What ERP Migration Path is Best for Your Company?

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One key aspect of this transformation is the ability to access and analyze reliable data in real time, enabling quicker decision-making and collaboration across teams. However, if your company is still using SAP ECC 6.0 and has yet to plan for an upgrade, you may be headed for rough waters. Think of it like an iceberg on the horizon: it may seem distant now, but it could have significant consequences for your company’s digital transformation efforts if not addressed.

In this post, I will first discuss options to migrate off SAP ECC 6.0. In my next post, I will discuss considerations and preparation steps companies should make before launching these projects.

As a reminder, SAP ECC has been powering large companies for years, but its time is running out. Official support from SAP for ECC will end in 2027, and while SAP will provide an additional 2% maintenance fee for ECC until 2030, that will be the end of the road for this popular ERP software. After that, companies using ECC will be on their own for support, with no more patches or OSS notes from SAP. It’s time to start thinking about a transition to a newer system before it’s too late.

If your company is still using SAP ECC and looking for a way forward, the most logical next step is to upgrade to S/4 HANA. This fourth-generation ERP system from SAP, released in 2015, offers a wide range of features and improvements over its predecessor, including support for all core ERP functions (such as supply chain, manufacturing, customer service, logistics, and project management), embedded analytics, and a refreshed user interface. S/4 HANA is powered by SAP’s in-memory relational database management system, HANA, and is continually expanding its process support to meet the evolving needs of businesses.

Do all companies need to migrate to S/4 HANA? In most cases, the answer is likely yes. However, there may be some situations where there are choices other than S/4 HANA. For example, if a company has undergone significant divestiture activity or has been carved out as a separate entity, it may be worth considering less complex and expensive alternatives. Take the following over-simplified scenario: GlobalCorp is a large conglomerate with $10B in revenue, operating in the oil and gas, agriculture, and t-shirt manufacturing industries across 11 countries. They are currently using SAP ECC 6.0. GlobalCorp decides to divest its t-shirt business, TeeCo, which operates solely in the United States with $500M in revenue. TeeCo receives a clone of GlobalCorp’s SAP environment as part of the deal. However, this SAP setup may be unnecessarily complex for a domestic t-shirt manufacturing company like TeeCo. In this case, it might be better for TeeCo to explore some of the multi-tenant SaaS offerings in the ERP space rather than upgrading to S/4 HANA. The takeaway is that if a business has undergone significant simplification since its initial ECC implementation, such as reducing its product offerings, industries, geographies, or physical locations, it may no longer be a good fit for ECC or S/4 HANA warranting a software selection.

Implementation Approach

What if S/4 HANA is the right choice? We’ll discuss infrastructure and hosting approaches later in this insight. One of the first decisions to make after selecting S/4 HANA will be which “field” approach you will choose. The traditional methods of Brownfield and Greenfield still apply. However, a new, somewhat marketing-jargon approach called “Bluefield” falls between Green and Brown. Let’s discuss each one and what considerations to make when making this selection.

Greenfield, Brownfield, and even Bluefield...these are the terms one must consider when embarking on an ERP Transformation journey.

Greenfield

In a Greenfield approach, a company will effectively start over with a clean install of SAP. If your ECC environment is heavily customized, consider a greenfield approach for upgrading to S/4 HANA. Customization can lead to inflated support costs, long end-user training cycles, and difficult or impossible upgrades. It can also result in messy data, as customizations to business processes often need to be accompanied by corresponding changes to data governance. SAP systems are designed to provide out-of-the-box reporting, and heavy customization can interfere with these native capabilities. If you’re experiencing these issues with your current ECC environment, a greenfield approach may be the best way to start fresh and build a clean, well-run SAP system for the future.

It’s worth noting that industry templates for SAP systems weren’t widely available until about a decade ago. If your company implemented ECC in the 2000s, your system would likely be heavily customized with numerous non-standard processes and data models. This can result in many z-transactions, which can be challenging to maintain and upgrade (no, Z_RUN_MY_SUPPLYCHAIN is not standard SAP). A greenfield approach, while more time-consuming and costly, offers the opportunity to start fresh and build a clean, well-run SAP environment for the future. This can be especially beneficial if you want to correct past customization “sins” and streamline your system for improved efficiency and effectiveness.

