Time to reflect on your ERP architecture for the future?

This post was modified on the 4th December in light of further research.

According to Computer Business Review “If you use SAP’s Enterprise Resource Planning (ERP) software, and you’re not using SAP S/4HANA, you’re on a deadline. A deadline that was recently extended to 2025, but still, the clock is ticking.

SAP will continue to offer support for its ERP software until this clock runs out. But then support stops, and those businesses that want support from SAP will need to migrate to SAP’s flagship ERP software, S/4HANA.

Described by SAP as its “biggest launch in 23 years, possibly ever”, this new ERP suite will run exclusively on SAP’s own database, HANA. Previously, SAP’s software worked with a number of databases, including Oracle, but businesses migrating to the new system will also need to migrate their entire database.”

Recent conversations on this matter within this sector have revealed some uncertainty among current users with regard to SAP’s service offerings and the new support deadlines for the SAP business suite products end of life announcement. SAP R/2 was replaced by S/3 and now we have SAP S/4HANA as their way forward. In the world of business software life moves on.

Of course – cloud architecture is the obvious way of the future for applications of this nature and but when a fork in the road is forced upon us, that’s surely the time for us to reconsider our whole future plan and to decide if we are on the right track for the long term.

And long-term it surely is. How many years does it take to decide upon, procure and successfully fully implement a new fundamental system like ERP? Five years or more probably?

Many businesses have invested in an on-premise ERP system with expensive, bespoke integrations and won’t want to be pushed into using the next SAP offerings without evaluating their other options. Are we thinking pure Cloud, Hybrid or On-premise from hereon?

So - Is SAP good for the future?

“And while SAP may well have been sold in the past as a way to encapsulate world-class business processes, traditional businesses risk being disrupted because an ERP invented in the 1990s is no match for the innovative supply chains of the 21st century.” Computer Weekly

If you’re running on SAP perhaps it is time to re-evaluate your ERP future?

What are your available options?

1)     Potentially adopt another fundamental applications layer and start the investigative process very soon?

2)     Hang on to what you have for the time being and decide on your future nearer to the deadline?

3)     Start planning for a migration, though staying with SAP. In this case the elementary questions a) are how easy the transition will be for your data and b) how readily will the functionality match or be better than what you already have?

If you’re planning on staying with SAP, evaluating costs of support packages, longevity and adaptions to standard functionality of their product is fundamental, as you’ll already recognise.

Many SAP users will see this as the signal to imminently re-evaluate their ERP systems strategy

Strategic and mutually beneficial partnerships with your technology suppliers are fundamental. As are the availability of intelligent integrations, non-siloed data and smooth sensible, enlightened workflows. Cost savings from future business process automations and innovative new business models are equally important.

Larger enterprises really need to take the time to look at this now, before it is too late

I’ve already talked about timescales for systems acquisition and implementation/enhancement in this most fundamental of application areas. Discussing this with colleagues, one said that for a large ERP implementation, “It would not be crazy to talk about a 10-year timescale for a fundamental system such as this is, from supplier selection through specification, project management, business process re-definition, implementation, training and all the other incidental matters”.

Based upon a very useful SAP ECPR3 calculator from Brightwork Research, the total cost of ownership of an SAP ERP system over 10 years based upon 800 users, with simple integrations, can reach over $89 million.

The process of re-evaluating an ERP solution is not a fast one

Rushing is not advisable; features get overlooked and the wrong decision can be costly. “No-one ever got fired for buying “***” is an old saying in IT procurement – though how does that stack up as an ethos today I ask?

Taking enough time to be strategic in selecting and implementing a new ERP system is key, and ensuring you have the right “Partner” and “Software Vendor” culture. And very importantly your own customer experience fit is crucial to success.

"ERP is the heart and soul of your business. Everything is in that system and making sure that all departmental needs are understood by the project manager and supplier is crucial to the project succeeding." Debbie Green, VP of Applications Oracle UKI

Speaking in depth to the potential vendor’s team is vital. It is mission-critical to decide if they have the right industry fit, educational resources, cost of ownership, and implementation capability. In short, doing thorough due diligence around the supply partner is more important for ERP than any other aspect of your systems infrastructure, as I’m sure you’ll agree.

