Embracing a Cloud mindset with SAP S/4HANA Cloud Public Edition

With the emergence of cloud technologies and solutions, the expectation of quicker, more cost-effective, and more easily and frequently upgradable Enterprise Resource Planning (ERP) solutions, is a natural outworking. This is further amplified by the need for companies to differentiate through digital innovation and the adoption of new business models – without tedious processes and long lead times to respond with appropriate systems and processes.

To achieve some of these benefits, you need to adopt what is referred to as a Cloud mindset in approaching a Cloud ERP implementation. Businesses may be at various places on the Cloud mindset curve depending on their willingness to rethink business processes, the pace of innovation required in their industry, their current IT operating model, their commercial model preference, and their willingness to hand over IT governance to a partner (SAP). I will touch on a few of these in this blog.

SAP has recognised this and embedded this paradigm within their SAP Activate Methodology for implementing SAP S/4HANA Cloud Public Edition. I am specifically referencing the SAP Activate for SAP S/4HANA Cloud Public Edition (3-system landscape) Methodology for the purposes of this blog, but some of the principles can be applied to private cloud scenarios as well.

Let us explore each component of a cloud mindset:

• A cloud mindset seeks to safeguard the stability of the core solution to ensure the Total Cost of Ownership (TCO) is as low as possible and future upgrades are de-risked. This means having a mindset to adopt the standard solution rather than adapt. It means minimising invasive customisation to adopt more regular innovation cycles in the cloud. With S/4HANA Cloud Public Edition there are two main updates per annum where new features or enhancements are added to the system.
• The S/4HANA cloud extensibility architecture supports this aspect of a cloud mindset by introducing some restrictions to the types and methods of performing extensions, while at the same time giving you the flexibility to extend in cloud-appropriate ways that do not make future upgrades difficult and risky.
• It is not the intention of this blog to explain extensibility, but the three types supported within the SAP Activate for SAP S/4HANA Cloud Public Edition (3-system landscape) Methodology, are Key User Extensibility, Developer Extensibility (In-stack), and Side-by-Side Extensibility (see image below).

• The SAP Activate Methodology assigns significantly greater responsibilities to the client team than many seasoned ERP shops will be familiar with. Client self-enablement is a large part of this and is addressed during the Prepare and Explore Phases of the project. What does this look like?
  • Prepare Phase self-enablement: During the Prepare Phase of the project, client self-enablement is a key activity for the client team. There is no room (or time, given the shorter project durations) for spoon-feeding by the consulting team. This self-enablement includes establishing an understanding of the SAP Activate Methodology, SAP Business Technology Platform, S/4HANA cloud-embedded analytics, and the process and mindset to be followed especially during the all-important fit-to-standard workshops where the standard out-of-the-box solution is presented, with a view to adopting are as closely as possible. (This client self-enablement is supported by online content in the SAP Learning Hub).
  • Explore Phase self-enablement: During the Explore Phase, fit-to-standard workshops are conducted. Having a cloud mindset in this context means being disciplined to accept the standard solution as far as possible and minimising the need to change or enhance the solution. Following the fit-to-standard workshops, the expectation is that the client’s key users execute the standard SAP Best Practice processes demonstrated during the workshops by following the SAP-provided scripts. I think this is a very important shift because my experiences over the years of doing SAP Best Practice implementations have exhibited this common change management problem: Typically, the consulting team engages with the client in such a way (from pre-sales into the delivery) that the consulting team knows what is on the menu they are delivering to the client but this seldom translates into the client understanding what they are actually getting. This often culminates in disappointment when it comes to the Test Phase later in the project when it is very difficult to shift or make up for the lost time. A typical client response is often, “Well obviously I need that to run my business, I thought you knew my industry?”. This is never good for the relationship between SAP/Partner and client and results in the dreaded ‘scope’ or ‘change request’ conversation.
  • In summary, I believe that if this aspect of the methodology is followed and the client takes on this responsibility early, expectation mismatches can be avoided later. Yes, this is a significant paradigm shift but it drives the focus to change management (which if we are honest, is the hardest part) rather than reinventing the wheel with the ERP solution.

• A client with a large, highly customised on-premise landscape, and a large internal IT team has much larger change management considerations when moving towards a more agile Cloud Mindset – both in their approach to system selection, and ongoing operations. In essence, when you shift to S/4HANA public cloud, you are handing over responsibility for operating the system to SAP with a standard Service Level Agreement (SLA), fixed downtime and upgrade windows, and reduced reliance on a heavy internal ‘run team’. There are two mandatory software updates per annum (and some shorter-term hot fixes and new feature continuous delivery updates in between). Thus, it is essential to build these update windows into your implementation and ongoing operational planning. From a cloud mindset point of view, this means that you (or your SAP partner) should be evaluating the use of these continually delivered enhancements regularly to determine which would be of benefit for adoption.
  

This perceived ‘loss of control’ may be uncomfortable for some CIOs, but it is fair to say that most companies have some exposure to cloud SaaS (Software as a Service) solutions, and it is now about leaping to apply the same model with their ERP solution. To do this, one needs to know the solution is fit for purpose for your industry, and still flexible enough to cater to inevitable change. Building this ‘trust’ is intrinsic to the SAP Activate Methodology through the show and tell (prove) process carried out through fit-to-standard workshops during the Explore Phase. I can confidently say, it is the most crucial part of the exercise, so do not take shortcuts and drill into the level of detail you need to minimise ambiguity in your understanding of the solution capability.

I will touch on some other cloud mindset aspects in a future blog, but I hope this gives you food for thought if you are considering shifting your ERP solution to the cloud. The SAP Activate for SAP S/4HANA Cloud, public edition (3-system landscape) Methodology provides a great framework for adopting Cloud mindset principles as you embark on your transformation journey. You can peruse the methodology here.