4.4 Estimating Implementation Costs
In the previous section, we deconstructed the various implementation cost components crucial to determining how much an SAP S/4HANA Cloud implementation will cost. However, beyond these data points, how does an organization dial in exactly what implementation will cost for its specific SAP S/4HANA Cloud situation? That’s a difficult question to answer fully, but we’ll provide some pointers in the following sections.
4.4.1 Fit-to-Standard Process
When engaged with a prospective SAP S/4HANA Cloud customer, the best method to estimate the actual implementation cost is to identify how closely standard SAP S/4HANA Cloud functionality fits a customer’s business needs. This process is known as the fit-to-standard process.
The fit-to-standard process changes how organizations look at SAP ERP. In the past, business blueprinting workshops were conducted, with business requirements gathered collectively by all required stakeholders. Then, the SAP product was designed around the agreed upon and defined business blueprint outcomes. In the fit-to-standard model, as defined by SAP’s newest implementation strategy (SAP Activate), business requirements definition has SAP Best Practices as its foundation. Table 4.2 highlights the paradigm shift in SAP business process requirements gathering.
| ASAP, Blueprinting Process | SAP Activate, Fit-to-Standard Process |
|---|---|
|
|
Table 4.2 Evolution of SAP Requirements Gathering Approach, from ASAP and Blueprinting to SAP Activate and Fit-to-Standard
4.4.2 Cost Estimation Process
Prior to the full engagement with an SAP S/4HANA Cloud implementation partner, a customer should engage an SAP S/4HANA Cloud services integrator to assist with a dialed-in SAP S/4HANA Cloud implementation estimate. Hopefully, the SAP S/4HANA Cloud services integrator is an existing trusted advisor. If not, SAP can recommend a lighthouse partner or equally competent services integrator knowledgeable in SAP S/4HANA Cloud. The effort to provide a reliable SAP S/4HANA Cloud implementation cost should be neither extensive nor exhaustive. Although dependent upon many factors, such as number of users and locations, extensibility requirements, and other important data points described previously, the estimate shouldn’t take more than a week of discovery from the SAP S/4HANA Cloud implementer and can be as little as several days depending upon the SAP S/4HANA Cloud customer scenario. (Discovery is an SAP term defined as the process of learning more about an organization’s specific business requirements and how they translate into the effort needed to implement the SAP software functionality.) This week of discovery could include—but doesn’t necessarily require—a series of tactical, quick-hit, fit-to-standard workshops onsite at the customer location, in which customers and SAP S/4HANA Cloud partners discuss and define the level of completeness with which SAP S/4HANA Cloud fits the given customer’s business requirements.
Example
During a recent SAP S/4HANA Cloud implementation, a customer was looking to deploy SAP S/4HANA Cloud within the United States for one of its business units within the retail space. As part of the process, the consulting partner was asked how long it would take to come up with a dialed-in scope and corresponding services cost. The consulting partner took a two-day on-site visit with the customer to clearly define what’s in the SAP S/4HANA Cloud scope. For an implementation of this size (12 locations throughout the United States and Canada for SAP S/4HANA Cloud, with approximately 100 users and no extensibility requirements), a two-day, on-site, quick-hit fit-to-standard workshop was sufficient. Larger, more complex implementations could require more analysis.
The goal of these quick-hit, fit-to-standard exercises is to provide as accurate an SAP S/4HANA Cloud implementation estimate as possible. One of the methods frequently leveraged in estimating delivery cost uses an Excel worksheet to break down the implementation by phase and by resource. After understanding who will be deployed in what implementation phase for what period, resource costs can be allocated, in turn providing a cost structure documenting the resources, rates, and estimated timeline. Figure 4.1 provides an example worksheet recently utilized for an SAP S/4HANA Cloud implementation estimate.
Figure 4.1 Fit-to-Standard Quick-Hit Implementation Estimate Template
As described in Section 4.3, customers are beginning to expect rough estimates between one and two times the cost of their SAP S/4HANA Cloud licenses. Although this is becoming a more prevalent cost benchmark within the SAP S/4HANA Cloud services world, the cost to implement is still very much aligned with the numerous implementation factors and which partner is performing the work.