Modernization vs Migration: The Future of SAP in the Industrial and Distribution Sector

• When it comes to SAP, the paths to success depend greatly on the specific circumstances, plans and market dynamics of each enterprise.

• A recent IDC survey of organizations that had already embarked on application modernization initiatives revealed that 96% of organizations expected their long-term IT strategy to be affected by the dramatic events of 2020.

• Decades of investments in enterprise resource planning (ERP) are coming to a critical juncture as enterprises and providers move forward with transitions to cloud-versions of these mission-critical applications.

When it comes to SAP, the paths to success depend greatly on the specific circumstances, plans and market dynamics of each enterprise. This is creating a clear case for organizations to develop agile, future-proof SAP strategies. For instance, a recent IDC survey of organizations that had already embarked on application modernization initiatives (44%) or planning (40%) to do so within the next 18 months revealed that 96% of organizations expected their long-term IT strategy to be affected by the dramatic events of 2020, with cloud playing a more pivotal role in the future of their deployments.

To explore the future of SAP across the industrial and distribution sectors of the economy, CIO.com co-hosted a moderated virtual roundtable with John Pawlikowski, and Larry Williams of IBM. Over a dozen senior executives from across the country participated in this interactive executive discussion.

This is what they had to say:

• Decades of investments in enterprise resource planning (ERP) are coming to a critical juncture as enterprises and providers move forward with transitions to cloud-versions of these mission-critical applications. The participants in the room were especially interested in the short-, medium-, long-term implications of their SAP operations, as the 2027 deadline for ceasing support for ECC looms. As the conversation unfolded, it was interesting to note the variety of responses -- and maturity levels -- exhibited of players around the room.

• As one participant noted: “We're developing roadmaps now. We are looking at what elements of SAP-ECC can effectively map to a single integrated approach to S/4HANA, or whether we actually migrate out of ECC right now into various SaaS based applications.”

• Others described how they had already moved major workloads into the S/4HANA environment and were now in the process of re-working their business processes. According to one participant, for instance: “We already migrated our SAP demand planning functions over to S/4HANA. So now we're really looking at more global processes to determine what business value we can harness as we explore this new way of working with SAP.”

• Embracing the idea of adjusting business operations to cloud-based SAP, rather than custom coding the enterprise application itself, was a consistent theme throughout the conversation. It represented the biggest break with traditional ways of implementing ERP across their organizations. For decades, organizations have purchased on-premises versions of SAP that have been customized to support what many business unit leaders felt were extremely unique business processes. As a result, a high degree of custom code has emerged, challenging efforts to easily migrate ERP functions to private- and public-cloud platforms.

• “Most customizations I have come across are not customizations that are really necessary,” noted another executive. “The customization exists because -- at some point -- the business felt like they needed to do things differently than everyone else. Our company is starting to realize that we can use standard processes and get rid of some of these customizations.”

• Legacy custom code has introduced challenges that modern cloud-based ERP solutions hope to address. The fact remains that regional business landscapes, geopolitical realities and national regulations offer their own complex nuances. Data sovereignty, for instance, is a major issue. “We have four major European sites that are predominantly using ECC. As we move forward, we want to adopt a single version of the truth. That has been the holy grail for so many people for so long when it comes to enterprise resource planning applications. The global picture does complicate the strategy. Every region has their own way of doing things,” explained one manufacturing executive.

• Securing critical SAP operations in cloud environments (public, private and hybrid) was another issue that received significant attention over the course of the roundtable discussion. Two enterprise security executives noted that it can somes be a struggle to ensure security and risk management is effectively represented during ERP modernization and/or migration discussions. “We found that to be successful -- at least in our environment -- security must be included during the architectural discussion to talk about risk, resilience and privacy. Not every organization has architectural expertise.”

• The rush to implement and transform ERP operations in a cost-effective manner can cause organizations to short-shift security considerations. “What organizations need to understand is that you can either pay for it on the front end...or you pay for it on the back end.” The latter, he suggested, is often more expensive and embarrassing.

• The good news is that there is an entire community of interest that is motivated to support constructive SAP modernization strategies, including SAP itself, stated IBM’s John. There appears to be significant room for discussion associated with changing existing business arrangements (such as contracts and licenses) and providing the tools needed to make a safe, effective and cost-efficient transition to modern platforms.

• From an enterprise perspective, the move to cloud-based environments creates new opportunities to leverage more value from SAP operations. “There are things you can do, for instance, with asset central frameworks, integrated business planning, and other tools that are sitting up in the cloud that can actually differentiate organizations. It is about more than just upgrading finance and procurement systems. S/4 is not your father's SAP,” concluded Larry from IBM.

To read more or for information on roundtable participation, please visit www.CIO.com.