2    Customer Use Cases: Who Should Use SAP S/4HANA Cloud?

SAP S/4HANA Cloud’s use case within the market ranges from start‐ups to Fortune 1000. This exciting new cloud SaaS ERP [offering] is changing the game.

—Brent Reed, SAP S/4HANA Cloud National COO

In the previous chapter, we introduced SAP S/4HANA Cloud. We explored the product’s functionality at a high level, its positioning within the SAP ERP landscape, why cloud as a platform makes sense, and what it takes to support SAP S/4HANA Cloud in postproduction. Hopefully, you established a sound understanding of what SAP S/4HANA Cloud is; now, we’ll begin to discuss who the potential candidates are for SAP S/4HANA Cloud.

In this chapter, we’ll delve deeper into which organizations—both big and small—are best positioned to make the most out of SAP S/4HANA Cloud and drive the biggest return on investment (ROI). Regardless of how robust a given software package is; how much potential it has to positively impact your business; and the myriad features and functions it possesses, deciding to ultimately implement that software for your company is not solely based on those factors.

Behind the Curtain: Who’s It For?

At first glance, you might believe that SAP S/4HANA Cloud is meant for only a specific subset of customers. In fact, the messaging directly from the mothership indicates that SAP S/4HANA Cloud is best positioned for customers with more than 1,500 users. However, the action on the street is different; organizations with employee bases of as few as 20 full-time employees are purchasing the software. The primary reason in our opinion for this positioning is the “crowded” set of SAP software already positioned within the small to midsize market (SME), loosely defined as companies with annual revenue or turnover of less than $1 billion. With SAP Business ByDesign and SAP Business One marketed as solutions for this stratosphere, SAP’s attempt to position another product within this realm could cause confusion. However, we believe that SAP’s positioning of SAP S/4HANA Cloud will gel quickly as the product matures and other products are pastured.

SAP S/4HANA Cloud is SAP’s strategic SaaS ERP product and is being positioned as the primary ERP for organizations not looking for on-premise solutions. In the following section, we’ll examine the most viable candidates to use SAP S/4HANA Cloud as a core IT solution that can deliver meaningful business value.

2.1    ERP in the Cloud

Everything is moving to the cloud. In a recent IT analyst report (http://www.gartner.com/newsroom/id/3616417), Gartner—one of the industry’s most highly respected researching bellwethers—predicts that worldwide public cloud services adoption will grow by 18 percent in 2017 alone. Cloud adoption is no longer foreign to business and decision makers; conversely, cloud services are a major driver for companies. Table 2.1 summarizes Gartner’s worldwide public cloud services forecast.

2016 2017 2018 2019 2020
Cloud business process services 40,812 43,772 47,556 51,652 56,176
Cloud application infrastructure services (PaaS) 7,169 8,851 10,616 12.580 14,798
Cloud application services (SaaS) 38,567 46,331 55,143 64,870 75,734
Cloud management and security services 7,150 8,767 10,427 12,159 14,004
Cloud system infrastructure services (IaaS) 25,290 34,603 45,559 57,897 71,552
Cloud advertising 90,257 104,516 118,520 133,566 151,091
Total market 209,244 246,841 287,820 332,723 383,355

Table 2.1    Gartner Study: Worldwide Public Cloud Services Forecast (in Millions of Dollars)

SAP’s business model and its strategic direction is either to build new cloud software natively or purchase best-of-breed complementary products and integrate them into the SAP product portfolio. From the building perspective, SAP Cloud Platform (formerly called SAP HANA Cloud Platform) is creating an entire blossoming ecosystem for new SAP cloud development. (For more information, check out SAP Startup Focus at http://startups.sap.com/.) From a buying perspective, SAP has been acquiring best-of-breed software market leaders such as Concur (for time and expenses), Hybris (for e-commerce), SuccessFactors (for human resources), and several others—all focused on bolstering its cloud offerings.

