Is the Business Ready to Adopt a Digital Core?
Exploring Customer Strategies for SAP S/4HANA
An insiderRESEARCH study, commissioned by
May 2016
Contents
Executive Summary
3
About This report
4
Demographics
4
Familiarity with and Evaluation of SAP S/4HANA
6
An Analysis of Stated SAP S/4HANA Benefits
7
Challenges and Roadblocks to SAP S/4HANA Adoption
10
Driving the Decision
13
Key Findings
15
insiderRESEARCH is the independent research arm of Wellesley Information Services (WIS).
Although WIS uses reasonable care to produce this and other insiderRESEARCH studies, we cannot assume
any liability for its contents.
SAP, SAP HANA, SAP S/4HANA, and other SAP products and services mentioned herein are trademarks or
registered trademarks of SAP SE in Germany and in several other countries. All other registered trademarks
are the property of their respective holders.
An insiderRESEARCH study, commissioned by HCL
2
Executive Summary
SAP underscored the magnitude of its February 2015 release of SAP S/4HANA by launching its next-generation
business suite on the floor of the New York Stock Exchange. For SAP, the ringing of the opening bell signified
the dawn of a new digital era for the enterprise, coinciding with the introduction of the product it deems
essential to unlock the digital core and transform the business.
Now, more than one year later, SAP touts more than 3,200 SAP S/4HANA customers.1 This is a proof point, it
claims, of continued momentum for the product as customers “increasingly embrace the benefits of running
simple and in real-time,” according to SAP’s Q1 results news release.
HCL embraced SAP’s latest offering and has developed a program in conjunction with its clients to address
the most common questions and concerns around SAP S/4HANA. Our market-leading Agile Benefits Creation
program (ABC123) focuses on assessing readiness and quantifying business value while providing a roadmap to
non-disruptive transformation. To determine whether this strategy is aligned with where SAP customers stand
in their SAP S/4HANA journeys, and to gauge customer understanding about its benefits and how it enables
an organization to adopt a digital mindset, HCL commissioned an insiderRESEARCH survey of existing
SAP customers with at least $1 billion in annual revenue. Our mission: discover customers’ perception of
SAP S/4HANA and the associated business value that digitization brings to businesses.
Key findings from this survey include:
• Nearly all respondents (88%) expressed at least some level of familiarity with SAP S/4HANA.
• While a full third (34%) of organizations have either already deployed SAP S/4HANA or are in the process of
deploying, precisely half are either seriously evaluating or interested in learning more about the product.
• Of those companies seriously evaluating or preparing for SAP S/4HANA, a sizable majority (71%) do not have
plans to deploy SAP S/4HANA within the next 12 months.
• The top four reasons cited for considering SAP S/4HANA were to enhance the SAP user experience (55%), to
implement new SAP functionalities with SAP S/4HANA (52%), to drive simplification and
process efficiency (48%), and because the solution is part of a digital transformation strategy (36%).
• While high cost was most commonly cited as an inhibitor of SAP S/4HANA adoption (46%), other cited
reasons included difficulty in making a compelling business case (37%) and the perceived high risk of
business disruption (31%).
• Despite the emphasis on the business benefits of SAP S/4HANA, approximately 60% of the respondents
indicated that IT is still driving their SAP S/4HANA strategy.
1
news.sap.com/sap-announces-preliminary-first-quarter-2016-results/
An insiderRESEARCH study, commissioned by HCL
3
About This Report
Demographics
This report is based on 110 responses to an online survey conducted by insiderRESEARCH in March 2016.
