S/4HANA was meticulously crafted to modernize ERP, ensuring heightened speed and user-friendliness through a streamlined data model, efficient architecture, and an innovative user interface based on the tile-oriented SAP Fiori UX.
SAP S/4HANA serves as an ERP business suite founded on the SAP HANA in-memory database, empowering companies to execute transactions and analyze business data instantly.
At the heart of SAP's strategy for facilitating digital transformation, S/4HANA acts as the pivotal digital core. In this comprehensive process, companies can adapt existing business processes or create new ones, enhancing flexibility, responsiveness, and resilience to evolving business requirements, customer needs, and environmental factors. SAP terms this S/4HANA-centric business environment as an intelligent enterprise.
Characteristics of S/4HANA
S/4HANA was meticulously crafted to modernize ERP, ensuring heightened speed and user-friendliness through a streamlined data model, efficient architecture, and an innovative user interface based on the tile-oriented SAP Fiori UX.
Integration with advanced technologies such as AI, machine learning, IoT, and advanced analytics is inherent in S/4HANA. Leveraging the SAP HANA in-memory database architecture, S/4HANA excels at addressing complex problems in real time and swiftly analyzing vast amounts of information, surpassing the capabilities of prior SAP ERP products.
The on-premises iteration of S/4HANA can be deployed in public or private clouds, or a hybrid environment. Additionally, there exists a multi-tenant SaaS version named SAP S/4HANA Cloud, featuring modules and functionalities distinct from its on-premises counterpart.
Challenges in Migrating to S/4HANA
As per a survey conducted by PwC and LeanIX, the primary challenges in migrating to S/4HANA are outlined.
S/4HANA's Historical Background
Introduced in February 2015, S/4HANA garnered significant attention, with then-CEO Bill McDermott heralding it as the most pivotal product in the company's history. The term "S/4HANA" denotes "Suite for HANA," signifying its optimization for the HANA platform that debuted in 2011. This ERP system underwent a complete rewrite for HANA, differentiating it from its predecessor, SAP ERP Central Component (ECC).
The reimagining of the database concept and the rewriting of 400 million lines of code resulted in a more comprehensible and user-friendly ERP system, deemed by SAP as an opportunity for businesses to reinvent models and generate new revenues through IoT and big data integration.
Furthermore, S/4HANA's elimination of batch processing allows businesses to streamline processes and execute them in real time, providing users with instant insights for planning, execution, prediction, and simulation, as per SAP's perspective.
Differences between S/4HANA and SAP ECC
S/4HANA shares many of the characteristics of previous SAP ERP products, up to and including ECC, but because S/4HANA was a redesign, it differs considerably from ECC in several areas. Fundamentally, S/4HANA is designed to take advantage of capabilities that are not available for ECC, such as advanced analytics and real-time processing.
Here are some of the main areas where S/4HANA differs from ECC:
Database
S/4HANA only runs on HANA, whereas ECC can run on many databases, including DB2, Oracle, SQL Server, and SAP MaxDB.
Deployment options
S/4HANA has a wider array of deployment options, including on-premises, public cloud, private cloud, hosted cloud, and hybrid environments. ECC is primarily deployed on-premises and can run in hosted public-cloud environments, but there is no specific public-cloud edition.
User experience
S/4HANA uses the modern SAP Fiori UX, while ECC uses the older, standard SAP GUI, though it does have a limited number of Fiori apps. Fiori is a collection of commonly used S/4HANA functions that are displayed in a simple, consumer-ready tile design and can be accessed across various devices, including desktops, tablets, and mobile devices.
Advanced functions
S/4HANA is designed to take advantage of advanced technologies, including embedded analytics, robotic process automation, machine learning, AI, and the SAP CoPilot digital assistant. These advanced capabilities are not available in ECC.
S/4HANA Business Modules
In its initial iterations, S/4HANA consisted of modules, each catering to specific business processes. The inaugural module, Simple Finance, streamlined financial operations, enabling real-time financial data analysis.
Subsequently rebranded as SAP Finance, it facilitated the alignment of financial and non-financial data, creating what SAP termed a unified "single source of truth." Many Business Suite users adopted SAP Finance as their initial step toward transitioning to S/4HANA.
