S/4HANA: What does SAP’s next generation ERP mean for customers?

We explain what SAP's next generation ERP system S/4HANA is, what the benefits are, deployment options, existing customers and pricing details

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For more than four decades enterprise resource planning (ERP) software has been the lifeblood for German technology vendor SAP.

That's why the release of its next generation ERP system, called S/4HANA, in February 2015 was hailed by CEO Bill McDermott as "our biggest launch in 23 years, if not in the entire history of the company".

So what makes S4/HANA different from the past generations of SAP ERP systems? The biggest clue is in the name. The underlying HANA data store, which was first released by SAP in 2010, is built on a fundamentally different architecture to your classic relational database. It runs in-memory, with data stored in columns, allowing for faster, near to real-time analytics and compute capabilities.

Read next: What's the difference between HANA, S/4HANA and HANA Cloud Platform

So with S/4HANA, SAP promises to deliver all core ERP capabilities in one place, with one underlying data store.

However, SAP has had trouble convincing customers, already locked in to their existing ERP deployments and licensing agreements, to move precious assets to S/4, let alone the cloud.

S/4HANA deployment options

SAP customers can now deploy S/4HANA in their own data centre, SAP's private Enterprise Cloud platform, or in the public cloud with IaaS providers AWS, Microsoft Azure or Google Cloud.

Co-founder and chairman of the SAP advisory board Dr Hasso Plattner has even admitted that “in the cloud is our version to aim for” when it comes to getting customers onto S/4HANA.

Read next: How SAP stopped worrying and learned to love the cloud

Benefits

The benefits of S/4 running in-memory include giving the enterprise a centralised, streamlined business suite for firms looking to take advantage of growing data streams - like online sales - and as internet of things (IoT) use cases take off.

At the time of release Plattner evangelised that "in this new system layout, satellite applications do not need their own instance, which furthermore decreases the data volume".

“It also means that only a single database is needed: SAP HANA. As a matter of fact, applications and database will grow together and there will be no distinction between application and database layer.”

SAP also introduced a whole host of machine learning-powered capabilities into S/4HANA with its 1709 release in September 2017.

These intelligent and predictive capabilities come under SAP's new Leonardo brand and are mostly aimed at giving customers real-time insights into their ERP data.

For example, the SAP Cash Application software will now be able to parse through a company’s historical financial clearing data to automatically pair invoices with incoming payments.

The 1709 release also includes line-of-business specific use cases, such as a 'financial closing cockpit' to help finance teams reach entity close faster by automating some closing tasks and revamping the user experience.

Customers

More than two years on, S/4HANA adoption is surging. According to SAP's July 2017 Q2 results, adoption of S4/HANA was up 70 percent year-on-year for customer numbers, now standing at more than 6,000.

One early customer of S/4HANA was plane manufacturer Airbus. It reported an improvement in reporting and data load processing for its HR department after replacing its Oracle database with SAP HANA during the SAP Insider tour in Nice in June 2015.

Since then, professional services firm Deloitte has committed to shift from SAP's R/3 to S/4HANA as it looks to bring consistent finance processes to all staff at the global organisation.

UK gas distributor Northern Gas Networks is also migrating to S/4HANA as it looks towards cutting edge internet of things (IoT) use cases.

Migration

SAP customers have long complained that the migration roadmap for S/4HANA has lacked clarity.

The German company responded in late-2016 with a new SAP Transformation Navigator tool. The idea is that customers lay out their technology landscape for SAP and are then given recommendations for where they should prioritise a shift to S/4HANA and where they can afford to wait.

Read next: SAP responds to S/4HANA roadmap criticism with launch of 'navigator' tool

SAP roadmap lead Peter Maier told Computerworld UK that the feedback they often get is: "SAP, please make sure you give us much more guidance and less choices moving forward."

Simply put, Maier wants the navigator tool to say "here is the solution, the integration and here is how to get from A to B".

Pricing

SAP originally offered S/4HANA for free top customers in the UK and internationally, back in July 2015. Essentially S/4HANA is priced differently depending on the size of the underlying HANA database, the number of seats (named users), and wether the deployment is on-premise or in the cloud. SAP has been criticised by user groups for a lack of pricing clarity for S/4.

Since then SAP has promised to simplify its pricing for the cloud era, after years of customer complaints about complex licensing agreements.

Hala Zeine, SAP corporate development officer wrote in May 2017: “In an agile world where digital reigns supreme, licensing complexity is getting in the way of innovation…Our objective was to make pricing predictable, linked to unit of value, transparent, and consistently applied.”

“We believe value is measured by outcomes. Therefore, our pricing model for the Procure-to-Pay and Order-to-Cash scenarios in ERP (ECC or SAP S/4HANA) will now be based on orders, a measurable business outcome for any business.”

Read next: SAP responds to Diageo indirect licensing case with “modern pricing” approach

Customers hoping for a simple pricing sheet may be accused of wishful thinking, however.

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