based upon one universal journal that helps in reduction of complexity and data footprint and reporting simplification. The challenges brought by the introduction of universal journal are overcome by the introduction of SAP/S 4 HANA (Lange 2014).

  • With the introduction of this product of SAP, businesses are empowered to maximize the opportunities provided by new emerging technologies. Several demanding technical requirements are set by the models of new digital business and S/4 HANA SAP helps by providing real time collaboration and support for business process that are digitized.
  • Enhancing efficiency through automating the process- The real time and automated process of business is driven by the unique combination of simplicity and innovation provided by S/4 HANA. This makes the process that is less prone to errors and helps in boosting productivity.
  • Supporting decision making by gaining access to real time information. All the relevant results and data can be accessed on real time basis with the help of S/4 HANA. This will assist business to make timely decision, forecasting cycles and faster planning. For instance, chief finance officer would be able to resolve and address the possible issues with the introduction of this real time transparency and this would lead to faster closing time.
  • Savings of information technology costs- The landscape of information technology is simplified with the help of S/4 HANA. In addition to this, this particular product also helps in removal of overlapping and parallel data and optimizing the volume of data that helps in reducing the ongoing infrastructure investment and operating cost.
  • Efficient collaboration- Employees working in organization employing such user friendly application are well satisfied. A new ways of working is enabled by a modernized and easy to use mobile user experience. Among IT and business users, the productivity of users increases up to by 30%.
  • Enhanced productivity- The process of doing businesses are streamlined by the application of such product as it helps in delivering an expanded range of tangible benefits such as 20% reduction in rates of manufacturing errors, 25% improvement in fulfillment of order, 12% improvement in process efficiency of supply chain and 15% reduction in cost of procurement. Business users are able to access the required data using such advanced analytics and thereby instilling faster reaction to changes in business environment along with bringing transparency and making a simultaneous reduction in manual workload.  
  • Providing accelerated financial close- The chief executive officer of organization and the team are not required to spend weekends and nights to ensure timely annual financial close and closing of monthly, quarterly and annual basis with the implementation of SAP S/4 HANA finance. There is significant improvement in financial closing process and quick business decision is ensured by the instant visibility of profit and loss accounts of business based on financial trend and emerging sales. An accurate and real time reporting is ensured by database simplification holding all the required financial information resulting from processing power of SAP S/4 HANA. The need for data replication in the system and batch jobs such as business intelligence is eliminated by the feature of application.
  • Managers are able to perform the parallel valuation of assets using the approaches of ledger and accounts due to component of new assets accounting of SAP/4 HANA along with making it not necessary to record the areas of depreciation (Ociepa-Kubicka 2017). Across all the valuations, there is a real time posting of all the systems.

Many businesses are in the process of migrating to the platform of S/4 HANA and such migration involves a major shift. Migrating to S/4 HANA would involve many complications of the any particular business is a user of SAP ERP. It is required by business to learn new way of handling the infrastructure of SAP and applications of enterprise resource planning. Applications and data on SAP are the critical assets that are required across entire business and it is required by business to make considerations since all the aspects of business are impacted by such application (Appiah et al. 2014). In this regard, the factor that is of huge importance is related to infrastructure.

Organizations implementing the application of SAP/S 4 HANA Finance are required to choose a migration between starting new or migrating. Adopting of SAP/S 4 HANA Finance leads to system conversion in terms of redesigning the process of business, new user experience and new database technology. In order to select the right path of migration, that is a phased approach or Brownfield or Greenfield approach, organizations are required to perform the evaluation of technical prerequisites, current landscape and several business case.

Case Studies

The case studies depicting the implementation of S/4 HANA can mislead in terms of selection of migration path. While assessing the possibilities of migrating to S/4 HANA, organization are required to have some prerequisites if deploying and installing HANA database. Organization intending to migrate to such application is provided with the opportunity to first migrate HANA business suite so that the performance effect of such database can be experienced before migration (Galliers and Ballantine 2017). In the next step, organization is required to fully migrate to the digital core of S/4 HANA while extending the finance core of S/4 HANA. This is indicative of the fact that latest optimized logical of application can be enhanced through other functional areas. The scope of migration project would increase while enhancement of additional enhancements having consequence on operation of business process on ERP and ERP (Hoffner et al. 2018).

Migration option for business suite:

(Source: Medina et al. 2014)

The application of S/4 HANA can be deployed by SAP using three options comprising of cloud, on premise and hybrid approach. The deployment of S/4 HANA is done using S/4 HANA On-premise by most of organizations. Degree to which the capabilities of S/4 HANA are utilized is dependent upon the choice of Migration scenario (Alamin et al. 2015).

The case study that is presented here is that of Bluefin that has considered the implementation of S/4 HANA by outlining the pros and cons of migrating to the new version and staring at all as fresh. It has been ascertained that migration to S/4 HANA is not purely technical. There will also be change in the underlying architecture along with changes in transactions, table and processes. The conversion of system to S/4 from release of R/3 would require functional and technical resources for retesting of all the business process and transactions. Some of the most important criteria that have been experienced by experts of Bluefin while migrating to S/4 HANA are the edition options, start release, technical prerequisites and the case of business. No easy migration is possible if the SAP does not provide ERP solution. Unicode coding system is one of the key requirements for migrating to SAP HANA database. A Unicode conversion is required if the Unicode complaint does not have current database. The criteria that have been considered by organization when seeking migration to S/4 HANA include remediation of custom code, data migration, complexity of architecture and changes to models of business. If the platform of enterprise has grown in complexities in term of increasing the dependencies and number of business process, business environment and architecture landscape, in such scenario, a phased or hybrid approach should be considered by organization. This is because conversion to S/4 HANA might not be realistic or even possible. Considering the phased approach would make migration more manageable. However, there would be temporary set up of parallel landscape (Hiebl 2017).

