May 26, 2020

Maintaining Momentum with SAP S/4HANA in Current Times

Dennis Kurlandski

Dennis Kurlandski

Managing Director, Finance & Asset Performance Management

2019 bore witness to many S/4HANA go-lives within utilities in North America.  There were net new implementations, technical upgrades and hybrid upgrades.  The S/4 movement entered 2020 with much momentum and excitement as utilities took steps toward laying their foundation for the future. 

In Q1 of this year, ASUG (Americas’ SAP Users’ Group) published their annual customer survey that included a section dedicated to S/4.  (The full survey results are available at www.asug.com.)  

What I found most interesting were the survey results regarding S/4 momentum. In a response to a question about S/4 move timeline, 37% of respondents reported already being live or starting to move—an increase of 5% over the prior year’s results. (See Figure 1.) Granted the results reflect all industries, but we are all part of the same North American SAP ecosystem.

What’s more, note that in the year prior 12% had no plans to move and in the most recent survey it is 0%.  Now that’s momentum!  

Figure 1.

Of course, recent events have slowed that momentum. 

On February 4th, SAP announced that it would support SAP Business Suite 7 software until the end of 2027 (previously 2025) followed by optional extended maintenance until the end of 2030. Fast-forward about six weeks and suddenly the WHO declared the coronavirus outbreak a global pandemic.  In North America businesses were shutting down, March Madness was canceled, and work and school from home quickly became the new norm.  By mid-March, nearly one third of the world's population was living under coronavirus-related restrictions. Utilities had to shift their operations and make extensive physical adjustments to ensure employee safety while continuing to maintain safe and reliable service for their customers. In fact, never in modern history has reliable power and clean water been so critical. We at Utegration applaud you for the excellent work.

Today, I am here to suggest that though you have lost some momentum, allowing two months to become three or four or more will do you no favors. The journey to S/4 has many steps, and compressing it may force decisions or shortcuts that are counter to your goals.

As a trusted advisor to the utility industry, Utegration would never want to see you in this position. So, think of me as the guy cheering you on at mile 5 of a marathon when you just crested a big hill.  Yes, you have lost some momentum, but you can regain your pace and complete the remaining 21.2 miles strong!  I am not the person holding a sign that inaccurately declares “almost there!” but someone who realizes how long the remaining journey is, and what other obstacles you may have to overcome.

How Long is the Journey to S/4 Exactly?

In late February shortly before the pandemic struck, Utegration co-sponsored a Northwest Utilities Day at SAP Labs Vancouver.  During the event we had an S/4HANA-focused session in which we asked customers to share the status of their S/4 migration plans.  It was exciting to hear that every utility represented had plans.  They were in various stages, but all had plans.  For me, the key takeaway was that plans and timelines can vary dramatically based upon one’s perspective.  This session reinforced that it can take anywhere from one to two years of ongoing effort before the S/4 migration begins.

Having a plan and maintaining momentum is key.  We must set aside time and make progress every month or the bow wave to push through in an accelerated timeline might be too large to overcome.  In the image below are several of the key activities that many utilities must address before a migration can begin.  The activities are purposefully depicted in no particular order, because one-size does not fit all.  There are many variables, like culture for example, that will determine which activities need to be addressed, when and how.  Following is a brief summary of each activity.

Figure 2.

Plan and Budget

In order to get budgetary approval, most utilities will need a comprehensive roadmap and details regarding what type of funding will be needed and when.  The roadmap will need to address all decisions that have a measurable migration cost impact in order to establish a budgetary number.  Utegration has developed an offering, Plan4U for SAP S/4HANA, that many utilities have leveraged to develop their S/4 roadmap and budget.

IT Portfolio Alignment

A timeline should be included with a comprehensive S/4HANA roadmap.  This timeline needs to align with other projects in the IT portfolio and ensure that the business will continue to be served while a reasonable cutover window to S/4 can be achieved.

Socialize

Paint the S/4 technology into your innovation lexicon early.  Even before you have aligned with the IT roadmap and the goals and objectives of the business, the focus needs to be what the in-memory computing platform can do for the enterprise.  We have transitioned from mainframe to multi-tier, now it is time for the next wave of computing.  One word of caution, migrating to S/4 should never be about an artificial date.  Be it 2025 or 2027, it is not about a date, it is about staying current with technology and being able to deliver the capabilities that the business needs to serve your customers, regulators and shareholders.  

Business Alignment

An S/4 migration plan that is not aligned with the business’ goals and objectives may be flawed from the get-go.  The business must have buy-in to the migration, understand what is in it for them and understand what change management will need to be absorbed.  With an eye towards current pain points and future aspirations, looking at new S/4 features and functions is a great way to engage the business.  Utegration has developed a preconfigured S/4 utility system, Utility4U, that can be used as a demonstration and reference system during S/4 planning and migrations.  Be it curiosity about the financial changes or pros and cons of the new call center, the business needs to be educated regarding S/4.

Rates & Regulatory

Does your S/4 migration require regulatory approval?  For those seeking recovery, the answer is likely yes.  Utilities that we have been working with are finding that this approval milestone is taking anywhere from 6 to 12 months depending upon where they are at in the rate case cycle.  There are many variables that determine what influence the regulators have upon your S/4 migration.  The key takeaway is that you need to understand and calendarize the entire approval process for your S/4 migration.  Do not get surprise by an unknown approval process.  Anecdotally, one of our customers failed to get their S/4 migration included in their two-year forward-looking rate case…essentially sidelining their S/4 plans for two years.

Potential M&A Activity

The big picture of what is going on with your enterprise is critical.  If you are acquiring or being acquired, merger synergies will need to be delivered.  A migration to S/4 might be the catalyst or the project that needs to be accelerated or deferred.  Either way, ask yourself “what if” while developing your roadmap.

I have merely scratched the surface, but I’m hopeful these examples help demonstrate how there is one to two years of prework to be done before an S/4 migration.  When you start to consider your overall timeline, the image looks like the one depicted below.

Figure 3.

Currently, our team is working with several utilities who are diligently securing 2021 funding and gearing up for System Integrator selection.  They are pushing hard to maintain momentum and position themselves for a 2021 migration to ensure their technology is in place to achieve their business goals as planned.

At this time, my best advice to you is: If you were just getting started on your S/4 journey, restart.  If you have plans underway that have stalled out, reinvigorate them.  And, if you have done little to date, get started now! With one to two years of prework before the migration can begin, 2027 really isn’t that far away.

If you would like to get additional perspective on your journey, don't hesitate to contact Utegration to schedule an online discussion, or reach out to me directly on LinkedIn.

On Monday, September 21, you can learn about different approaches to S/4HANA migration at ASUG Best Practices: SAP for Utilities, The "Selective" Secret to SAP S/4HANA Success.