Many organisations find it hard to wean themselves off older versions of enterprise resource planning (ERP) applications such as finance and HR systems for which millions of dollars have been spent to maintain and customise.
But as with any aging piece of software – such as the SAP R/3 suite of business applications and Windows Server 2003 – there will come a time when it is necessary to upgrade to newer versions.
The reasons for upgrading are manifold. In some situations, it may be too expensive to protect aging software that’s no longer supported by their developers against new and complex security threats.
Or, it may be a case of older technology not being able to meet the needs of today’s businesses that increasingly require advanced data-crunching capabilities to help them make quicker decisions in real-time.
In February this year, German software giant SAP released Business Suite 4 SAP HANA, or SAP S/4HANA in short, as a replacement for the SAP R/3 and Business Suite platforms.
“S4/HANA is the most significant release of SAP software since we released R/3 23 years ago,” said Darren Rushworth, managing director of SAP Singapore, adding that the software giant is rewriting 400 million lines of code to take advantage of the performance of the SAP HANA in-memory database platform.
This is a key milestone in SAP’s software strategy that will affect not just existing SAP customers, but also systems integrators (SIs) that have built their businesses around helping enterprises adopt and customise SAP applications.
For one thing, S4/HANA will only run on the SAP HANA database platform, while previously enterprises could choose to use databases from other vendors such as Microsoft, Oracle and IBM.
SAP claims that’s because HANA is sufficiently innovative that the rewritten S/4HANA software would not perform well on the traditional relational database systems.
“Traditional databases haven’t changed for over 40 years, and we used to provide aggregates for database queries,” Rushworth told Techgoondu in an interview. “With HANA, we don’t need aggregates and indexes in the database, so we’ve reduced the size of the database by 10 times to run an ERP system that provides real-time access to information.”
For a start, Simple Finance is the first module under S4/HANA (Simple Logistics will come later this year) available on-premise, as well as through SAP’s public cloud and managed cloud services from SAP partners.
SAP has indicated that it is taking a cloud-first approach with S4/HANA, which means the cloud versions will offer new features earlier than the on-premise version.
But what if enterprises still wish to keep their Oracle databases because they can’t get out of their contracts?
For those customers, SAP will continue to support their Business Suite applications until 2025, but the upgrade to HANA will not be covered under their maintenance contracts. Those already using Business Suite powered by SAP HANA will be able to upgrade to S4/HANA, at no cost. See the official S4/HANA FAQ for more details.
By maintaining two separate lines of code – Business Suite powered by SAP HANA plus other databases, and S4/HANA – SAP is providing a clear upgrade path for SAP customers at different stages of software refresh cycle.
“If you’re already on the HANA database, we’ll only replace the application code base with S4/HANA and that’s a fairly simple exercise,” Rushworth said. “And if they’re still on R/3, they’ll need to migrate to Business Suite and move on to HANA from there.”
With a much simplified code and data model for S4/HANA, businesses can expect to reduce their hardware and software costs. However, that also means SIs would need to focus on delivering higher-value services, beyond integrating separate database and analytics components for SAP customers.
“If we can simplify the application, make it configurable and easy to use, hopefully the SIs can use the real-time components to drive more business value for customers in a predictive fashion,” Rushworth said.
While rewriting ERP applications is no mean feat, it’s something that SAP needs to do to keep up with the demands of the businesses who need to work faster and smarter.
That said, it’s uncertain if its customers will bite, given that S4/HANA is an early stage product. A global survey by support services vendor Remini Street showed that 85 per cent of organisations using SAP Business Suite are not committed to S/4HANA, while 75 per cent are not on the most current enhancement pack release.
In the Asia-Pacific region, SAP is slowly building a list of early customer wins such as PT Delami Garment Industries in Indonesia and Parle Biscuits in India, among others.
But it needs those customers to articulate the business case of moving to S/4HANA, return-on-investments, implementation and migration costs, and whether there is a guaranteed transition for existing customisations — beyond the product marketing speak.
Do you plan to migrate to S4/HANA? Why and why not? Tell us more in the comments!