In subsequent releases, SAP introduced additional modules and functionalities:
S/4HANA 1511, unveiled in November 2015, introduced the logistics module, Materials Management and Operations.
S/4HANA 1610, released in October 2016, featured modules for supply chain management, incorporating Advanced Available-to-Promise, Inventory Management, Material Requirements Planning, Extended Warehouse Management, and Environment, Health and Safety (EHS).
S/4HANA later restructured the SAP ECC ERP modules into Lines of Business (LOBs), each encompassing functions specific to distinct business processes. The pioneering LOB was SAP S/4HANA Finance, with subsequent releases introducing additional LOBs.
As of 2022, S/4HANA includes the following LOBs:
- S/4HANA Finance covers all financial aspects, encompassing financial accounting, controlling, treasury and risk management, financial planning, financial close, and consolidation.
- S/4HANA Logistics comprises LOB modules dedicated to supplier relationship management and supply chain management, including Sourcing and Placement, Manufacturing, Supply Chain, and Asset Management.
- S/4HANA Sales focuses on processes essential for fulfilling sales orders, such as pricing, sales inquiries, quotes, promise checks, repair orders, individual requirements, return authorizations, credit and debit memo requests, picking and packing, billing, and revenue recognition.
- S/4HANA R&D and Engineering addresses the product lifecycle, covering product structure definition, bills of materials, product lifecycle costing, project and portfolio management, innovation management, and compliance with health and safety regulations.
- SAP subsequently expanded the digital core LOB capabilities to meet industry-specific requirements, including Consumer Industries, Discrete Industries, Energy and Natural Resources, Financial Services, Public Service, and Service Industries, as of 2022.
Each industry segment contains functionality for particular business requirements.
Consumer Industries
- Agribusiness
- Consumer Products
- Fashion
- Life Sciences
- Retail
- Wholesale Distribution
Discrete Industries
- Aerospace and Defense
- Automotive
- High Tech
- Industrial Manufacturing
Energy and Natural Resources
- Building Products
- Chemicals
- Mill Products
- Mining
- Oil, Gas and Energy
- Utilities
Financial Services
- Banking
- Insurance
Public Service
- Defense and Security
- Federal and National Government
- Future Cities
- Healthcare
- Higher Education and Research
- Regional, State and Local Government
Service Industries
- Cargo Transportation and Logistics
- Engineering, Construction and Operations
- Media
- Passenger Travel and Leisure
- Professional Services
- Sports and Entertainment
- Telecommunications
Pros and Cons of S/4HANA
S/4HANA stands out as a sophisticated ERP system ideally suited for large, intricate organizations aiming to standardize business processes across diverse geographic locations and corporate entities.
Advantages:
Tailored for Complexity:
S/4HANA excels as a sophisticated ERP system, particularly well-suited for large and intricate organizations. Its strength lies in the ability to standardize business processes across multiple geographic locations and corporate entities, addressing the complex requirements of industries like manufacturing, procurement, supply chain, distribution, retail, and financial services.
Cutting-edge Functionality:
As the largest ERP vendor globally in terms of market share and revenue, SAP invests significantly in research and development for S/4HANA. This strategic focus places S/4HANA at the forefront of ERP functionality, integrating advanced technologies such as AI, machine learning, industrial IoT, blockchain, and advanced analytics.
Real-time Capabilities:
Built on the HANA in-memory database, S/4HANA boasts improved processing speed, enabling real-time analytics and transactions. This feature is particularly valuable for organizations requiring immediate and up-to-the-minute financial reporting.
Drawbacks:
Intricacy vs. Simplicity:
The complexity inherent in S/4HANA can make it less suitable for organizations with relatively straightforward requirements. The extensive implementation and operational costs associated with S/4HANA mean that it is best suited for organizations with ample resources to effectively deploy and manage it.
Skill Shortages:
Given its distinct architecture, data model, and capabilities compared to previous SAP ERP systems like ECC, there may be a scarcity of developers and administrators possessing advanced S/4HANA skills and experience. While this challenge was more pronounced in the early years, it can still be a consideration.
