TRANSITION TO S/4 HANA – PRE-CHECKS AND WHETHER MIGRATION OR NEW IMPLEMENTATION?

S/4 HANA On-premise edition (1511 release) is out with hype. SAP clearly says ‘It is a new product’ and the path to S/4 HANA from ERP ECC is not an upgrade. Not sure whether existing SAP customers has any choice rather than switch to S/4 HANA at certainpoint in time, the moot question is When and How to move to S/4 HANA .

When: S/4 HANA is not fully released i.e developments are ongoing and will continue for more years. SAP has a road map, but no completion date. So, should the transition be started when it is fully released? SAP’s marketing person says to start the journey as SAP is releasing its functionalities over time.

How: SAP says 3 transition paths as in below screen shot.

If it is migration (System conversion or Landscape transformation), then probably all old (and redundant) custom codes, existing order types also will be carried over, then will the innovations or simplicity really be achieved? Is new-implementation a better option to come out of legacy or changed business processes? Or a mixed approach ( like System conversion for core ECC functionality and then new implementation for IBP) is better?.There is no straight answers to ‘When’ and ‘How’ questions. But the most important is to analyze the Simplification (or restriction) list as in URL:

https://uacp.hana.ondemand.com/http.svc/rc/PRODUCTION/pdfa4322f56824ae221e10000000a4450e5/1511%20000/en-US/SIMPL_OP1511.pdf ,  understand the impacted functionalities on conversion to  S/4 HANA and then decide considering the complexity , custom developments , dependency with other SAP applications , feasibility of streamlining businesses, industry specific solution , minimal disruption to business etc . Following country specific versions / localisations are not yet supported in S/4 HANA 1511 release

Country specific versions / locations

There are restrictions for Brazil , Portugal , Russia , Chiili . Refer Note 2228890 S4H 1511 Country version release info and restriction lists for specific details. (For complementary information related to Brazil: Reporting. See SAP Note 2195701 - 2195701 - SAP S/4HANA, on-premise edition 1511: Obsolete transaction codes and programs in Brazil country version) 

Highlighted below some of the On-premise functionalities which will be different (and/or not available) in S/4 HANA and must be pre-checked for migration or transition before deciding the path for S/4 HANA journey.

Finance : Migration from classic G/L to new G/L (using ledger to update particular valuation) is mandatory. Secondary cost elements will now be G/L accounts and need to migrated to chart of accounts. Existing functionality of parallel valuation needs to be adapted due to merger of FI & CO tables into universal journal. Activation of material ledger is mandatory . Account based COPA is now the default option though Costing based COPA is still available.Actual costing is optional. Some migrations are also needed if source system is already active with material ledger.

Business partner : Customer and vendor master data will be replaced by Business partner . Customer / vendor integration (CVI) is a Pre-requisite for transition to S/4HANA. Custom fields or code (if any) for auto creation of customer or vendor master data etc need to adapted to Business partner.

Material number extension : Material number can now be 40 characters from existing 18. It is a optional feature. Impact of this extension on custom coding, interfaces, other SAP applications need to be evaluated before switching on 40 characters.

Foreign trade: Functionality of foreign trade under SD (Sales & distribution) has been deprecated with SAP’s GTS (Global trade service). There is an option to integrate GTS natively in S&4 HANA or it can be separate application / instance. Existing foreign trade processes need to be analyzed.

Change in SD data model : There are several changes in SD data model including pricing (which is the heart of existing applications).  SAP has provided some migration options to move data from existing tables to new tables, however it needs to be evaluated the impact of amendment / append of existing tables.

Credit management : SD credit management is replaced by Credit management under Financial Supply Chain Management (FSCM).

SD revenue recognition: Revenue recognition is not supported. SAP’s Recommendation is to migrate to ‘Revenue accounting and reporting’. Not all functionalities of revenue recognition are available in release 1.1 of Revenue Accounting and Reporting

Rebate: SD Rebate Processing (excepting SAP CRM Trade Promotion Management (TPM)  is replaced by Settlement Management. Existing rebate agreements must be closed by a final settlement before migration.

Billing : Contract billing is not supported . Existing billing output (through NAST ) needs to be migrated to Adobe , Smart forms etc.

Variant configuration , BOM  Version: Certain functionalities are not supported

MRP : Material Planning only on plant and MRP area is possible , but not on storage location level (as a part of simplification) . MRP will be run through MRP Live (optimized for HANA). Net change planning is not supported.

ATP & Scheduling : APO’s GATP & PPDS functionalities are expected to be bundled in future release of S/4 HANA for Availability check and production scheduling.  MRP live is pre-requisite for PPDS functionality in S/4 HANA.

S&OP : Sales and operational planning will be replaced by IBP (Integrated business planning). Some functionalities of APO are also being made available in IBP.

Product catalog : SAP is positioning Hybris for web / internet processes , Product catalog will not be in target architecture.

SRM : S/4 HANA will have SRM bundled within it . Only limited SRM functionalities are included in 1511 release.

Quality management : ITS services for results recording , quality notifications & certificates are not supported .

Project system : PRT (Production resources and tools) , texts , claim , Easy cost planning (ECP) , Work force planning , project reports , OpenPS , cProjects  will not be supported. Many transaction codes will not be present as a part of simplification . Existing CJ20N is being  enhanced for navigation to different reports. Needs huge knowledge transfer to users.  Archiving needs to be done through central SARA transactions i.e not by individual transaction like CN80 etc.

Warehouse management : Standard WM functionality is available though it is not in Target architecture. Existing warehousing (WM) functionality will be replaced by EWM (Extended warehouse management). Migration for existing EWM (running separately) customers to natively integrated S/4 HANA also needs to be evaluated. QIE within EWM also will be made obsolete. It is not clear how quality functions of existing EWM will work within S/4 HANA.

Transportation : Existing Logistics execution transportation (LE-TRA) is also not in target architecture and may be replaced by TM (Transportation management). TM has several advanced functionalities on transportation planning , optimization , freight charge / settlement, carrier selection & procurement, but has huge master data requirement. Is TM an overkill for customer (Shipper) with simple distribution requirement?

There are obvious advantages in unifying several applications within S/4 HANA as highlighted in other blog in URLhttp://scn.sap.com/community/s4hana/blog/2015/11/19/sap-s-road-map-for-supply-chain-solution-with-s4-hana-and-its-expected-benefits , however the implementation of EWM in place WM , TM in place of LE-TRA are separate projects by itself. So, the warm up (Pre-check) for move to S/4 HANA will be a huge project spanning several years. SAP’s innovations may be in right direction, but the journey towards unified digital platform will not be that simple and that is probably the reason for changing the name for ‘Simple finance’ to ‘S/4 HANA Finance’ or ‘Simple logistics’ to ‘S/4 HANA Logistics’.

Update to Blog on 7th march’2016: Excel file in URL  Simplification List for SAP S/4HANA in XLS-based format

provides a very good snap shot on simplification list and also feasible to filter on ‘ Functionality on available’ , ‘Change in existing functionality’ , ‘Not in target architecture’ etc.
Source: SAP SCN - Transition to S/4 HANA: Pre-checks and whether migration or new implementation