In summary, Greenfield is best for companies that meet several of the following criteria:

  • The ECC environment fell off the upgrade path before EHP7 due to over customization
  • Customizations no longer make sense for the organization
  • Data models are complex to the point that standard reports do not work
  • There is a strong desire to standardize processes and reporting across the enterprise

Brownfield

One option for upgrading from SAP ECC to S/4 HANA is a brownfield approach, which involves keeping most of your existing data, configuration, and customizations intact. SAP provides a well-defined migration path and tools to identify any potential issues that may arise during the upgrade process. These issues can then be addressed through data changes, ABAP code, new configuration settings, or other prescribed approaches. While testing is still required, the upgrade process typically occurs over a weekend, with the overall process taking several months to complete depending on the list of necessary remediations. This approach is the most cost effective and efficient option and may be suitable for companies generally satisfied with their current ECC environment.

In summary, Brownfield is best for companies that meet some of the following criteria:

  • The company’s processes are all working well, with strong governance and few inefficiencies
  • Data is relatively clean, with solid reporting and insights available to end-users either through ECC itself or an external BI or analytics tool
  • There are few customizations to the environment and the ones that do exist support capabilities that provide a competitive advantage
  • Budget and timeline are top priorities

Bluefield

Bluefield is the new lingo that will come up in any Google search around S/4 HANA upgrades. I don’t get why “Blue”; perhaps SAP’s logo is blue? Regardless, this approach serves as a middle-ground approach between Brownfield and Greenfield.

A Bluefield approach involves starting with your current SAP ECC environment and creating a copy of it. You can select which configurations and customizations you want to port to the new environment. These configurations and customizations will still need to go through the S/4 HANA upgrade process, similar to a brownfield approach, and may require new configuration or customization. Data will also be selectively migrated to the new environment.

Bluefield is marketed as the “best of both worlds,” allegedly allowing you to enjoy the speed and cost savings of a brownfield approach while also addressing issues from your previous system that you might want to fix, as you can with a greenfield approach. With Bluefield, you can keep the “good” parts of your previous system and remove the “bad,” allowing for a certain degree of customization while still taking advantage of the latest features and capabilities offered by S/4 HANA.

If you’re considering a Bluefield approach for upgrading to S/4 HANA, exercise caution and carefully assess your needs and priorities. My skepticism is rooted in the fact that ERP systems, particularly SAP systems, are highly integrated, and it may be necessary to make some concessions to take advantage of the shortened timeline offered by this approach. It’s also important to consider the impact of data migration on your project, as data can be a significant factor in determining the length and complexity of your upgrade process. When exploring a Bluefield approach, be honest with your stakeholders and create a clear, comprehensive list of priorities for what needs to be fixed and what does not to maximize the benefits of this approach.

There are some scenarios where Bluefield would be a good fit. If a company has had significant M&A activity, has expanded or shed locations, going with a Bluefield approach may allow it to restructure, keeping some of its customizations, and eliminating unnecessary complexity.

In summary, Bluefield may be a good fit if you feel your company is somewhere between Greenfield and Brownfield.

Takeaways of Deployment Types

While this post uses SAP ECC 6.0 to SAP S/4 HANA as an example, these same considerations will apply to a company migrating from any other legacy ERP system. This decision will be the driving guiding principle for the ERP transformation program and needs to be well thought out. Liberty has experience operating under all three of these potential scenarios. While each of them has its pros and cons, we can help your company assess and determine the best fit for your business needs. There is no universal answer, but there is one that works best for your company.

If your company is ready to move forward with an ERP transformation feel free to reach out and we’ll give you our honest opinion in a quick workshop. And if your company is really ready and wants to start soon, see my next post, in which I will discuss the considerations and preparatory activities every company should make when tactically planning for the move off ECC.

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

Related Post: Preparing for an ERP Transformation – Key Foundation Activities

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