Insight

SAP Insight: S/4HANA – What, why, when and how?

Insight

s4hana license migration

Understanding SAP’s next generation application ERP – a whole new technical and licensing suite.

S/4HANA is the new and improved version of the classic ERP (Enterprise Resource Planning), commonly known as the Business Suite or ECC.

A key technical difference is that the S/4HANA platform has been optimized for SAP’s HANA database, and is therefore only able to run their own database. The ECC system allows you to run your own choice of database, for example Microsoft, IBM or Oracle.

A key licensing difference is that you no longer need named user licenses to access packages; the package license covers this usage. You only need S/4HANA user licenses for the Digital Core.

Importantly, SAP does not consider this as a legal successor to ECC, but rather a completely new product. This means there are strict restrictions in what you can and can’t do before, while and after transitioning to S/4HANA.

 S/4HANA – Why should I move?

There are two main reasons your organization might switch to S/4HANA.

First, SAP is only offering mainstream support for Business Suite until the end of 2027. As SAP is critical to the running of your business, it is not advisable to run your SAP estate unsupported. Technology is moving fast. If you choose to stay with SAP, migrating to S/4HANA is almost inevitable as SAP ERP becomes outdated.

Second, S/4HANA comes with many added benefits, including in-memory technology and simplifications in coding and tables.

You also have the excellent opportunity to cash in your old, unused licenses for credit towards your purchase.

Have you encountered any of these common problems with your SAP contracts:

  • Your complex contract history makes it unclear what your rights are and what you own
  • You need to pay maintenance on old, unused licenses
  • Your organization’s needs have changed and the license entitlement no longer reflect your needs

If any of these points apply to you, an S/4HANA migration gives you the opportunity to upgrade your software and restructure your licensing estate. As S/4HANA is a completely new licensing model, your old licenses are eligible to be traded in for credit against your S/4HANA purchase. Of course, terms and conditions apply.

S/4HANA – How do I begin this process?

Understanding the process of your S/4HANA migration means you can time it appropriately. The process can take years to fully complete, so being able to map out the steps helps you to plan effectively.

This diagram shows the ITAA process we have executed for customers going through an S/4HANA migration.

 

The left-hand side looks at what you currently own and how many licenses you are consuming. We compare this against your roadmap, and identify where you require S/4HANA licenses based on your current licensing position and future plans for SAP.

We can then provide you with a list of products that you would require for your migration. The route here splits into two for your license migration options.

SAP currently offers two methods of migrating your licensing to S/4HANA: Contract conversion and product conversion.

Contract conversion

The premise of this option is that you can turn your entire SAP contract history into credit. This credit can then be used to purchase your S/4HANA licenses and you negotiate a new contract with SAP.

Product conversion

For this option, you are able to move your contract from ECC to S/4HANA piece by piece. Each product you own will be mapped to the S/4 equivalent.

With either option, you can leverage existing ‘Classic’ applications until 2025. This means you can continue to use your ECC applications in conjunction with your S/4HANA applications, as long as:

  • You comply with license levels across both applications based on the S/4HANA metric level
  • You continue to use third-party DB such as Oracle, MS, DB2 until usage stops (this is not terminated, it is invoiced).

Once you have decided the best option, we look at the right-hand side of the diagram. With all the tools needed to understand what you own, what you require and your contractual changes, we can start looking at the commercial and negotiation strategy. Using ITAA’s expertise means you can benchmark your pricing and achieve the outcome that’s best for your organization.

S/4HANA – Anything else I should be considering?

We often see companies using third parties to help with their technical S/4HANA migration. While this can be an effective strategy, we would advise caution around the licensing aspect.

We have seen cases where implementation partners have been given the responsibility of managing the licenses and determining what is required, despite not being licensing experts. Typically, this leads to a licensing estate with a suboptimal number of licenses, a lower than achievable discount level (benchmarking), missed opportunities for optimizing the type of licence, a lack of flexibility post-migration or a suboptimal approach in phasing the transition (mix of product and contract conversions).

This all culminates in much higher running costs than necessary.

Proactive is always better than reactive. License migration always comes before technical migration. Engaging expert support before or during your migration can prevent problems from happening in the first place.

ITAA can assist you with every step of your S/4HANA migration, from the first consideration to final implementation.

Get in touch to speak with one of our expert consultants.

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