Respondent Industries
Consumer Products
Retail
Banking & Financial Services
Consumer Products
Professional
Services
Retail
Automotive
Banking
&
Financial
Services
Engineering, Construction, & Operations
Professional
Services
High
Tech
Automotive
Manufacturing
Engineering,
Construction,&&Life
Operations
Pharmaceuticals
Sciences
Tech
Transportation &High
Logistics
Manufacturing
Other
Pharmaceuticals & Life Sciences
Utilities
Transportation
& Logistics
Wholesale Distribution
Other
Chemicals
Utilities
Energy
WholesaleLife
Distribution
Sciences
Chemicals
Media
Energy
Mining
LifeOil
Sciences
& Gas
Media
Software Provider
Mining
Defense & Security
Oil & Gas
Insurance
SoftwareIntegrator
Provider
Systems
Defense
Security
Building&Materials
Insurance
Healthcare
Systems&Integrator
Higher Education
Research
Building
Materials
Industrial Machinery
& Components
Healthcare
Public
Sector
Higher Education
& Research
Telecommunications
Industrial Machinery & Components
Public Sector
Telecommunications
United States
Germany
United Kingdom
United
States
Belgium
Germany
India
United Kingdom
Australia
Belgium
Canada
India
Singapore
Australia
Switzerland
Canada
Netherlands
Singapore
Norway
Switzerland
Hong Kong
Netherlands
Thailand
Norway
Malaysia
Hong
Kong
Mexico
Thailand
New Zealand
Malaysia
Philippines
Mexico
New Zealand
Philippines
1%
1%
1%
1%
1%
1%
1%
1%
1%
1%
1%
1%
2%
2%
2%
2%
2%
2%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
4%
4%
4%
4%
Respondent 10%
Geographies
An insiderRESEARCH study, commissioned by HCL
6%
5%
5%
4% 6%
5%
4%
5%
4%
4%
4%
3%4%
3%4%
2% 4%
3%
2%
1% 3%
2%
1%
2%
1%
1%
1%
1%
1%
1%
10%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
6%
6%
6%
6%
7%
7%
9%
9%
43%
43%
4
Respondent Roles
54%
54%
Director
54%
26%
26%
26%
11%
11%
9%
11%
9%
9%
Director
C-level (CEO,
CFO,
Director
C-level (CEO, CFO,
CIO, CTO, etc.)
CIO, CTO, etc.)
C-level (CEO, CFO,
Senior Management
Senior Management
(SVP, EVP) CIO, CTO, etc.)
(SVP, EVP)
Senior Management
Vice President
(SVP,
EVP)
Vice President
Vice President
IT or Business Professional
30%
30%
30%
IT Professional
IT Professional
40%
40%
40%
30%
IT Professional
Business Professional
Business Professional
Both
30%
Business Professional
Both
Both
30%
Respondent Company Size
12%
16%
$1 billion − $2 billion
$1 billion − $2 billion
12%
12%
16%
45%
16%
27%
$1 billion − $2 billion
Over $10 billion
Over $10 billion
45%
45%
$10 billion
$2 billion −Over
$5 billion
$2 billion − $5 billion
27%
billion
− $5 billion
$5 billion −$2
$10
billion
$5 billion − $10 billion
27%
$5 billion − $10 billion
An insiderRESEARCH study, commissioned by HCL
5
Familiarity with and Evaluation of SAP S/4HANA
How familiar are you with SAP S/4HANA?
36%
32%
Familiar
21%
36%
Somewhat familiar
12%
32%
Very familiar
Familiar
Not very familiar
21%
Somewhat familiar
While a base-level familiarity with SAP S/4HANA is to be expected with more than a year having passed since
12%
Very familiar
the product’s launch, one reflection of SAP’s marketing efforts is that not a single respondent is completely in
the dark about SAP S/4HANA, and only a small percentage of respondents (12%) were even less than someNot very familiar
what familiar with the product.
Conversely, just 21% of those polled We’re
indicated
theyevaluating
were very
familiar
32%
seriously
it familiar with SAP S/4HANA. If being very
with the product sets the base-level bar for taking steps toward adoption, then we would expect familiarity
18%
We’re interested in learning more about it
percentages to roughly match up in regard to SAP S/4HANA adoption.
