Common Risks in S/4HANA Migration & How to Overcome

Large companies use ERP systems to link financial, procurement, and supply chain processes for effective and efficient work. Nevertheless, the fast pace of digital transformation which affects almost all facets of work and business has made it necessary for firms to update their ERP systems in order to keep up with market changes as well as remain adaptable toward meeting new demands.

SAP is one of the world’s leading ERP system providers, who have released in the past decades the most popular ERP systems - SAP R/3 and SAP ERP. As these tools are currently considered legacy systems, organizations that seek to stay competitive in the modern digital world tend to make the “natural” choice and migrate to their successor - SAP S/4HANA.

While the S/4HANA migration holds clear benefits such as better performance, more straightforward processes, and advanced analytics, it also includes numerous hurdles. In this article, we will look at common risks associated with a S/4HANA migration and how they can be effectively mitigated.

What is SAP S/4HANA?

SAP S/4HANA is a modern ERP software that runs on the SAP HANA in-memory database. Introduced in 2015, the software aims to help enterprises with modern, digital world dynamic needs, and speed up business processes with increased efficiency. Due to the power of the HANA database, this system enables faster transaction processing, advanced data modeling, and real-time reporting capabilities. Organizations can decide, according to their needs, whether to deploy SAP S/4HANA in a private cloud, public cloud, or on-premises.

Moreover, S/4HANA works seamlessly with other SAP programs as well as third-party systems. so everything is connected – finance, supply chain management, human resource management, etc. This provides enterprises that most likely use various tools among different teams and departments, to be handled from one place.

Benefits of a SAP S/4HANA Migration

Migrating to SAP S/4HANA offers various notable advantages:

1. Simplified Data Models: The in-memory HANA database allows for simplified data models, reducing complexity and improving performance. With faster data processing and more efficient use of resources, businesses can handle larger datasets and work faster than before.

2. Enhanced User Experience: The modern Fiori user interface offers an intuitive user experience compared to legacy ERP systems. This user-friendly interface helps staff members reduce the learning curve and start working with the system faster.

3. Advanced Capabilities: S/4HANA includes advanced capabilities such as AI and machine learning, mainly for real-time analytics and process automation. These capabilities will help organizations to quicker decision-making, which is critical for industries that rely on timely insights, such as retail, manufacturing, and finance.

4. Multiple Business Processes Integration: The integration of multiple business processes across different domains in the organization into S/4HANA, helps in improving efficiency and reducing the need for re-work. This centralized comprehensive system ensures that all departments are aligned and working towards common goals and mitigating the risk of errors. For example, seamless integration between finance and supply chain management can improve inventory control and financial planning.

Common Risks in S/4HANA Migration

Despite the clear benefits of using SAP S/4HANA, the migration process includes various risks. Here are some common challenges that organizations face:

#1 Data Migration Challenges

Probably the most critical and error-prone stage is data migration to S/4HANA. The process of transferring data from legacy systems to the new platform is for the most part the most complex one, with high risks including data loss, data corruption, and data integrity issues which can severely harm business operations.

Data migration issues can occur when there are differences in data formats or field gaps between legacy systems and the new ERP system. For example, organizations may have duplicate records in their old system, which can lead to problems during migration. As a result, the migration process is an excellent opportunity for data cleaning to ensure you migrate only relevant data and accurate data. However, this adds another layer of complexity and requires valuable resources.

#2 Lack of Planning and Migration Strategy

To avoid any issues or at least mitigate them as much as possible, prior to the migration process the organization should make a comprehensive plan and include choosing the right strategy. Without a proper plan, the success of the migration project is a risk and may lead to delays, cost overruns, and data issues. It is essential to establish a clear S/4HANA migration path, including a detailed timeline of each phase, resource allocation, and risk management plan. There are some companies that also use consulting services that specialize in migration processes to validate that their plan covers all important aspects.

#3 Technical and Operational Risks

The migration process is exposed to lots of risks from technical aspects such as system integration issues and infrastructure requirements. And as organizations have different needs, Each one of them should evaluate their level of technical readiness toward migration. Another very important parameter that has to be taken into account is the proper implementation of the integration with third-party tools since it directly impacts business operations and the ability to maintain service levels.