For customers looking to embrace ERP in the cloud, SAP S/4HANA Cloud is a viable solution. There are myriad reasons that cloud-based ERP products work well for businesses. In the following sections, we’ll dig into some of the specific reasons that an organization focused on cloud would be interested in SAP S/4HANA Cloud.

2.1.1    Minimal IT Spend

SAP S/4HANA Cloud provides tremendous benefits for organizations focused on minimizing costs as part of an ERP deployment. From software purchase through long-term support, SAP S/4HANA Cloud lowers an organization’s spending and investment in software systems and support. With previous SAP options for robust ERP software deployment, companies needed to deploy significant capital across myriad areas, including upfront software purchase; necessary infrastructure, such as servers, operating systems, database, and the like; small armies of human capital, whether internal (full-time employees) or external (third-party consultants); and postproduction IT mechanisms to support the installed ERP system.

With the advent of ERP SaaS and SAP S/4HANA Cloud, most of these expenses are eliminated or greatly reduced. Thus, for organizations driven by cost savings first and foremost, SAP S/4HANA Cloud solves many problems.

Table 2.2 describes the different cost savings opportunities made available by implementing SAP S/4HANA Cloud.

Cost Component Cost Savings Opportunity
Software SaaS-based pricing allows for payment per user, per month.
Infrastructure No infrastructure costs are required to be paid separately. Infrastructure costs are embedded into the overall payment per user, per month pricing.
Implementation SAP S/4HANA Cloud implementation timeframes are drastically shorter than those of traditional SAP ERP projects. A general rule of thumb is that the implementation cost is between one and two times the cost of the annual software. For example, if an SAP S/4HANA Cloud subscription costs $100,000 per year, then the estimated implementation cost should be between $100,000 and $200,000.
Postproduction support In the past, the support needs of an SAP production environment were massive. Even for a small SAP ERP deployment, the SAP production support team needed to include at least three people. With an additional 30 percent burden, the internal support cost would be expensive. The same holds true for leveraging third-party SAP production support services. However, with SAP S/4HANA Cloud, postproduction support is essentially nonexistent, because the software is directly supported by SAP; also, because configuration is minimal, any “config” changes can be handled by strong business users. (The one noteworthy exception relates to any extensibility scenarios, such as SAP Cloud Platform development, for which some technical knowledge will be required.)

Table 2.2    Cost Savings Opportunities When Deploying SAP S/4HANA Cloud

Therefore, the cost to deploy SAP S/4HANA Cloud is very reasonable, relatively speaking, enabling even organizations with small ERP deployment budgets to be able to afford the initial implementation and long-term product sustainability.

2.1.2    International Businesses

SAP S/4HANA Cloud is a viable solution for international businesses. Organizations with business units, satellite offices, acquisitions, remote plants, workplaces with poor connectivity, and so on spread throughout disparate regions across the globe make a strong case for implementing SAP S/4HANA Cloud.

In previous SAP ERP releases, such as SAP R/2, SAP R/3, and SAP ERP, companies looking for a holistic SAP-deployed platform were left with several choices for how to create an integrated perspective, as follows:

With SAP S/4HANA Cloud, companies now can truly integrate disparate business units via a multipronged SAP approach by leveraging SAP S/4HANA Cloud within the distributed regions and on-premise SAP S/4HANA for the corporate headquarters.

In addition, SAP S/4HANA Cloud can be leveraged for multinational organizations as the only SAP ERP platform, depending on the functionality required for the greater business. If core SAP ERP functionality tackles a large percentage of the business requirements, then SAP S/4HANA Cloud can be deployed if the specific localizations (language, country, and legal requirements) have been deployed as part of the solution set. (At the time of writing, SAP currently supports 21 countries and is continuing to increase this number.)

Behind the Curtain: Magic Number

To determine if SAP S/4HANA Cloud is the right solution for an organization, we typically recommend an out-of-the-box functionality fit of approximately 80 percent—meaning that if an organization’s business requirements are 80 percent handled appropriately though base configuration and product functionality, the organization passes the litmus test for implementation. Although this is just an approximation, in our experience it’s a great barometer. The other 20 percent of an organization’s requirements typically can be handled through either organizational change management or integration with other complementary products (whether SAP or non-SAP) via SAP Cloud Platform or API direct point-to-point integration.