13%
We’re preparing our landscape for implementation
SAP
S/4HANA
We have
already
deployedadoption
13%
10%
We have no plans to implement
We’re seriously evaluating it
We’re in the process of implementing
We’re interested in learning more about it
We have evaluated it and decided not to proceed at this time
We’re preparing our landscape for implementation
18%
6%
13%
13%
We have already deployed
10%
We have no plans to implement
We’re in the process of implementing
We have evaluated it and decided not to proceed at this time
32%
8%
8%
6%
Looking more closely at where organizations stand in regard to adoption, 21% of those polled say they have
deployed SAP S/4HANA or are in the process of implementing the solution. Yet some indecision or uncertainty is
reflected by more than half of those polled either still expressing interest in learning more (18%), still evaluating
(32%), or having no current plans to implement (10%).
An insiderRESEARCH study, commissioned by HCL
6
When do you plan/expect to deploy SAP S/4HANA?
3%
12%
6 − 12 months
12 − 18 months
18+ months
3 − 6 months
0 − 3 months
36%
13%
3%
Not sure
13%
23%
12%
Not sure
6 − 12 months
36%
13%
Some indecision
is also reflected in responses regarding the deployment timeline. The survey asked all except
12 − 18 months
18+ months
those who have already deployed SAP S/4HANA or those who have decided not to proceed when they planned
or expected to deploy SAP S/4HANA. More than one-third of those polled (35%) said not for at least 12
3 − 6 months
0 − 3 months
13%
We want
enhance
the SAP
55%
months, with only
16% to
saying
in the
nextuser
six experience
months. Another 36% were unsure.
23%new SAP functionalities that
We want to implement
52%
come with SAP S/4HANA
An Analysis
ofsimplification
StatedandSAP
Benefits
We’re looking for
processS/4HANA
efficiency
48%
36%
It’s part of our digital transformation strategy
Why is your organization considering SAP S/4HANA? (select all that apply)
30%
We want to get a competitive edge with SAP S/4HANA
26%
It’s part of our SAP cost reduction strategy
We want to enhance the SAP user experience
come with SAP S/4HANA
We want to ensure license support compliance
We’re looking for simplification and process efficiency
48%
5%
We are typically always early adopters of new solutions
We want to get a competitive edge with SAP S/4HANA
4%
Other
It’s part of our SAP cost reduction strategy
4%
36%
30%
26%
14%
We are impressed by the SAP S/4HANA product roadmap
We want to ensure license support compliance
12%
5%
We are typically always early adopters of new solutions
4%
Other
4%
An insiderRESEARCH study, commissioned by HCL
52%
12%
Not sure
It’s part of our digital transformation strategy
Not sure
55%
14%
We are
by the SAP
S/4HANA
product roadmap
Weimpressed
want to implement
new
SAP functionalities
that
7
What, then, is holding organizations back? Where does hesitation stem from? If the majority of those polled
haven’t ruled SAP S/4HANA out — in fact, just 6% said they have no plans to proceed versus 32% seriously
evaluating it — wouldn’t they be more serious about setting a more definite timeline?
To better understand this question, the survey set out to discover more about what respondents know about
SAP S/4HANA. Asked to list the reasons why the organization is considering SAP S/4HANA, the most common
reasons cited were overwhelmingly in synch with SAP’s messaging about what SAP S/4HANA delivers — namely simplification, a modern user experience, and the cornerstone of a forward-looking digital platform.
These responses support the notion that SAP customers are, for the most part, on board with the promise of
SAP S/4HANA as the digital foundation that will bring significant benefits to both IT and the business. However,
“digital” and “simplification” are rather generic terms that can mean very different things to different companies.
Is there a perception among customers, then, that while SAP S/4HANA can indeed facilitate a simplified
architecture and digitization of the enterprise, that those benefits are not as potentially transformational as
expected? In other words, do customers see SAP S/4HANA as more of an enhancement to a traditional ERP
system? Bolstering this notion is the 30% of respondents claiming that they’re considering SAP S/4HANA to
gain a competitive edge, and 26% citing an SAP cost reduction strategy as a reason to consider SAP S/4HANA.
Those percentages would seem to be higher if customers were fully on board with digitization and simplification not just as buzzwords but as having the very real potential to transform the business.
How would you rate the importance of the following stated
benefits of SAP S/4HANA in your decision to evaluate/deploy SAP S/4HANA?
