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Navigating S/4 Hana Migrations to secure the best contract terms

 

In Episode 2 of our on-demand SAP video series, we discuss S/4 Hana migrations and how best to navigate these from a licensing perspective, in order to secure the best possible contract terms for your organization.

But before we share our top tips, let’s get back to basics.

What is S/4 Hana, and why migrate?

S/4 HANA is the SAP business suite for Hana – a column-based, in-memory database first introduced back in 2010. Introduced five years later, S/4 Hana was founded on the Hana database and is the successor to R3. In order to use S/4 Hana, organizations must undertake both a technical and contractual migration.

There are a couple of key reasons why organizations will benefit from migrating. Firstly, SAP announced that it will be innovating exclusively in S/4, and no longer in ECC. Not only this, but SAP will also cease all maintenance on ECC at the end of 2027, and any extended maintenance after this point will be at additional cost to the customer.

As well as the benefits, it’s worth bearing in mind that migrating to S/4 Hana is not a simple upgrade – but rather more like a new implementation entirely. This means that the migration process will take time – as organizations will need to ensure the whole company is aligned, and that all the necessary resources are in place.

Organizations will also need to decide whether to follow an on-premise or cloud approach. Many opt for a hybrid model, but some go for a full-cloud approach RISE with SAP. It’s important to make the decision that’s right for your own organization. Watch Episode 3 of our series to find out more about the pros and cons to each approach.

The technical side of S/4 Hanna

As mentioned above, migrating to S/4 Hana is both a technical and contractual undertaking. On the technical side, it’s important to be aware that S/4 is completely different to ECC. The ‘S’ stands for ‘simplification’, and this means that the internal structure of SAP is simplified too. For example, tables are set up differently, and processes themselves have been made easier.

Another factor to bear in mind is that migrating is complex. Some organizations will have used the old system for many years, implementing various customizations along the way. These organizations may want to consider starting from scratch, getting rid of all customer code and data, and thereby simplifying all processes. Alternatively, organizations can use the SAP standard as a starting point, and from there add only what is strictly necessary. In summary, there are few different approaches organizations can choose from:

  1. The ‘Green Field’ approach – which means SAP customers start from scratch with a completely new implementation
  2. The ‘Brown Field’ approach – where some elements are changed, but the same, old data is used
  3. And finally, ‘Blue Field’ – which is when organizations keep their customizations, but apply these to new data

The approach taken will naturally vary from organization to organization. The key is to be fully aware of all the different factors that will impact this decision, starting with ensuring complete, in-depth knowledge of your entire SAP estate, and then what the organization realistically needs going forward.

Contractual considerations for S/4 Hanna

The most important decision to make next is whether to opt for a product conversion or contract conversion:

  • Product conversion – this involves checking the products in your contract, line-by-line, to see if an S/4 variant is available. Only those products will be migrated. The same process can be applied to the Terms and Conditions.
  • Contract conversion – this is a full conversion of all products in your contract, which can ultimately lead to a completely new contract with new T&Cs. Organizations will need to create their future Bill of Materials in order to receive credit for all products. Also known as the ‘milkshake’ approach, in the end organizations should have a clean slate with one new order form.

In both cases, organizations are still allowed to make use of the classic software until they are fully migrated to S/4 – so there’s no need to migrate all processes immediately. Instead, take the time to understand what is the best fit for your organization. At Livingstone, our SAP experts can guide you step-by-step through every phase of the migration process – including all the key decisions, how to ensure you’re getting the best deal, how to interpret SAP rules, and more.

Top tips and takeaways

To review, here are our key takeaways to keep in mind:

  1. Maintenance on ECC ends in 2027, so plan ahead to ensure a successful S/4 Hana migration in advance
  2. SAP will also stop developing ECC, and innovations will be on S/4 only – meaning a migration will be in most organizations’ best interests
  3. Migrating to S/4 is not just a simple upgrade, but a new implementation entirely – organizations will need to take the time to develop an internal strategy and ensure alignment across the company
  4. Organizations will need to undertake an S/4 license conversion before the technical migration
  5. Product metrics and models can change in S/4 Hana
  6. Create a roadmap to determine whether a contract or product conversion is the best fit for your organization

In order to ensure a successful S/4 migration, organizations first need to have a clear overview of their current SAP entitlement. This may sound obvious, but is far easier said than done. Organizations will need to take the time to dive deep, in particular checking what is really being used so as to avoid overspending in future. It’s also important to be aware of new license models and general T&C’s. In short, gathering and understanding as much information as possible about your current SAP estate will ensure you only get what you need when it comes to a negotiation – ensuring both optimization and cost-efficiency.

 

Livingstone Group can meet all your SAP needs

If you’d like to learn more about upcoming SAP trends and how to prepare, make sure to tune in to our SAP Briefing Series.

Our independent consultants already work with many of the world’s largest and most complex organizations, using their specialist expertise to advise on all things SAP: whether that be contract renewals, negotiations, audits, compliance, and much more.

For more information please visit our dedicated SAP page, email us on info@livingstone-group.com, or click on the 'contact us' tab on the side of this page.

 

ABOUT THE AUTHORS

Marco Claassen, Senior Licence Consultant

Marco has extensive experience in the field of SAP Software Licensing and Contract Management:

  • 16+ Years of SAP experience whereof 9 years in management roles
  • Commercial Support Director at SAP for 6 years
  • Fulfilled various roles within SAP related to Contracting, Management, Licensing, Order Management, Deal Structuring and after sales
  • Broad international management experience Leading SAP Contracting teams in Netherlands, Belux and Czech Republic
  • Experienced Change Management agent

 

Alex Meijer, Senior Consultant SAP Licensing

Alex has extensive experience in the field of SAP Software Licensing, Software Asset Management and Compliance:

  • §12 years SAP experience of which 7 years working as a license auditor at SAP
  • Technical head and delivery responsible at JNC Consultancy for 4 years
  • Successfully lead and supported 55 consultancy projects world-wide across various industries; includes several very large multi-nationals
  • Broad expertise including SAP Indirect Access, S/4HANA Conversions, Contract Benchmarking, Commercial Engagement Strategy, Mergers, Acquisitions and Divestitures, Audit Preparation and Defense

 

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