Differences between SAP S/4 HANA Finance and ERP FICO

In the scenario when the conversion to S/4 HANA might not be realistic, it is required by organization to consider a phased or hybrid approach and the migration becomes more manageable, if migrating company code by company code or system by system or module by module. Business of bluefin was required to implement the Unicode encoding system for migrating to SAP HANA database. Organization is required to perform the conversion to Unicode if the current database is not complaint to Unicode for supporting Brownfield migration. The future of to S/4 HANA will be more expensive if the dataset is larger and the assessment of data migration strategy will be guided by the assessment of organization. Such migration strategy would comprise of growth of data and life cycle, compression factors and watching reports. The landscape of ERP would contain a single system and in event of multiple system, there will be integration layers, different releases and heavy customization.

Another case study is on Gartner which is an American based advisory and research firm for providing insights to the business leaders on the information technology. Gartner conducted a benefit assessment framework relating to adoption of S/4 HANA. The evolution and adoption of S/4 HANA has been tracked by Gartner since the product has launched in year 2015. It analyzed the impact of such application in terms of real time analytics, performance improvement, and new functionality, transformation of potential business and Fiori application and simplified structure. It has been ascertained by organization that using such benefit framework would help in highlighting significant benefits in client interactions. About 800 client enquiries was conducted by analysts at Gartner about S/4 HANA and it decided to migrate to S/4 HANA after analyzing many tactical adopters such as large manufacturing organization and other retail groups. The strategic benefits of the product were mainly in finance areas and it was anticipated by Gartner that the significant benefits would be realized in operational areas. It is so because it would bring changes in capabilities such as availability to product planning and inventory valuation. At some point of time, Gartner decided to migrate to S/4 HANA and in this category; many clients are putting efforts to identify prior potential adoption date that would be well aligned with current investment in ERP. At the start of initiative, the advantage and disadvantage of S/4 HANA are weighed up by organization that depends upon the benefits that would be realized by earlier adoption of such application (Nieuwenhuis et al. 2017).

Migration Options for Businesses

Gartner has pointed out that the major challenge is associated with the business case for S/4 HANA as the organization make large investment in implementation of ERP. For the existing database management system, Gartner has purchased SQL server and oracle as migrating to S/4 HANA requires a business case. Moreover, additional technology expenditures are required in terms of both hardware and software while switching to S/4 HANA. However, no clear estimates on risk, level of efforts and cost have been determined involved in migrating. Majority of development work is required for fully realizing whether the vision of S/4 HANA is significant and it will take between three to five years for work completion (Plattner and Leukert 2015). It needs to be realized by the application leaders how such application has evolved that help in assessing the deployment options and different versions maturity.

Certain strategies of mitigating risks have been recommended by Gartner and this includes engaging the max attention premium support of SAP. 89% of budget of information technology is contributed to enhancements and operations. The potential benefits that would be delivered by S/4 HANA has been defined into six categories based on growing evidence and an own analysis (Jann et al. 2017). This involved real time analytics, performance improvement and benefits of functionality of S/4 HANA.

Another case can be discussed is that of Capegemini that has considered migration of SAP S/4 HANA. It was realized by organization that such migration would lead to huge savings on total cost of ownership and enhanced business value. Moreover, many new applications are created by SAP that is available through SAP S/4 HANA. Capegemini would be able to evolve itself toward the development of software defined enterprise by providing customer with all virtualized benefits relating to production environment of SAP HANA.

It has been recognized by Capegimini that it will be required by them to shift the way of doing business due to adoption of SAP S/4 HANA. The price should be clearly defined and the destination must be clearly mapped prior to starting the journey of this new application. In light of this, organization has done the assessment of determining how it would be transformed due to SAP S/4 HANA.

 

Capgemini approach to migration:

(Source: Rouhani and Mehri 2016)

The impacts and outcome are demonstrated transparently with the help of assessment. It has been found that there is no business that requires intention to achieve some tangible value from the process when entering the phase of technological change. True value of SAP S/4 HANA is unlocked by workings of Capgemini and the services are designed in such a way that the entire landscape of business process is considered (Ghattamneni 2016). This would in turn lead to acceleration of process, minimization of risk and increasing agility.

For formulating the roadmap and strategy, it is required by organization to analyze the transformation and impact of business. The hosting of SAP S/4 HANA reduces the cost of information technology in the landscape. Services of migration would provide benefit attributable to methodology of Capgemini. Usage of real time analytics for leveraging transactional data will help in getting real time visibility and improvement in flexibility of the business process (Shalaby 2017).

Conclusion:

In this particular documentation of report, a guide for implementing or migrating to the new product line of SAP that is SAP S/4 HANA has been discussed and evaluated by giving a focus on migration to SAP S/4 HANA. It has been ascertained that migration to this particular application of SAP can be done by organizations using tow variants that is Greenfield and Brownfield approach. Both the approach has its own advantages, using the former approach would enable organization to introduce themes with more flexibility and initiation of new system along with system simplification. Brownfield approach on other hand would result in less disruption to the operational activities and a shorter runtime. The report has presented three cases relating to the implementation of SAP S/4 HANA and the issues they faced while migrating to such system application. When looking at Bluefin, it has been ascertained that before converting or migrating to S/4 HANA, the firm was required to take into account some prerequisites. Before implementation, an adequate analysis of current situation has been conducted that might push up the cost of migration. Case of Capgemini depicts that migration to the application has been done for lowering the total cost of ownership and better business value. Case of Gartner on other hand depicts that the migration to the new system application was done after conducting a detailed analysis of pros and cons of such application and benefit analysis. The implementation of SAP S/4 HANA would provide organization with wide range of benefits in terms of impact of transformation and other potential benefits in areas of finance

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