(For those exploring SAP S/4HANA or are in the process of implementing)
16
Simplified SAP landscape
Faster transaction processing
and reporting
6
8
22
21
30
10
Improved user experience
31
24
11
Reduced costs
Increased speed and agility
10
Simplified business processes
10
33
29
23
24
31
30
21
Added functional enhancements
Access to industry-based
solutions with SAP S/4HANA
An insiderRESEARCH study, commissioned by HCL
41
20
Enhanced user productivity
25
21
Reduced data footprint
1 Not important
at all
25
27
29
22
2
3
4
13
21
5
12
6 Extremely
important
8
How would you rate the importance of the following stated
benefits of SAP S/4HANA in your decision to evaluate/deploy SAP S/4HANA?
(For those who have deployed SAP S/4HANA)
3
Simplified SAP landscape
Faster transaction processing
and reporting
2
5
4
8
3
Reduced data footprint
Enhanced user productivity
2
5
Improved user experience
4
3
3
2
Increased speed and agility
6
1
3
3
6
7
Added functional enhancements
Access to industry-based
solutions with SAP S/4HANA
4
2
3
4
8
2
Simplified business processes
3
5
3
Reduced costs
1 Not important
at all
4
4
5
3
3
3
3
6 Extremely
important
Digging deeper into the reasons for considering SAP S/4HANA, at least two-thirds of respondents rated enhanced user productivity, improved user experience, increased speed and agility, faster transaction processing,
a simplified SAP landscape, and simplified business processes as very important (rated 5 or 6 on a 1 to 6 scale).
Likewise, for those companies that already have deployed SAP S/4HANA, those same reasons reached the
two-thirds threshold as very important (rated 5 or 6 on a 1 to 6 scale).
While these specific benefits align with overall reasons for considering SAP S/4HANA – with benefits related
to simplification rated higher — it is also telling that no one particular benefit stands out. This also supports
the notion that customers have uncertainty about the product; unlike a traditional ERP system, SAP S/4HANA
supports a multitude of benefits that arise from realignment across business processes. Single benefits do not
arise by default but rather from a concerted effort. In other words, while simplification is indeed the end result,
companies need to develop a simplification strategy and prioritize process realignment before proceeding.
Unlike a traditional ERP upgrade or enhancement, SAP S/4HANA provides more than an infrastructure
step change. Were more customers grasping the true promise of SAP S/4HANA, we would expect to see
this reflected in the survey responses, mostly with more customers citing gaining a competitive edge as a
reason for considering the product.
An insiderRESEARCH study, commissioned by HCL
9
Challenges and Roadblocks to SAP S/4HANA Adoption
For those companies with no plans to implement SAP S/4HANA, most of the more popular reasons were related
to cost or resources, including the top two: high cost of deployment (46%) and resource constraints (41%).
What do you consider to be the biggest inhibitors to adopting SAP S/4HANA?
(select all that apply)
46%
High cost of deployment
41%
Resource constraints
Not a priority of our leadership/
business case not compelling enough
37%
Lack of skills/knowledge
32%
High license cost
32%
31%
High risk of business disruption
29%
Unclear migration path
28%
Unclear product roadmap
Our existing infrastructure is not
yet ready for a refresh
Lack of install base
Other
24%
13%
11%
In addition, more than one-third of respondents didn’t think they could make a compelling business case
(37%), while nearly one-third cited a concern for a risk of business disruption (31%), and 28% were confused
about the product roadmap.
These results are somewhat unexpected, as they run counter to SAP’s message of SAP S/4HANA as a low-cost,
non-disruptive solution to help bring the enterprise into the digital age. Again, were customers truly on board
with SAP S/4HANA as a difference-maker that can be non-disruptive to the business, these reasons would
likely rank lower as inhibitors to adoption.
The results may indicate that clients are still struggling to distinguish SAP S/4 HANA from the more traditional
ERP and the associated complexities to implement.
