How to Efficiently Migrate to SAP’s S/4HANA Digital Core

During SAP’s recent Capital Market’s Day, it outlined its vision for the intelligent S/4HANA enterprise comprised of the digital core, cloud lines of business, and the underlying database platform. Given our experience advising on S/4HANA migrations, I thought it would be prudent to highlight strategic opportunities to ensure your migration to SAP’s S/4HANA digital core is “efficient.”

There are several areas to increase productivity tied to your previous ECC investments and to minimize additional upfront investments in S/4HANA digital core.  A few important recommendations follow.

Terminate ECC Shelfware

SAP customers that develop a deep understanding of the products they have previously licensed as a part of their ECC footprint — and are actually using today — typically become aware that they have too much on the shelf. Sometimes shelfware makes up as much as 40% of their ECC footprint, which means lost value on previous ECC investments and a perpetual loss of value tied to the associated maintenance that will be carried forward into the S/4HANA digital core — unless it is remedied. Many SAP customers with shelfware look to their SAP agreements and realize they did not contemplate this predicament at the outset of their relationship and they can only terminate the agreement in whole (not specific products that are on the shelf).

In lieu of terminating the agreement in whole, there is an opportunity to cut the fat attributable to your ECC footprint as part of your migration to S/4HANA.  We recommend conducting a baseline assessment with a focus on your shelfware to understand the lost value and what it means for operating expenses and annual maintenance. Armed with this information at a detailed level, you can weave termination of ECC shelfware into your negotiations with SAP as something to be right-sized during your migration to S/4HANA.

Convert to S/4HANA

As part of rolling out S/4HANA, SAP has created many S/4HANA products with functionality that wasn’t available on ECC. However, several ECC products have also been repackaged into products with similar functionality on the S/4HANA platform. It is critical for SAP customers to develop a deep understanding of the products you previously licensed in your ECC footprint and the equivalent S/4HANA investments you plan to make as a part of your migration.

In lieu of paying for the same functionality in your ECC footprint and again on S/4HANA, there is an opportunity to make the migration to S/4HANA more palatable. Proactively solicit commercial support from SAP to get conversion credits for previous investments.

Exchange for More S/4HANA

Many SAP customers have achieved the ability to exchange out shelfware products as part of a specific negotiation. However, few companies at that time take the opportunity to develop a deep understanding of all products they have previously licensed and the opportunity to exchange them to meet their future demand.

As a part of your SAP negotiations, in addition to negotiating your initial S/4HANA investments, negotiate exchange rights. With exchange rights, you provide your company the ability to exchange shelfware products for additional units of your already-made S/4HANA investments. This allows you to turn lost value on previous ECC investments and associated maintenance into additional units of your S/4HANA investments.

A competitive discount for your S/4HANA digital core transaction should certainly be an objective of your negotiation. However, emphasizing efficiency as an objective for your S/4HANA enterprise will enable your company to leverage the value of your previous ECC investments and reduce capital expenses tied to your S/4HANA migration.

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