How to Implement ERP Transformation: Before You Begin

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Previously, we outlined what SAP RISE is, what types of companies it is typically best for, and outlined the strategic deployment considerations that need to be made. Here, we’ll outline the preparation items that can be started right away to ensure a successful ERP transformation.

For further context into this topic, we recommend reading SAP RISE: What Is It? as well as What ERP Migration Path Is Best For My Company? However, if you just want to learn the most critical aspects of ERP transformation preparation, you’re in the right place!

How to Implement ERP: The Prep Phase

Before committing to an upgrade to S/4 HANA with SAP or an implementation agreement with a systems integrator, there are several preparatory steps that your company can take to ensure a smooth and successful transition. These steps are relevant to all implementation approaches. Planning and preparing ahead of time can set your company up for a successful upgrade that will drive digital transformation and support your business goals.

ERP Transformation Key Activities

ERP Infrastructure and Hosting

There are thousands of insights written about on-premise vs. cloud, and we won’t punish the universe with another. As this decision relates to SAP, however, if you are in the cloud or considering a move to the cloud, consider SAP RISE.

If you’re planning to upgrade from ECC to S/4 HANA, keep in mind that the move will require a shift in your approach to storage. S/4 HANA uses an in-memory database called HANA, which can be more expensive in terms of storage costs. To help you plan for these costs, SAP provides a database sizing tool to estimate your storage requirements. It’s worth noting that if your current ECC system stores many attachments, such as journal entry approvals and invoices, the cost of HANA storage may come as a surprise. 

In this case, you may need to implement a document management system to store these files. SAP may recommend using OpenText as a document management system for storing attachments during an upgrade to S/4 HANA. However, this solution can be expensive and may only be feasible for some companies. Instead, there are simpler and more cost-effective alternatives available, such as using SharePoint.

ERP Process Analysis

The whole point of ERP software is to run and manage your business with a single solution. The most critical step of setting up this ERP software is modeling that software to look like your company, but this modeling can be accomplished in two ways. Despite best intentions, companies end up with unnecessary software customization to fit their business. It should be the other way around. It’s essential to carefully consider which aspects of your business are worth investing in and which can be more efficiently managed using the software’s standard processes. To make this determination, it’s helpful to assess where your business functions offer a competitive advantage or address specific customer or regulatory needs. Where none of these elements exist, streamline your operations by adopting the software’s processes and adjusting your business accordingly. By carefully evaluating your business processes before implementing S/4 HANA, you can ensure that the software is tailored to meet your company’s needs and support your business goals while limiting system complexity.

Example of ERP Process Analysis

Suppose your company only issues a small number of large purchase orders each year to a select group of suppliers. In that case, you likely do not need customization. Instead, utilize the standard procurement and accounts payable features in SAP without requiring specialized PO types, customized reporting, or complex approval workflows. By adopting the software’s default processes, you can streamline your operations and avoid the need for unnecessary customization.

Conversely, we’ve worked with a client who every day would get a set of crate packing requirements from their largest customer. When packing their crates for shipment, the client would ensure every part was in a specific sequence, allowing the customer to pull parts out of a crate in the exact sequence needed for their own production. This is an area of appropriate customization.

Be Data-Driven in Your Review Process

Review all your functions that are in scope for SAP. Build a heatmap showing where you believe you have these differentiating services and requirements or have excess manual execution. This heatmap will help tell you where you will need to invest the most in the upcoming implementation. If your supply chain function has many specialized requirements, you likely need a larger team of subject matter experts to support its conversion.

Data Readiness

Data is a significant factor in the success or failure of an SAP upgrade project. Even when moving from one SAP system to another, data can still cause problems. Thoroughly review and clean your data before beginning the upgrade process, especially if you are implementing Greenfield. Customized ECC systems can contain a large amount of unnecessary data, which can cause issues when not properly managed. We’ve witnessed several instances in which people in charge of data governance sometimes don’t know how to disable or delete records in the system, or there isn’t someone in charge of data governance.

Note: For further context on this matter, read ‘ERP Implementations: Four steps to ensure data readiness.’

How to Execute Data Readiness Analysis

Like the process analysis commentary above, inventory all your key data elements and determine which areas are most critical and have the most opportunities for clean-up. Assign a dedicated resource to manage data migration and build a team to support them. To reduce the cost of HANA storage, deactivate old data in the ECC system and only migrate open transactions to the new system.

Another worthwhile exercise is identifying gaps or challenges in the current system’s reporting capabilities and working with your implementation team to address them. Do not dismiss the importance of reports, as they inform business decisions. We’ve witnessed implementation teams dismiss reports as a lower priority. This is lazy. It is better to prioritize reporting requirements alongside other requirements rather than risk having a CEO ask for a report after go-live and discover it was not addressed. From personal experience, that’s an unpleasant situation.

Deployment Planning and Interim States

A commonly overlooked area in planning an SAP upgrade or implementation is the deployment approach and its interim states. An interim state refers when only some functionality or sites are live in production while the rest of the business is not. Work with your IT leadership team to determine the most feasible deployment approaches and then consult with business stakeholders to establish guiding principles. Common priorities include minimizing business disruption or prioritizing speed. Ultimately, you’ll need to decide on a deployment strategy, such as rolling out sets of functionality, deploying to specific clusters of sites, or a combination of both.

Interim state planning should be an additional consideration in Greenfield or Bluefield deployments. Think about how the different parts of the company will interact with each other during this time and whether temporary integrations, manual processes, or additional labor will be needed. Anticipating and addressing these challenges beforehand will enable proper planning and transparent communication with stakeholders.

Establish an ERP Governance Model

Establishing strong governance during an SAP ECC to S/4 HANA upgrade is crucial to ensure its success. Identify the key individuals responsible for managing each business function of the implementation and allocate them to the project full-time. This may also require dedicating key individuals to testing and training. It is also important to assemble a program Steering Committee, ideally consisting of C-suite executives and their direct reports, to prioritize and oversee the program’s progress. Proper planning for these roles and responsibilities will allow for effective management and coordination of the upgrade.

As you consider the governance structure for your SAP ECC to S/4 HANA upgrade project, consider the role of your implementation partner. Suppose your company has a strong SAP Center of Excellence or similar team capable of handling complex SAP upgrades. In that case, you may only need staff augmentation to provide additional resources in specific areas. However, if your team lacks the necessary skills or experience, you may need to bring on a more comprehensive implementation partner to support the project. The upgrade process’s complexity and your in-house team’s capabilities will be critical factors in determining the level of support you require from a partner.

Liberty Advisor Group Can Facilitate ERP Transformation

The decision of if, how, and when to upgrade from SAP ECC to S/4 HANA is not to be taken lightly. Careful consideration must be given to the approach that best suits the business’s needs, whether it be a Brownfield, Greenfield, or Bluefield approach. It is essential to conduct a thorough process analysis to identify streamlining opportunities and properly prioritize and budget for the project. 

Data migration and management are also crucial considerations, as are the deployment approach and the management of interim states. Ensuring strong governance and assigning dedicated, skilled resources to the project will also be crucial to its success. By carefully planning and executing each step of the process, a company can smoothly and efficiently upgrade to S/4 HANA and realize the full benefits of the new system. 

Liberty has the advisors and expertise to help your company navigate the upgrade process, whether you’re just starting to plan or are a couple of months into execution. Our team prides itself on providing independent and objective advice, and we will help you avoid that iceberg.

To learn more about how we can assist in ERP implementation, reach out to us today.

Related Post: SAP RISE: What is it, and more importantly, who is it best for

Related Post: What ERP Migration Path is Best for Your Company?

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