19%
An insiderRESEARCH study, commissioned by HCL
Yes
10
If an upgrade to SAP S/4HANA could be non-disruptive and non-impacting to the end user,
would that impact your decision to move to SAP S/4HANA?
19%
Yes
Not sure
57%
24%
No
Drilling deeper, companies that have yet to deploy SAP S/4HANA were asked whether their decision would be
impacted if the move to SAP S/4HANA could be non-disruptive and non-impacting to the end user. More than
half (57%) of respondents responded affirmatively, with another 24% unsure. This lends further support to
the notion that SAP’s messaging about the non-disruptive path to SAP S/4HANA is not sinking in. Customers
may harbor a misguided notion that moving forward with SAP S/4HANA requires taking a step back to gain
two steps forward. In many ways this is understandable as it aligns with traditional IT projects during which
lateral implementations were often beset with various challenges for minimal gains.
What are/were your biggest challenges in building a business case for SAP S/4HANA?
(select all that apply)
Quantifying benefits
51%
Fully understanding the
solution’s capabilities
47%
42%
Demonstrating cost reduction
38%
Implementation risks
35%
Not the right time/Not budgeted
Lack of proof points on product
performance and benefits
25%
15%
Establishing an executive sponsor
Other
5%
An insiderRESEARCH study, commissioned by HCL
Help create a migration roadmap
68%
11
Lending more support to a presumption of uncertainty are the reasons customers provided as to why they
were challenged to build a business case for SAP S/4HANA. Of companies that are exploring SAP S/4HANA,
just more than half (51%) of those polled cited quantifying benefits as the top challenge in building a business
case, while just shy of half (47%) said that fully understanding the solution’s capabilities was a challenge, and
42% of respondents claimed difficulty in demonstrating a cost reduction. These percentages align closely with
the responses given to the question that asked about inhibitors to SAP S/4HANA adoption (that question was
posed to those with no plans to implement SAP S/4HANA; this question was asked of those who are exploring
SAP S/4HANA).
benefits
An interesting contrast isQuantifying
that only 25%
of respondents said that a lack of proof points on product 51%
perfor-
mance was a challenge
in understanding
building a business
Fully
the case for SAP S/4HANA. This could mean that customers are for
47%
solution’s
capabilities
the most part sold on the
product’s
capabilities as an engine or platform for a digital enterprise, yet are hav-
ing trouble making
that connection
to their specific business. As we saw earlier in the question
42% about reasons
Demonstrating
cost reduction
for considering SAP S/4HANA, it comes back to making that transition from understanding SAP S/4HANA as
38%
Implementation
risksSAP S/4HANA can do for a particular organization.
a concept to understanding
specifically what
Not from
the right
time/Not
budgeted
To come at this
a different
angle,
the survey asked about expectations from a35%
service provider perspec-
tive. AnswersLack
aligned
withpoints
the aforementioned
of proof
on product challenges; namely the top three expectations were to help cre25%
performance
benefits
ate a migration roadmap
(68%), and
to help
develop a non-disruptive migration approach (67%), and to help create
the business
case for SAP
Establishing
an S/4HANA
executive (55%).
sponsor
Other
15%
5%
What are your organization’s key expectations from a service provider related to
SAP S/4HANA deployment? (select all that apply)
Help create a migration roadmap
68%
Develop a non-disruptive
migration approach
67%
Help create the business case
for SAP S/4HANA migration
55%
Deliver SAP S/4HANA
solutions for our industry
39%
Help integrate SAP S/4HANA deployment
with our digital transformation strategy
35%
Bundle SAP S/4HANA into an
“as-a-Service” offering
Other
26%
7%
CIO group
An insiderRESEARCH study, commissioned by HCL
IT department
45%
39%
12
for SAP S/4HANA migration
Deliver SAP S/4HANA
solutions for our industry
39%
Help integrate SAP S/4HANA deployment
with our digital transformation strategy
35%
Bundle SAP S/4HANA into an
26%
“as-a-Service” offering
Driving the Decision
Other
7%
Who is driving the SAP S/4HANA evaluation/strategy in your organization?
