Migrating from ECC to S/4HANA: Strategic Lessons from Global Finance Transformations

The enterprise software market is undergoing a point of no return every few years. And that is just around the corner for SAP customers still on ECC. With the mainstream maintenance of ECC by SAP about to be over soon, the impetus to S/4HANA is no longer a question of the future state. It is ongoing, and finance teams are assuming center stage.

Following the experience of a few mass migrations being put into effect in the manufacturing, retail, and financial services sectors, there are two trends that can be identified in the companies that have landed on their feet and those that continue to put the pieces together years on. In this posting, I will tarry about those teachings of strategy that are actually significant when you need to move the financial nucleus.

The Data Problem Is Almost Always Underestimated

The project owners continually underestimate the data migration effort, even though they can listen to the project sponsors talking about it in the discovery stage several times. Thirteen-, fifteen-, or twenty-year-old ECC systems can represent a source of unbelievable technical debt: vendors who are duplicated, an irregular account structure across GLs, cost centers that are open and ought to have been closed years ago, as well as items that no one dares touch.

The Universal Journal of S/4HANA is an architecture that is truly different. One of the most radical structural changes that the product has ever undergone is the combination of FI and CO into a single table (ACDOCA), and that, regardless of how many inconsistencies you have today, will be either fixed before go-live or all the reporting headaches over the years.

Organizations which are effectively operating in this region will be inclined to implement a data quality program 6–12 months before technical migration. They view it as a finance project as opposed to an IT project. Data are owned by the business. It is just cleaned up by means of IT.

Greenfield vs. Brownfield: The Decision Has More Nuance Than People Admit

The question of whether it is best to implement a greenfield or carry out a system conversion is a controversial matter. Greenfield proponents cite the opportunity to re-architect processes, do away with customizations, and use best practices at SAP. Brownfield proponents reckon that there are such advantages as speed, reduced risk, and conservation of institutional memory that is implicated in the current system.

In reality, the majority of the changes in finance throughout the world fall in between. A hybrid/selective data transition solution enables organizations to maintain the master data and open items they need and be able to redesign key process areas. This is especially so with finance, where the functioning of some settings, such as intercompany elimination logic or currency revaluation procedures, are inseparably tied to the functioning of the business.

The struggling organizations tend to be those who choose a course of action based on what the implementation partner is selling most, as opposed to what is appropriate in the business scenario. This should start with a hard eye-opener of just how far your existing setup goes in any way beyond what your business is really differentiated.

Central Finance as a Migration Path Deserves More Attention

Central Finance (CFIN) does not have the credit it deserves as a valid migration strategy. Instead of the big-bang cutover, CFIN provides organizations with the ability to capture financial transactions from the original ECC system to an S/4HANA Central Finance system in near real time. The company continues to operate on ECC, and finance departments are starting to report, consolidate, and plan on S/4HANA.

This method has some practical drawbacks. You are operating two systems at the same time and thus it is difficult to use and expensive. And at some time or another, you have to cross the operating systems. However, in the case of large multi-entity organizations where a single cutover indeed is too risky, CFIN might be an option to de-risk the transformation and to build S/4HANA competency before the whole migration.

A variety of international companies in consumer goods and in life sciences, where CFIN is the first phase of a multi-year change rather than a workaround, have successfully implemented this strategy.

Change Management in Finance Is Different From the Rest of the Business

Finance users are procedural, risk averse, and are very attached to the existing processes in place, especially at the end-of-period close. One sure way of creating friction is to notify a controller that there is a change to the month-end close sequence right before go-live.

The best migrations are those where the finance leaders are active sponsors in the migration, as compared to budget approvers. Having the VP of Finance, or the CFO, present during design workshops sends the message that it is not finance that is being pressed into this activity, but that finance is actually leading the activity.

The training must also be role-based and scenario-based. It is not about training them to use generic systems to direct the user on how to deal with the transaction codes, and putting him/her under the strain of having to operate the new system during the first close. Close exercises (simulated) in the quality environment, using real data and realistic timelines, are much more valuable.

The Go-Live Is Not the Finish Line

A lot of the transformations become stable or unstable during the course of the earliest post-go-live period. Hypercare coverage should be with optimum staffing, particularly during the first month-end close. Period-end deadlines render theoretical matters in the process of testing something too real.

Companies that include a specified period of hypercare in the project schedule, with well-defined escalation curves and special support centers, will always perform better than those that hope that everything will settle down in the near future.

One of the huge technologies of finance that an organization would implement during this decade is the S/4HANA migration. The technical element is real, but the strategic and organizational element that most impacts whether the transformation will yield the value it is intended to yield is the strategic and organizational element.
 

Kajendran Jayaraman