Executive Roundtable: SAP Modernization Will Require Effective – and Rapid – Navigation of Multi-Dimensional Challenges
By Lane F. Cooper, Editorial Director, BizTechReports and Contributing Editor, CIO.com
The daunting complexity faced by large organizations with SAP instances that have been in place for many years will have to be managed quickly – and deftly – to address two compelling requirements: 1) Meeting the 2027 deadline set by SAP to raise support costs for its workhorse ERP Central Component (ECC) platform; and 2) Making the technical transition while supporting comprehensive business transformation initiatives at both an organizational and industry-wide level. Success will hinge on careful collaboration among business process and technology managers and effective digital diplomacy across complex supply chain participants.
Michael Love and Bharvi Parikh, IBM
These were among the conclusions of a recent executive CIO.com roundtable that included senior executives from diverse industries, including the financial services, professional services, manufacturing, education, and pharmaceutical sectors. The event was co-hosted by IBM's Michael Love and Bharvi Parikh.
Below are just a few of the highlights that emerged over the one-hour session.
Compliance Through Complexity – Measure Process Twice and Cut Once with Tech Modernization
Among the most heavily regulated organizations – such as financial services and pharmaceutical – moving fast to simultaneously meet business transformation objectives and technology sunset deadlines raised concerns about executing effective migrations to S/4HANA in a risk-adjusted and industry-compliant manner. This is especially challenging for institutions that have conscientiously delayed moving to cloud environments because of the history – and comfort – they have found in keeping resources on-prem. More importantly, compliance in highly regulated sectors was often accomplished through hard-coded ERP customization initiatives that met compliance requirements while tailoring technology to business workflow requirements.
SAP modernization calls for a complete reversal of this cultural mindset. As the discussion unfolded, a consensus emerged around the need to re-evaluate business process re-engineering by bringing together critical stakeholders -- including audit, compliance, technology, security and business process owners -- from the very beginning of the migration process to thoroughly think through the full implications of the desired "target operating environment." The key is to get the job done sooner rather than later without exposing institutions to unnecessary risk.
Easier said than done.
Leaning Hard into Automation
Automation, the group agreed, is the only way to succeed in today's "no-compromise" digital economy (in which everybody must be fast, excellent and cost-effective).
Organizations that integrate automation into the design and architecture of SAP migration strategies and modernization will embrace concepts like robotic process automation (RPA) and low- or no-code strategies to accelerate transformation while establishing guardrails that ensure discipline and enable the agility needed to respond to shifts in dynamic markets.
Success, however, will require a bullet-proof process architecture. One participant noted that concepts like RPA can bring significant intelligence into process design and execution. It is why every SAP transformation project should start with the process layer.
For large organizations with decades of legacy SAP implementations, thorough and rigorous process assessments will unveil what can be supported by new "out-of-the-box SAP" features and highlight processes that require additional resources for "alternate treatment."
Avoiding customization – clean core strategies
Talk of "alternate treatments" immediately triggered heated dialog around the perils of "customization." Several participants shared accounts of the significant investments in enterprise applications dwarfed by outlays for customization and systems integration projects that exploded project costs and timelines.
It is a history that no one in the session was interested in seeing repeated – nor rhymed – through the next modernization cycle. That said, there was a recognition that at least some significant mission-critical processes would not be in a position to use new SAP functionality in S/4HANA on a strictly "as is" basis.
The key to addressing these workflow exceptions, concluded Love and Parikh from IBM, is to remain faithful to "clean core" methodologies in which processes that cannot be directly supported in S/4HANA are moved to separate agile development-friendly cloud-native process platforms from which interfaces are then built to feed critical data back into the standard SAP environment.