increase your utility's readiness for SAP S4HANA

May 13, 2020

What to Do Now to Prepare Your Utility for SAP S/4HANA

Dennis Kurlandski

Dennis Kurlandski

Managing Director, Finance & Asset Performance Management

Whether your utility is planning to move to SAP S/4HANA soon or will utilize SAP’s extended support of ECC and Suite on HANA, now is the time to take steps for both immediate and long-term benefit. The four tips below are designed to increase your readiness for S/4—that is, to simplify the migration and reduce its risk—and some will also optimize your current SAP system years before you move to S/4. 

Tip 1: Inventory your custom code

Moving to SAP S/4 will entail either a new (a.k.a., “greenfield” or “net-new”) implementation using standard SAP; a conversion of your existing SAP ECC system (a.k.a., “brownfield); or a Landscape Transformation. The suitability of these three approaches depends in part on how much customized code you currently use and expect to use in the future. We recommend the following preparatory steps:

  • Identify all current customizations and categorize them based on actual usage and importance.
  • Eliminate customizations that are no longer used or remove access to them via SAP Security.
  • Further categorize the customizations you do use into “Reporting” and “Business Process” groups. See if S/4’s embedded OLAP with virtual info providers will generate the same data as your custom reports; if so, you may not need those custom reports in S/4. Determine how much of your custom business processes are now standard SAP. You may only need to bring over some of these Z-transactions into S/4.
  • If it is determined that some custom code will be moving forward into S/4, now is the time to assess its compatibility and efficiency. Such an assessment will help to document effort and risk of custom code remediation for your future S/4 migration and may offer opportunities to remediate code ahead of time.
  • Push towards out of the box where you can. The benefits of a net-new, standard S/4 implementation—such as lower cost, and regular and frequent updates—may be compelling in and of themselves, but out of the box provides another value: pursuing it forces you to critically reevaluate your legacy customizations and think seriously about their necessity. For utilities that have been on SAP for a decade or more, this “cleaning house” exercise is a means to jettison past design decisions that may be holding you back from modernizing your ERP.

Tip 2: Clean up your cost model

In our 25+ years of working with utilities on SAP, we have repeatedly seen that cost models—the flow of costs through the organization—are a key driver of new ERP project cost, complexity, and success. Unfortunately, many utilities have cost models that are intricate, opaque, difficult to explain and poorly documented. We often see this condition in utilities that:

  • Implemented SAP Financials with consultants unfamiliar with utility accounting;
  • Acquired other utilities and have outgrown their original cost flow model; and/or
  • Added other modules to their original SAP design without updating the use of Controlling (for example, to integrate Project Systems’ WBS elements with other cost objects).

Whatever the root cause, overly complex cost models warrant simplification to deliver more transparent data to management (and regulators) and to take full advantage of S/4. We highly recommend that customers clean up their existing cost models before migration. The best way to start that process is to take a critical look at your use of the five types of allocations:

  1. Assessments
  2. Distributions
  3. Settlements
  4. Overheads
  5. Activity Allocations

Once this review process is complete, we advocate eliminating unnecessary assessments, such as those not required by regulators, and reducing settlements to simplify your cost flow and make your data more intuitive to explain and understand. Addressing this functional work in advance of S/4 will not only make your migration easier, but also deliver meaningful benefits from your current SAP system well before you move to S/4. Simplify your cost flow now and the move to S/4 will be far more of a technical exercise.

Bigger picture, we recommend that utilities invest some time in reviewing overall financial performance management cycles. Imagine your ideal, real-time enterprise: what would performance management look like?  how would it help you to cope with financial and regulatory reporting challenges? Once you’ve thought about your desired financial processes, you can engage the right experts to blueprint your approach towards that future state.

Tip 3: Clean up your logistics master data

Utilities that have been running SAP Materials Management or Plant Maintenance for some time generally have a need to clean up master data, including material masters, vendor masters, functional locations, and equipment records. In our experience, one of the most common issues is redundant records, for example, an audit might identify eight material masters that are essentially all the same. Other typical issues include obsolete work orders and notifications, maintenance plans that are no longer accurate or relevant, and MRP stock levels and values requiring updates.

Before cleaning up master data, though, we recommend that customers first identify and correct any root causes. There may be process gaps (e.g., a lack of a clear process for creating new material masters) and governance gaps (e.g., a lack of clear ownership for creating new material masters).  Addressing root causes can often be achieved via process excellence.

Once your master data issues have been identified and their root causes corrected, consider cleaning the data in your source system. Yes, your current ECC or Suite on HANA system will be the source when you migrate to S/4.  Vendors in the S/4 data model are business partners and will need to be converted via Customer Vendor Integration (CVI). In general, master data improvements will reduce time and risk when migrating to S/4.      

Tip 4: Assess your use of Business Warehouse (BW)

Do you use BW as a query tool only, or to enrich data from SAP? If you use it primarily for reporting, you may be able to eliminate BW from your S/4 design, or refocus its use, because HANA Information Views in S/4 will function similar to BW, and HANA’s real-time analytics capabilities can make valuable data more accessible to users.

Another consideration includes understanding your historical reporting requirements:  if you have 7+ years of history in ECC, you may not want to migrate all of it to S/4, and BW may need to remain in place. Confirm there aren’t any regulatory requirements for snapshots of certain data that are being done in BW.

In addition, if you’re on BW version 7.4, keep in mind that general support ends in December 2020; if they haven’t already done so, your IT team should evaluate an upgrade to 7.5 or BW4HANA, or migration to the Cloud. Utilities with the business case for maintaining their investments in BW, or desiring self-service data management for LOB departments, should also consider SAP Data Warehouse Cloud as an option.

Next Steps

To discuss the application of these tips to your utility and to validate your readiness for S/4HANA, contact Utegration’s experts for an introductory conversation.