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23 August 2018 | Ignatius Wong, Director, SAP Practice, Asia Pacific
More enterprises today are using SAP S/4HANA as a nucleus for digital transformation. With capabilities such as connecting workflows, delivering live information, and powering better business decision-making, successfully deploying the intelligent ERP suite will give enterprises competitive advantage. But what is the most efficient implementation pathway? Enterprises need to weigh in several factors to make the right decision.
SAP S/4HANA is fast becoming one of the standards for ERP systems. Across the world, SAP S/4HANA adoption has doubled year-on-year, reaching more than 5,400 customers across the globe. In the fourth quarter alone, there were about 1,300 additional SAP S/4HANA customers, of which 30 percent are new.
Organizations in the region are beginning to see the value of SAP S/4HANA as a digital core to power their digital transformation journeys. This intelligent ERP suite is built to connect workflows across the enterprise and value chain to improve productivity, facilitate collaboration, and drive innovation and time-to-market. SAP S/4HANA also offers contextual, role-based suggestion and autonomy to support better decision-making. Organizations can also use SAP S/4HANA to empower business users with live information across operations, allowing them to respond to changing conditions and enhance customer experience.
However, moving to SAP S/4HANA is not a simple task. Enterprises must understand how it affects their business processes and IT infrastructure as a whole. Therefore, one of the most important considerations is to identify the right deployment pathway for SAP S/4HANA. Common modes of deployment include on-premise, public clouds, and private clouds. But there is no “one-size-fits-all” solution and enterprises must choose the option that is right for them, taking into account the following factors:
According to a recent study, more than half of SAP projects were not delivered on budget. Getting provisioning right can be complicated due to the complexity of SAP S/4HANA. Inadequate sizing for SAP S/4HANA leads to unexpected delays and raises operational costs unnecessarily. On the other end of the spectrum, over-provisioning leads to bloated hardware cost, excessive TCO, and underutilized IT capacity.
In order to achieve the right fit, enterprises have to understand SAP S/4HANA sizing and how it affects cost and complexity. They have to consider impacts on IT agility, security provisioning and business downtime.
There are numerous factors that have to be worked through to arrive at the most suitable deployment pathway. With the higher upfront cost of deploying SAP S/4HANA on-premise, enterprises are generally advised to switch from a CAPEX to OPEX financial model. An OPEX model typically includes cloud, which can reduce costs in terms of hardware acquisitions, security capabilities, and technology refresh. But when it comes to the cloud, there are also several roads to choose. Public clouds offer great savings with its “pay-per-use” model but only a small subset of available public cloud instances may be certified for SAP S/4HANA workloads, which is fairly restrictive. Private cloud, on the other hand, offers more control while delivering scalability and flexibility but enterprises have to take on more initial upfront set up costs.
Enterprise IT agility is essential for competitive advantage today. Higher agility translates to rapid digitization, faster time-to-market for products and services as well as shorter time-to-value. But the speed at which IT can meet changing business demands is directly dependent on IT’s alignment and collaboration with the lines-of-business (LOB) that they serve. Hence, when selecting a SAP S/4HANA deployment pathway, enterprises’ IT teams need to ensure that the resulting SAP S/4HANA infrastructure can handle changing workloads according to business needs without affecting performance.
In this respect, on-premise usually involves longer setup periods and are slower to provision. In-house resources have to be allocated away from other duties to perform the implementation. SAP S/4HANA requires special expertise and certifications to manage and operate and these staff might not be readily available to handle the migration. In the long run, enterprises will also run into scalability issues with the need to purchase additional hardware. LOB are then subjected to the timetable of IT procurement cycles, which prevent timely IT responses to business needs.
When it comes to agility, the cloud is usually the better option. Public cloud allows enterprises to provision and de-provision resources rapidly according to the workloads of the season and accommodates sudden increases in traffic. This is especially useful for e-commerce enterprises which experience huge fluctuations in traffic due to holiday seasons and big bang events such as Singles’ Day.
Customizing SAP S/4HANA in the public cloud can be tricky and this is where private cloud can come into play. Enterprises that need more control over their SAP S/4HANA deployment can utilize private clouds to build their own environment that suits their needs. Workloads can be dynamically managed and the shared-resource single-tenanted environment means that the cost of securing the deployment is significantly lower than on-premise.
With the advent of regulations like GDPR, enterprises must also be mindful of compliance regulations when it comes to their SAP S/4HANA deployments. The landscape is becoming more complicated as regulations keep up with advancements in technology and globalization.
In the rush to leverage SAP S/4HANA for digitization, it can be tempting to regard compliance as an afterthought. However, that is a costly mistake as non-compliance costs more than 2.7 times as compared to the investment of taking the right precautions.
Some of the more prominent regulations enterprises need to take note of include Singapore’s PDPA and Hong Kong’s PDPO, which govern the collection, use, disclosure, and care of personal data that organizations have to adhere to. Meanwhile, Singapore-based organizations in the FSI industry have to be aware of outsourcing guidelines. The ABS guidelines for Outsourced Service Providers requires them to leverage services of certified service providers for outsourcing of critical systems and/or systems handling personally identifiable information data of their customers.
When it comes to third-party cloud providers, enterprises should assess vendors for regulations such as SOC 1, SOC 2, SOC 3, PCI, HIPAA, SOX, GLBA, HITECH, FISMA, ISO, NIST, and GDPR. Enterprises using private cloud will be able to manage compliance more closely but they still need to conduct compliance audits aligned to their customers’ needs and industry best practices.
In light of today’s evolving threat landscape, it’s important to not overlook security when selecting a deployment pathway. CenturyLink 2018 Threat Report revealed that an average of 195,000 threats were detected per day in 2017. Hotspots for malicious traffic in Asia Pacific included China, South Korea, and Vietnam. The recent data breach of a national healthcare system also signals the fact that cybercrime has reached a whole new level.
When deciding on a secure deployment option, enterprises can consider the cloud as an option. Despite concerns over the security of the cloud, the fact is that cloud environments are more secure than commonly perceived. Some of the biggest threats in recent times, such as WannaCry, were possible due to old, unpatched versions of Windows. Insider threats are also on the rise due to human error or disgruntled employees. The cloud solves these issues with providers taking on the responsibility of updating software, monitoring threats actively, and providing the talent to detect and respond to threats. Cloud providers are also constantly audited to demonstrate competence and compliance.
The three main deployment pathways are not mutually exclusive. Enterprises can take a “best-of-all-worlds” approach. Instead of sticking to one deployment path, organizations can use a mixture of cloud environments to achieve the transformation and business outcomes they set out for themselves.
But whatever option they choose, the optimal deployment path is one that balances the organization’s business needs, priorities of security, IT agility, and economies of scale to lower TCO.
Enterprises typically do not have the necessary in-house expertise to deploy, operate, and manage SAP S/4HANA. Hence, it is recommended that they partner up with third-party vendors to plug the gap and seek expert consultation on the right path.
A survey found that 57 percent of organizations felt that they had not procured the right balance of third party vendors and internal resources to support business adoption – including 68 percent of procurement personnel.
By teaming up with a trusted provider of SAP solutions, enterprises can concentrate on taking full advantage of the suite to drive their digital transformation and business objectives—instead of being entangled in the hassle of SAP S/4HANA deployment.
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