S/4HANA - A DREAM COME TRUE?

Reflections from FKOM and our conversation with Hasso Plattner.

Last week at their annual Field Kick-Off Meeting (FKOM) in San Diego, SAP announced their new S/4HANA Solution. It’s short for "SAP Business Suite 4 SAP HANA” and it’s SAP’s new evolution of ERP. Rob Enslin spoke about the ‘Perfect Enterprise’: Integrated, Open, Networked, and Realtime. He is aiming at 4,000 S/4HANA customers in 2015, his Sales People are energized.

Then, Hasso Plattner came on stage and spoke about S/4HANA as 'SAP’s next Big Thing’. He described it as break-through innovation at the level of R/2 (1979), R/3 (1992), and ERP/ECC (2004) => S/4HANA (2015). The ‘4’ in the name stands for 4th generation.

We met Hasso on Friday evening in San Francisco and chatted with him about S/4HANA. Hasso spoke about the enormous changes that S/4HANA brings to the table. Speed is dramatically enhanced and enables new ways of doing business. Hasso spoke with passion about S/4HANA. He left no doubt that S4 is a game-changer. His enthusiasm is understandable (also contagious), considering that he started this whole new database initiative some 8 years ago with a handful of students, against the push back and ignorance of many doubters; now he sees the vision become a reality. Well, change at SAP isn’t always exactly happening at the speed of light, but when it happens, it’s typically rock-solid.

Those of us who have been around long enough can draw a parallel to the shift from R/2 mainframe to R/3 client-server in 1992. Except that in the meantime SAP grew perhaps 10 times in size and has hundreds of thousands of customers. And as of today, Rob Enslin claims, SAP is the largest Business Network in the world with its SuccessFactors, Concur, Fieldglass, and Ariba acquisitions - larger than eBay and Alibaba combined.

So, yes, it’s big news, but it’s not all new news. HANA In-Memory Technology has been around for a few years and some of the other components such as SAP Cloud and Fiori were announced prior as well. However, it’s refreshing to actually see SAP finally change the pay-upfront license model to a subscription-based model. It’s a huge struggle for an established company like SAP to make that shift. It really requires rethinking how to engage with customers while accepting a financial hit due to the subscription model when Wall Street is watching all the time. The real news with S4 HANA is perhaps that the whole package of what SAP is going to be in the future is all coming together now.

Here are some of the highlights from FKOM and our conversation with Hasso:

All Business Applications are moving back into one single system:

This is a dream come true for many SAP IT professionals. SAP customers have complained for a VERY long time about constantly growing System Landscape requirements. Practically any application outside of ERP/ECC meant new server requirements, new instances, and middleware connectivity such as SAP PI or non SAP. SAP System Landscapes grew extensively and with them the complexity and maintenance requirements - definitely a driver for the success of SaaS Business Apps.

Bringing this back into one system is a welcome (and overdue) relief for users. SAP has promised to push quarterly updates and innovations for S4 going forward.

Following this direction, we would wish that SAP TM 9.2, TM 9.3, EWM 9.2, Event Management, GTS, and other components will become part of S4 down the road also. The retirement of PI/XI and CIF middleware systems, at least as far as SAP-to-SAP internal Integration is concerned, would be a welcome technical simplification as well. Not too many customers would mourn about losing XI/PI. However, in any case, we can expect PI to stay for B2B Connectivity. Simple Finance is already available; Simple Logistics will follow in 2015. We are anxiously waiting for SAP to shed more light on the details of what is coming and when. Meanwhile, there is a wealth of benefits to capture from the current SAP SCM solutions available today.

As for the opportunity to design a more responsive, faster, and more efficient supply chain execution organization with S4 at customers, it is exciting to think about the capabilities. Large volumes of Track and Trace data, Rate data, Traffic, Weather, Geoinformation, and so on can be leveraged on a whole new level in the future. We will discuss this further in future blogs.

Reduction in size, dramatically faster:

The new HANA Database Architecture allows for a massive reduction of aggregation layers that were required in the past to store interim values. No more, it’s all real-time generated against the large amounts of available transaction and context data. Why, for example, store an aggregated inventory value (and it’s probably not even accurate anymore by the time you’ve stored it) when you can determine it in real-time whenever you need it. Consequently, code can also be cleaned up since no data aggregation layers need to be managed. Designing S4 was an opportunity to finally get rid of old, crusted structures from ERP that were very sticky across product generations. So SAP did a table clean-up. For example, the very old Material Master Database Tables from R/2 times (MARA, …) are finally no longer around, only views on the data. The result is dramatically higher speeds and a 1:10 reduction in Data Footprint. Imagine - a 1 Terabyte SAP Database is down to 100 GB. You could fit a few on your SD Memory Card, or on your iPhone - very nice.

No other database anymore - besides HANA:

Oracle DB is out. That’s a dream come true for SAP. No more feeding the archrival with SAP Business $$. Sure, there will be system maintenance for a long time, but essentially there is no future for Oracle in any SAP Business anymore. Colder times for the folks in Redwood Shores.

In the Cloud - or not, you decide:

SAP will offer S4 HANA as a full cloud-based option (no IT infrastructure needed) or as a private cloud (you build and run your own cloud environment in-house). And then there is a combination as a hybrid cloud. Hybrid clouds are now a common model for SAP customers who want to keep mission-critical data in-house but run SAP more efficiently in virtualized environments that allow more flexible IT resource management on demand and at the same time run non-mission critical applications and test for development environments in an external cloud environment - meshed to a hybrid cloud.

Ease of consumption:

Perhaps that’s an old dream come true for SAP users who criticized and battled SAP for its rigid UI for a very long time. Fiori - meanwhile free of charge - is a welcome new start for Information Workers, a lot cleaner and much more in line with today’s standards of consuming information. All ERP transactions will eventually run with Fiori, driving up the fun factor and user adoption.

Simple run business:

That is a dream for most C-Level managers in big companies, but it hasn’t come true yet and I can’t quite see that for some time. Sure, all of the above will help to cope with the daily complexities that mid-size and large businesses face, however that’s not enough to turn it into simplicity overnight. But then we know from Disney, Pixar, Harry Potter, etc. that dreams sell pretty well. SAP’s marketing people know that, too. Perhaps we can agree on ’Simpler run Business'.

In summary, as always the technology is an enabler to perform better and compete more effectively, to drive efficiencies and profitability. S/4HANA has the promise to make a real difference for businesses. It removes some of the technical complexities and lets business and IT teams focus more on what matters - not only to optimize business processes but rethink new ways of doing business: transformation and evolution. The elimination of large amounts of data layers, excess code, and aggregation levels while producing instantly meaningful insights and actionable intelligence is a big step forward.

Now that the technology is evolving, IT and business professionals need to evolve with it, too. Otherwise, some of their dreams might not become a reality.

We need to think about new ways how we can better leverage big(ger) data, anywhere and anytime. It creates opportunities for innovating competitive advantages. SAP will contribute its share and embed new, leaner, and faster business processes in the application design of S4 HANA that leverage the new speed and wealth of data, however, as in the past, it’s the customers’ responsibility to drive business benefit from the technology and ensure their possible S4 HANA investments will squeeze out additional returns.

At Novigo we see many opportunities opening up in the context of converging supply-demand networks on the S4 HANA platform and we look forward to collaborations with our forward-thinking customers. Meanwhile, it is great to see SAP lead again with innovative business applications technology and extend its position over competitors. As Hasso said last Friday: “Now, anyone buying Oracle Applications has to clearly justify and defend his/her decision".