Legacy ERP systems are rigid and difficult to scale – and make it more challenging than it should be to adapt to evolving needs, expand globally and respond to market demands. Legacy ERP systems are also increasingly incompatible with modern software and emerging technologies. This creates major barriers for adopting new applications, integrating AI-driven capabilities, and receiving regular updates.
The difficulty of integrating newer technologies with outdated ERP systems limits a business’s ability to streamline operations, gain valuable insights, and drive innovation. And we all know enterprises that can’t adapt to industry trends put themselves at a competitive disadvantage.
Many manufacturers are using SAP ERP Central Component (ECC), which will terminate mainline support in 2027. Though extended support will be available through 2030, it will come at a premium. Organizations on an ECC landscape are at an inflection point. They need to either transition to S/4HANA or re-platform their existing ECC workloads and augment their existing infrastructure with non-SAP S/4HANA applications.
But why wait?
The cost of integrating AI, IoT and other modern technologies with legacy ERP systems can surpass the cost of transitioning to a platform that was natively built for these capabilities.
Most organizations know that transitioning to SAP S/4HANA is an opportunity to reduce technical debt and optimize operational processes.
Here are some additional advantages:
Though the advantages of transitioning to S/4 HANA are clear, migrating is no small task, and barriers can seem overwhelming.
Organizations will make the decision to move to S/4HANA based on its perceived ability to achieve business outcomes at reasonable cost. SAP is having market challenges in the U.S., where its S/4HANA adoption rates have been anemic. It’s worth noting that enterprises that delay adoption may struggle to secure ERP and SAP resources without paying a premium due to rising market demand. This urgency highlights the risks associated with accumulating technical debt, which can leave manufacturers unaware of critical gaps in their systems.
To address this, SAP offers a “Readiness Check” tool that helps organizations assess whether a “brownfield,” “greenfield” or “a bluefield (hybrid)” implementation is the best fit. Choosing a migration path is the first step in the transformation journey.
Enterprises can face challenges when migrating from an older ERP system to S/4 HANA. Common challenges include:
Downtime risks: Poor planning can lead to business disruptions during the migration.
Migrating to SAP S/4HANA typically takes between 12 to 18 months. Given the unpredictability of the migration journey, it is important to begin transitioning to the right ERP solution as early as possible. An early start allows organizations more time to implement changes effectively, minimize disruptions and reduce costs.
Here are a few strategic considerations to help determine the optimal time for migration.
Resource availability: With the 2027 deadline approaching, the demand for skilled consultants and service providers is increasing. Early planning and securing the necessary expertise can help mitigate the risk of resource shortages and implementation delays.
Over countless projects helping manufacturers manage SAP implementation, we understand the journey.
Each phase should include a clear plan for organizational change management.
Strategic Roadmap: The strategic roadmap serves as the foundational guide for an organization’s SAP migration journey, delineating the vision and objectives that align with overall business goals. This roadmap is essential for establishing clear outcomes that the organization aims to achieve post-migration, such as improved operational efficiency, reduced costs and enhanced user experiences. It involves engaging key stakeholders across the organization to gather input and ensure their alignment with these objectives, fostering a collective commitment to the project.
Phase 0 Readiness: Phase 0 readiness is a critical preparatory step that focuses on evaluating the organization’s existing capabilities and overall preparedness for SAP migration. During this phase, a comprehensive assessment of the current state of SAP environments, applications and customizations is conducted to understand the potential impact of the migration. This assessment includes a gap analysis to identify discrepancies between the current capabilities and the future requirements of the organization, thereby prioritizing initiatives accordingly.
SAP Licensing: A vital aspect of the migration journey is fully understanding and optimizing SAP licensing agreements to ensure the organization effectively manages its software costs. This process begins with an assessment of the various license types required for the S/4HANA environment, including user types and consumption models that best fit the organization's needs.
SI Selection and Contracting: Selecting a SI is a critical decision in the SAP migration journey, as the right partner can significantly impact the success of the implementation. This process begins with defining evaluation criteria that assess potential SIs based on their expertise, experience and capability in performing SAP migrations.
SAP Activate: SAP Activate is a comprehensive methodology that provides a structured approach for implementing SAP solutions, guiding organizations through the complexities of migration. This framework includes a set of tools and methodologies designed to enhance efficiency and minimize risks.
Ongoing Operations: Once the migration to SAP S/4HANA is complete, the focus shifts to ongoing operations, which are essential for maintaining performance and optimizing the newly established SAP environment. This phase involves establishing comprehensive monitoring and support systems to track performance metrics and address user inquiries or technical issues that may arise.
A global phosphate and potash minerals company needed to migrate from ECC to S/4HANA delivered under RISE with SAP, Private Cloud Edition using SAP’s Cloud Extension Policy in four weeks. It also needed to secure market competitive pricing and commercial terms.
ISG assessed the RISE with SAP proposal and found uncompetitive costs, significant risks and financial liability unknown to the company, including higher subscription costs than the market benchmark and annual cost increases of 3.3% in the term of the agreement. It also found a lack of price protection and a locked cloud Bill of Materials that caused concern for shelfware risks based on the client’s product roadmap.
ISG devised a strategy that positioned it as the relationship and deal facilitator to support the company with licensing, pricing and contracting in its non-negotiable deal window. The result included $7.3 million in savings on total RISE With SAP subscription costs over a five-year subscription term. We also retained the company’s ECC licenses and secured the right to use them in parallel with S/4HANA to reduce the risk of lock-in on the RISE solution. We also negotiated an annual product substitution right that allows the enterprise to swap products as needed based on any changes in its SAP roadmap.
In another case study, an Australian agricultural co-operative needed to adopt S/4HANA and wanted to ensure market aligned pricing. ISG deployed a team of experienced SAP licensing, contracting and pricing advisors to create a proforma total cost of ownership assessment and develop a strategy to meet the company’s key commercial requirements.
With ISG as the relationship and deal facilitator, the company was able to establish a contracting timeline to meet the company’s revenue timing forecast, secure tiered price protection for expansion and new products and maintain annual cloud exchange rights and assignment and transition assistance rights.
ISG made sure the company achieved its key target outcomes by:
Enabling the company to protect its investment in the non-terminable subscription products by allowing to exchange, starting on month 18, any unused software products or other products within its Bill of Materials
As SAP ECC 6.0 support nears its end, organizations face a crucial decision: transition to S/4HANA or re-platform their existing ECC workloads. By embracing SAP S/4HANA, manufacturing companies can unlock new efficiencies, optimize processes and secure their competitive edge in an increasingly digital world. This transition offers significant benefits, including reduced technical debt and access to advanced functionalities.
Even with these advantages, the transition can be complex. ISG's industry-specific expertise, licensing negotiation skills, strategic assessment, change management programs and continuous improvement support ensure a successful migration to SAP S/4HANA.
Our comprehensive support includes:
Risk management: Ensuring compliance with industry standards and managing transition risks proactively to avoid unexpected challenges.
Contact us today to learn more about how we can assist with your SAP S/4HANA migration. Let us help you navigate this critical transformation and drive your business forward.