Another potential SAP S/4HANA Cloud application for international businesses is the opportunity to standardize processes across multiple regions. For geographically dispersed organizations, maintaining consistent operational processes and procedures can be challenging. After coupling multinational remote locations with complex ERP business software, many organizations are left with misaligned methods for standard ways of doing business.

When leveraging SAP S/4HANA Cloud as a cloud-based ERP offering with minimal configuration options, the end user (and business) is provided with only a limited number of ways of performing a task. This might also hold true for standard templatized SAP implementations, the mere fact that SAP S/4HANA Cloud is a SaaS product creates not only an organizational foundation but also a corporate mandate and governance. Simply put, the psychology associated with SAP ERP SaaS specifically makes governance stronger.

2.1.3    Outsourced IT

As part of the quest to reduce overall organizational costs, most organizations are looking for ways to reduce IT expenses. In the 2000s, with the surge in managed hosting, businesses began to dip their toes into the water of outsourced infrastructure providers and services. Today, hosting is a commodity and ubiquitous. If organizations aren’t exploring hosting, they’re missing a tremendous cost savings opportunity.

Similarly, within the SAP world, organizations are looking for ways to minimize SAP production support costs while maintaining a strategic business-facing workforce. With SAP S/4HANA Cloud, the argument for templatized ERP grows even stronger.

SAP S/4HANA Cloud, with its multitenant, cloud-based, SAP-supported software, requires little configuration knowledge. This model is vastly different than that of SAP S/4HANA or previous SAP ERP versions such as SAP R/3, SAP ERP 5.0, and SAP ERP 6.0. For previous SAP ERP platforms, numerous skillsets, knowledge pockets, technical skills, and corresponding workforces were required to effectively support a diverse and complex, highly configurable on-premise solution. Even in the most “basic” of previous SAP ERP landscapes, typically a minimum workforce of four skillsets would be required for basic support. Staple SAP skillsets such as ABAP (SAP development), SAP Basis (SAP administration), security (SAP role compliance and risk mitigation), and a minimum of at least one SAP functional area (such as finance, manufacturing, or sales) were necessary competencies. Although not all these skillsets necessarily required a full-time resource, they still needed to be supported via a combination of human beings.

Another fascinating fact emerging within the IT world and specifically the higher end of business software (including SAP, of course) is the rise of the contingent workforce. With trends continuing to move towards independent contracting and contingent labor, hiring qualified employees and finding available, full-time SAP talent is becoming more and more difficult.

The new emerging workforce grounded in the generation known as generation Y or millennials (loosely defined as people born between the 1980s and early 2000s) values different ideals than previous generations. No longer are money and stability the primary motivating factors for employment for this new workforce. Different values have risen up the list of priorities. Autonomy, work/life balance, and contribution to the community are a few of the values deemed most important for the emerging worker. Thus, businesses are becoming acutely aware of the challenges involved in sourcing their IT and SAP talent. This trend will only grow, making it tremendously challenging to internalize SAP support staff.

For an organization that understands the following points, the argument for moving towards SAP S/4HANA Cloud is strong:

These are all moot points when implementing SAP S/4HANA Cloud. Because SAP S/4HANA Cloud is designed to minimize SAP implementation requirements and postproduction support essentially can be eliminated, the case for low-cost SAP S/4HANA Cloud’s value is strengthened.

2.1.4    Faster Upgrade Cycles

Unlike traditional deployment timelines and upgrade cycles for on-premise ERP, SAP S/4HANA Cloud is designed to continuously upgrade features and capabilities for users. SAP has committed to a quarterly release cycle that pushes out new functionality to users. Some of these improvements may be prosaic and standard for ERP upgrades, albeit delivered faster and with less disruption than usual. In other cases, the rapid update cycle will provide users with genuinely new capabilities, such as in the emerging fields of machine learning, predictive analytics, and artificial intelligence applied to real-world business scenarios.