4.3    Implementation Cost Components

Beyond the subscription costs for SAP S/4HANA Cloud, the next most expensive component in deploying the product is implementation services. SAP S/4HANA Cloud integrators (i.e., SAP consultants) vary in implementation services and costs, but there does appear to be a recognized implementation cost multiple benchmark related to the corresponding software cost. This multiple for services seems to be more externally driven (i.e., from outside the SAP world) than internally driven (i.e., profit margin-based on an SAP S/4HANA Cloud implementation partner’s internal delivery cost).

SAPanese: The Definition of Multiple

The term multiple in the context of this discussion refers to the multiplying factor associated between the cost of SAP S/4HANA Cloud software to the cost of consulting services required to implemented SAP S/4HANA Cloud.

Due to the sheer competitiveness within the greater SaaS ERP space, any implementation costs too out of line with the competition (NetSuite, Infor, Workday, etc.) make SAP’s ERP SaaS solution—SAP S/4HANA Cloud—noncompetitive. Therefore, the multiple between SAP S/4HANA Cloud licenses and SAP S/4HANA Cloud implementation services reflects the competition’s corresponding multiple for greater ERP bake-off alignment.

Note

The term ERP bake-off denotes a competitive ERP system selection process between multiple similar ERP systems. This often occurs during an ERP system request for proposal (RFP).

Within an SAP S/4HANA Cloud implementation, there are various components with an impact on the overall services cost. The following are the primary SAP S/4HANA Cloud implementation cost factors:

• Fit-to-standard process
  The biggest factor driving implementation cost is how well a customer’s business needs fit with SAP S/4HANA Cloud functionality. The objective of SAP S/4HANA Cloud is to meet a customer’s business processes as much as possible. The goal is to implement SAP S/4HANA Cloud out of the box and in turn provide SAP Best Practices functionality with little additional customization (i.e., extensibility) or development. If a given organization’s business requirements are not mostly met (around 80 percent) with existing or roadmapped SAP S/4HANA Cloud functionality, the cost to implement SAP S/4HANA Cloud could increase dramatically. When additional nonstandard SAP S/4HANA Cloud business requirements are needed, the value proposition for rapid and inexpensive SAP SaaS deployment diminishes.
• Extensibility
  SAP S/4HANA Cloud allows for extending its core functionality via bolt-ons. These bolt-ons could be SAP S/4HANA Cloud whitelisted APIs or customer-specific extensions designed in and integrated via SAP Cloud Platform. Depending upon the number and complexity of any additional extensions, the additional costs associated with deploying SAP S/4HANA Cloud could be extensive. In some cases, these extensions are rapid and inexpensive, such as simple uploads and downloads or other SAP product integrations (such as SAP S/4HANA Cloud integrating with SAP Analytics Cloud). For new SAP Cloud Platform app development, this extensibility will be greater. The bottom line is that extensions to SAP S/4HANA Cloud increase implementation costs—especially complex, customer-specific extensions. Table 4.1 highlights the extensibility options provided by SAP, including in-app and side-by-side options. Note the cloud icons, which mark extensibility options available for SAP S/4HANA Cloud.

  Key User In-App Extensibility	Side-by-Side Extensibility Based on SAP Cloud Platform
  Cloud-enabled development objects Custom fields Custom analytics and forms Custom business objects Custom business logic (cloud ABAP web editor) No modifications allowed Only whitelisted SAP APIs Software lifecycle of extensions de‐coupled from SAP software updates	Enable an SAP Fiori and mobile user experience Integrate with other cloud solutions (for example, from SAP SuccessFactors, SAP Ariba, and third-party solutions) Take advantage of SAP Cloud Platform application services (cloud portal, mobile documents, output management, etc.) Use a full-fledged development platform to build extension applications (Java, SAP HANA native development)

  Table 4.1    SAP S/4HANA Extensibility Options

• Data conversion
  Another implementation cost factor is the effort associated with data conversion. Whether migrating from an SAP ERP on-premise platform or another IT backend system, data conversion and migration act as a factor in overall SAP S/4HANA Cloud deployment costs. SAP S/4HANA Cloud implementation costs could be impacted greatly, depending upon the data quality and amount of data to convert. The only scenario in which data conversion doesn’t exist as a potential SAP S/4HANA Cloud implementation impact factor is for a net-new implementation with no previous data. If there’s no data to convert, no effort is required. One way in which to save implementation services costs is to internalize any data conversion activities if required.
• Training
  Like data conversion, training is another area in which customers implementing SAP S/4HANA Cloud can save on implementation costs. Some training should always be included in any implementation partner’s scope of SAP S/4HANA Cloud deployment services, but extensive training is normally nice to have rather than a must-have. Training is fundamental to both the short-term and long-term success and sustainability of an SAP S/4HANA Cloud deployment, so while a business can engage an external consulting organization for training services, that company’s overall training preparation, rollout, and superuser “train the trainer” should not be outsourced.
• Custom code
  If your organization is among the companies that have implemented one of SAP’s previous ERP offers, such as SAP R/3, SAP ERP, or even on-premise SAP S/4HANA, and is looking to fully migrate over to SAP S/4HANA Cloud, custom code migration might impact your overall SAP S/4HANA Cloud migration. Often, one of the primary reasons to migrate to SAP S/4HANA Cloud is to simplify your SAP landscape. In that case, removing or eliminating your custom code is not only a good thing but could be a motivating factor for SAP S/4HANA Cloud migration. However, if there’s some mandatory business rationale mandating that you must maintain custom code and/or functionality, SAP provides some tools to help you determine the effort of and impact associated with doing so.
• Analytics
  A final SAP S/4HANA Cloud implementation cost factor relates to a customer’s need for analytics and the extent to which a customer expects SAP S/4HANA Cloud to provide a given level of meaningful reporting. SAP S/4HANA Cloud provides real-time analytics as part of the platform. However, the depth of analytics isn’t as robust as that of dedicated SAP analytics products such as SAP Analytics Cloud. As part of the SAP S/4HANA Cloud product analysis researching phase, you must assess what your business reporting needs are and how SAP S/4HANA Cloud fits your specific reporting requirements. Depending upon your requirements, your SAP S/4HANA Cloud implementation costs may increase.

Behind the Curtain: The SAP S/4HANA Cloud Lighthouse Program

At the beginning of the SAP S/4HANA Cloud product launch, a select group of SAP integrators had the opportunity to participate in a dedicated SAP S/4HANA Cloud program called the SAP S/4HANA Cloud lighthouse partner program. As part of this program, these SAP integrators were given training alongside SAP to learn the product functionality, features, implementation methods, extensibility, and deployment methodology. Based on this training, lighthouse partners are uniquely positioned to provide a higher level of SAP S/4HANA Cloud implementation service. We highly recommend leveraging one of these select partners for your deployment. Furthermore, in many cases, SAP won’t allow non-lighthouse partners to implement SAP S/4HANA Cloud.