(select all that apply)
CIO group
45%
39%
IT department
19%
CFO group
11%
Line of business
COO group
4%
All of the above
9%
No one/not applicable
9%
One driver for digital transformation is to empower business users and business analysts to make insightful
decisions based on real-time data. With SAP S/4HANA eliminating the need for batch processing or having to
query IT to build and run reports, businesses can transition to self-service data consumption.
Is some of the hesitancy we have seen among the respondents for a more definitive SAP S/4HANA deployment timeline, or difficulty with quantifying business benefits, a case of customers being preconditioned to
think of IT as the sole driver for leading the charge for a technology upgrade?
The CIO group (45%) and the IT department (39%) were the resounding top responses given when companies
were asked who is driving the SAP S/4HANA evaluation and/or strategy for the organization. The CFO group
(19%) and line of business (11%) also reached double digits as choices, which could be attributed to the fact
that SAP S/4HANA Finance (formerly SAP Simple Finance) led the SAP S/4HANA roadmap. But the overwhelming selection of the CIO group and IT department supports the notion that IT is the default option for
evaluating new technology, even if that new technology — as is the case with SAP S/4HANA — at its core
delivers functionality that changes those long-held assumptions. This raises the question once again whether
clients understand the distinction between SAP S/4HANA and the traditional ERP where SAP was driving key
infrastructure decisions.
An insiderRESEARCH study, commissioned by HCL
13
To gauge how preparedness for the cloud translated to SAP S/4HANA, the survey asked how ready organizations were for a cloud journey. Of those who have already deployed SAP S/4HANA, precisely half (50%) of
respondents said they’ve already started a cloud journey. This dipped to 32% among respondents still exploring
SAP S/4HANA, lending credence to the perception that cloud and digitization go hand in hand. This is further
supported by 57% of respondents claiming that the organization decided to implement SAP S/4HANA because
doing so was part of their digital transformation strategy. If you recall, just 36% of those considering SAP S/4HANA
cited this reason. Likewise, of companies that have already implemented SAP S/4HANA, 43% said it was to
gain a competitive edge.
How would you rate your organization’s readiness to embark on a cloud journey?
(Exploring SAP S/4HANA)
3%
2%
6%
8%
32%
9%
18%
10%
8%
10 We’ve
already started
5
9
4
8
3
7
2
6
1 Not ready
at all
3%
How would you rate your organization’s readiness to embark on a cloud journey?
(Deployed SAP S/4HANA)
7%
7%
14%
50%
14%
7%
An insiderRESEARCH study, commissioned by HCL
10 We’ve
already started
5
9
4
8
3
7
2
6
1 Not ready
at all
14
Key Findings
The results of this survey seem to strongly suggest that despite a lot of messaging around SAP S/4HANA in the
market, and the buzz around the terms “simplification” and “digitization,” there is still a fair amount of uncertainty around the product and the business benefits associated with it. This is indicated by the results showing:
• A lack of short-term commitment to the product
• A decision that is still largely driven by IT
• Uncertainty of what digitization means at the company level
• Preconceived notions about legacy ERP and transformation mentality
In sum, the survey data suggests that at least some of the hesitation for SAP S/4HANA adoption rests with
the fact that organizations do not yet fully appreciate how becoming a digital enterprise can transform the
business. This is understandable; customers can accept the reassurances that SAP S/4HANA is not just another
ERP system but has been completely re-architected as a next-generation digital platform, but getting there
also requires customers to accept that in many cases it will be necessary to shred some long-held beliefs about
the best way to run a business process. This emphasizes the importance of global SAP Partners, like HCL, to
assist both the business and IT to build a business case for their investment in SAP S/4HANA. HCL’s reputation
for transformation programs that are outcomes-based and focus on realizing the benefits will help clients
eliminate any remaining doubts about the value of SAP S/4HANA to allow a business to compete in the 21st
century. Old habits die hard. Harder still is developing new habits in line with a ground-breaking technology
with capabilities for the enterprise that haven’t been seen before.
An insiderRESEARCH study, commissioned by HCL
15