Deloitte is in the process of upgrading from R/3 to S/4HANA for its enterprise resource planning (ERP) needs, as it looks to bring consistent finance processes to all staff at the global organisation.
Speaking at the SAP Innovation Forum in London this week, Paul Bray, the system integration partner to Deloitte as it implements S/4HANA, explained how the rollout is going, some of the integration and change management challenges and what benefits the professional services firm expects to see.
Shifting from R/3
Deloitte was an early adopter of SAP's R/3 ERP system back in 1995 despite it "not really being designed to be used by a professional services firm," Bray said. "So guess what? We customised the hell out of it," he added, with more than 33,000 SAP finance customisations made over 20 years.
Over the years Deloitte has adopted some of the professional services-specific editions of SAP software, but was still facing the typical challenges of having an ageing system. Namely, long run times, maintenance issues, little flexibility due to the number of customisations, and outages. Now it is looking to fully upgrade to the next-generation S/4HANA suite, which is built on the software vendor's in-memory HANA database.
Deloitte hopes that a shift to a fit-for-purpose system like S/4, which comes with integrated analytics, planning and forecasting capabilities, will help its finance staff to move away from a cultural dependence on Microsoft Excel spreadsheets. Bray said that the company currently has a reporting catalogue of more than 6,000 spreadsheets in the USA alone, and "I know we have over 3,000 reports in the UK too", he added.
Deloitte's plan to modernise its finance processes is internally named SWIFT. The project was signed off in June 2016 and included a full upgrade to SAP S/4HANA Finance. The accounting firm will be running S/4 on-premise for the time being as "no one was prepared to put the crown jewels in the cloud at this time," Bray admitted.
Ten key financial processes will be brought up to date: client-to-cash, procure-to-pay, planning, forecasting, analytics, taxation, partner accounting, time management, asset management and record-to-report.
In the build up to implementation Bray canvassed hundreds of staff to map their core business processes, something he described as "incredibly painful".
He explained: "We had representatives from all of the firms and if I had a pound for every time I heard the word 'unique' I would have been a very rich man." This change management was necessary if the organisation was to get anywhere near to consistent global processes though.
As the Deloitte business has shifted away from fixed-fee activities like accounting into more recurring consulting activities, the way it recognised revenue has had to change. The existing SAP system has been pushed to its limits by the increased need to recognise ongoing subscription billing, instead of traditional fixed fees.
As Bray said: "We do have some pretty arcane processes in how we run projects and recognise revenue. So how does a time and materials based project system cope with that? The answer is: it simply doesn't."
In terms of general change management Bray said: "The technology is actually quite easy, apart from the integration aspects, but we have a massive behavioural change to implement within our business to get people to follow the disciplines, processes and policies that we are putting in place and I don't underestimate that."
Global Finance Platform
The overall aim is to create a "global finance platform" at Deloitte, something Bray describes as a "once in a generation opportunity".
He envisions benefits ranging from operational cost savings to productivity gains. Specifically, having shared processes underpinned by S/4HANA allows for global data sharing across member firms, something Bray said was "a manual enterprise" before.
This decision did cause some internal disagreements, though, as a number of Deloitte departments "were very sensitive about having their client data held in the US," Bray said. "We have had to put some encryption facilities in for extremely sensitive government and private tax clients it can be encrypted at source."
Deloitte is rolling out the latest SAP finance ERP system in waves, starting with the US to go live in September, the UK in June 2018 and Australia soon after in July-August.
Bray said that the implementation is generally going to plan, but admits "one of the problems we have had is the release cycles of S/4. Particularly in terms of [version] 1610, which came out late and did cause us a problem. So we have been using up a lot of our time contingency because of those issues."
Deloitte is also implementing SAP's procurement solution Ariba alongside the S/4 upgrade, but is going live in the UK first. Bray believes that the operating savings a better procurement system would bring could essentially offset the local implementation costs for the S/4 project.
He explained that by bringing a greater share of procurement into formal purchase processes the organisation could save £10 million a year, "mainly around using preferred suppliers to save money based on volume discounts and not using individual suppliers just because we can, and also authorising expenditure before it happened."