With pressure to automate, streamline and innovate to maximise shareholder value it’s important to act decisively

Your ERP system is the strategic backbone of your business. It often takes years and years to get right and multi-millions to implement. Well implemented ERP provides long-term stability and security for a business – it’s the backbone of the whole enterprise. Merger and Acquisition activity often stalls, even fails, because the ERP system is weak.

A late quick fix for businesses who haven’t decided what to do could be costly

Details of future SAP support policy still don’t seem clear at this time. Some observers have suggested that a premium support package maybe offered for R/3 systems by SAP thereby making the move to their new offering seamless. In order to discourage their users from migrating to the options of other vendors.

Third party system support companies can provide both specialist support and virtual patching to maintain SAP installations. But how effective will these be and for how long we don’t know, in the light of SAP’s clear strategic path to total Cloud.

So – inevitably many SAP users will be ascertaining what is being offered by competitive vendors such as Oracle, IBM, Microsoft and how easy (or otherwise) such a move could be. A clear consideration is whether there are any data migration and business process migration tools available.

Is moving to the Cloud for your SAP ERP system a necessity?

SAP has decided that moving all customers into Cloud is in their own strategic interest – and why not? Clearly that’s the future for almost all systems and it will be much easier for them to maintain their software in the more advanced environment. Probably also to roll-out new stuff like AI/ML, Robot Process Automation with the obvious potential benefits to their clients’ businesses.

However, that’s not really my focus in this blog – I am more concerned with the reality that when this “fork in the road” arrives, it’s time for a fresh wave of strategic thinking. Maybe you concur with me?

Looking at the history of ERP implementations, I did a fresh search of relevant articles on the web, which is littered with accounts of legal challenges from businesses who have attempted to use new ERP systems and failed.

Lidl sunk an estimated 500 Million Euros into implementing SAP ERP

Lidl pulled the plug after several years. Was it perhaps due to a cultural mismatch or the price being too high or perhaps the correct features didn’t exist, or it took too long…

Lidl decided to resurrect their legacy system. Developing, implementing and maintaining innovative applications in house is a costly business.

Most ERP disasters arise from unrealistic expectations and the “solutions” not being fit for the business purpose. Most common factors are that they are missing the required functionality - the “vertical sector fit”, and badly scoped and estimated projects from both sides of the buyer/seller relationship.

Summary

Clearly this is not a trivial situation - as anyone who has trodden this path before will appreciate – and when someone changes the fundamental ground rules many business executives must responsibly re-examine the path they are on.

Whether it is decided to stick with SAP or to change suppliers is something to think long and hard about, even though time is short. How you wish to be treated by your major systems partner moving forward is a key issue for the prosperity, even survival, of your business.

If the current SAP set up is not customised, then it may make sense to simply convert to their Cloud alternative. Other software vendors may have migration processes that can be used to ease a move away from SAP, if that’s what is concluded to be the right way forward.

The internet is littered with accounts of legal battles of badly implemented ERP projects, such as the Lidl scenario mentioned above.

I am unsure how SAP will manage to keep their customers content, considering this short deadline. 2025 may seem a long way away, though an IT ERP migration project with SAP can take many years. This seems like a very tall order for many, unless they know something I don’t know. Can your ERP system future plans depend on this scenario where so much seems to be unclear?

If it was me making this decision, I would look at my options, examine case studies and talk to other vendors. Then I would not hesitate to switch if the functionality was there and the costs – all considered – were appropriate.

Making migration a success and enabling innovation, growth and cost savings with continued security and up-time is key to all of this, as I am sure you recognise already.

Investigate other vendors with experience of the systems on the scale you need, and get your management team to work out how much money you could save, what sort of extra innovations and business models you can fit into your future road map.

Feel free to reach out to me if you have any questions on what I have written here. I will happily put you in touch with the appropriate people. [email protected]

Alternatively please visit the Oracle ERP page here to learn more about their ERP software.