#4 Customization and Compatibility Issues

Since ERP systems are so complex and comprehensive, companies have been using the same tools for many years and only replacing them when they become outdated. During the years of use, organizations probably made deep customizations to their legacy systems in order to make them convenient for their use, but those areas might be difficult to support in S/4HANA. Some of the customized ABAP source code, for instance, must be modified, as the SAP code has been drastically simplified, and in some cases, not in a manner that is backward compatible.

#5 Lack of Expertise

When the migration process includes a large volume of data and many technical elements, it becomes highly complex and requires skilled staff members. While some organizations may have these staff members in-house, others may not which may hinder the migration process and cause delays.

Mitigation Strategies

To address the common risks we mentioned above, organizations can implement the following mitigation strategies as part of S/4HANA migration steps:

Comprehensive Planning

The first thing to do is to plan the migration process. Even though that may seem like the most obvious thing to do, it’s so easy to unintentionally miss critical elements. Planning must include a close review of the IT infrastructure at the present moment as organizations must map the entire process of migration: from initial preparation and data migration to testing and going live.

A significant part of the planning process should be risk assessment, as it helps prepare for challenges that may arise and reduces the likelihood of unexpected issues. Based on this evaluation, you should define the timeframe for and allocate the needed resources that will help you meet your desired timelines and succeed in the migration project. Without a detailed plan, teams will likely encounter unexpected challenges that can derail the project.

Data Quality and Validation

Another crucial and key part of the planning process is to conduct data validation. In this phase, you should map the existing system to understand what data is important and needs to be moved over to S/4HANA and be left at the current system to avoid overloading. Organizations can leverage the S/4HANA migration cockpit, which provides preconfigured migration objects and templates, and enables streamlining the data migration process. This tool allows organizations to standardize S/4HANA data migration activities and ensures fewer errors and a faster timeline for the whole S/4HANA migration process.

Ensure Technical Readiness

Ensure that your IT infrastructure meets the technical requirements of migrating to S/4HANA. Whether choosing to migrate to the cloud or working with the on-premises version, you should invest in the necessary hardware, software, and network upgrades to support the new system in the best way possible. Early detailed technical assessment of the project to identify possible infrastructure gaps allows timely upgrades to be done.

Collaborate With Experience Partners

A complex migration process is where partnering with experienced consultants will add value in terms of insight and best practices for successful migration. Collaboration with SAP consultants with rich experience in migration to S/4HANA may help one tackle most of the technical challenges and guarantee a seamless transformation into S/4HANA. Such experts would provide you with custom solutions and strategies that would meet maximally the particular needs and goals of your business.

Importance of Using a Test Management Platform

In addition to the advanced capabilities and benefits of implementing SAP S/4HANA, enterprises must also utilize a dedicated test management platform such as PractiTest. Those platforms provide large companies with a centralized hub to effectively manage and track their QA work from end to end. Using a test management platform complements the QA needs that are not covered by ERP systems alone. A test management platform enables organizations to:

1. Consolidate Testing Efforts: Integrate manual and automated testing efforts into a single, cohesive platform, ensuring thorough coverage and easy access to everything.

2. Enhance Control and Visibility: Provide greater oversight of testing activities, allowing for better tracking, reporting, and improving weak areas.

3. Support Comprehensive QA Needs: A QA-dedicated platform that covers all aspects of QA from A to Z, including requirements, defects, and tests.

4. Improve Collaboration: Facilitate communication and coordination among teams that are involved in the QA work and also ensure that stakeholders have access to critical information and updates.

To Sum Up

Migrating to SAP S/4HANA is a complex and challenging process that requires careful planning, execution, and risk management. While the benefits for an organization that has adopted S/4HANA can be substantial, it is important for the organization to be aware of the common risks associated with it and how they can be mitigated to ensure a successful migration. By ensuring comprehensive planning, addressing data migration challenges, and adopting a structured approach to S/4HANA migration, businesses can achieve their desired outcomes, realize significant operational improvements, and drive future growth.