Dependency on Third-party Integrators:
Many S/4HANA customers find it necessary to engage third-party systems integrators for deployment and ongoing management. This dependence can lead to increased costs and potential challenges in customization.
Implementation Risks:
The complexity of S/4HANA increases the risk of failed implementations if projects are not properly managed or if requirements are inadequately defined. This underscores the importance of robust project management and clear requirements definition.
S/4HANA Deployment Options
On-premises Deployment:
Originally designed as an on-premises software system, the standard version of S/4HANA can be deployed in a private cloud environment hosted by a cloud service provider. This option is favored by companies looking to benefit from aspects of cloud computing without sharing the cloud environment with other instances of the ERP system.
Cloud Deployment (S/4HANA Cloud):
Many organizations opting for a cloud-based approach choose SAP S/4HANA Cloud, a product distinct from the standard S/4HANA. While initial versions had fewer capabilities, subsequent releases have narrowed the feature set gap.
Hybrid Deployment:
For companies with specific security or data governance requirements, a hybrid deployment is a viable option. In this scenario, some instances of S/4HANA run on hosted cloud infrastructure, while others remain on-premises, providing a balanced approach that addresses both cloud advantages and regulatory considerations.
Implementing S/4HANA: A Comprehensive Overview
Implementation Complexity:
The implementation of S/4HANA, irrespective of the chosen deployment method, is a complex, time-consuming, and resource-intensive process. While many S/4HANA customers opt to replace existing SAP ECC systems, it's crucial to recognize that a migration to S/4HANA differs significantly from a standard version upgrade. In fact, in many instances, an S/4HANA migration resembles more of a new software implementation than a traditional upgrade.
Rethinking Business Processes:
Due to S/4HANA's simplified data model and its incorporation of various functions not present in SAP ECC, companies must undertake a thorough reconsideration and redesign of their business processes. This is essential to fully harness the advanced capabilities that S/4HANA offers.
Customization Evaluation:
Given that most SAP ECC systems have been extensively customized, it's imperative to assess and potentially eliminate unnecessary custom functions that S/4HANA already incorporates as standard functionality. This involves a comprehensive examination of existing processes to optimize them for S/4HANA.
Approaches to Implementation:
Organizations embarking on S/4HANA implementation can opt for either a brownfield or greenfield approach. The brownfield approach involves transferring the existing SAP landscape to S/4HANA, retaining some legacy functions. This approach is generally less disruptive and time-consuming but may not fully realize the transformative potential of S/4HANA.
On the other hand, the greenfield approach entails installing and configuring S/4HANA in an entirely new environment, requiring a redesign of entire processes. Although more disruptive and costly, the greenfield approach provides the complete benefits of S/4HANA's modern ERP capabilities once implemented.
Data Management:
Regardless of the implementation approach chosen, effective data management is a critical component of any S/4HANA implementation. Data intended for migration into the new system must be prepared to align with S/4HANA's simplified data model.
SAP S/4HANA Cloud:
Introduced in March 2017, SAP S/4HANA Cloud is a multi-tenant SaaS version of S/4HANA. Best suited for organizations with 1,500 employees or more, it caters to those wanting to run a two-tiered ERP system. S/4HANA Cloud incorporates next-generation technologies, including machine learning through SAP Clea and a conversational digital assistant bot named CoPilot.
Embedded Analytics:
S/4HANA includes embedded analytics enabling users to conduct real-time analytics on live transactional data. Utilizing Virtual Data Models, prebuilt models, and reports based on SAP HANA Core Data Services, these analytics functions come bundled with S/4HANA software, eliminating the need for separate installation or licenses.
S/4HANA Roadmap:
Major releases of on-premises S/4HANA and S/4HANA Cloud occur annually. The naming convention, which combined the year and month of release until 2020, switched to only indicating the year from the 2020 release onwards.
Notable releases as of 2022 include 1511, 1610, 1709, 1809, 1909, 2020, 2021, and 2022, each introducing new capabilities, extensions, cloud integrations, and the incorporation of emerging technologies like AI, machine learning, IoT, advanced analytics, and blockchain into various LOB modules.
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