Is the Business Ready to Adopt a Digital Core? Exploring ... · Is the Business Ready to Adopt a Digital Core? Exploring Customer Strategies for SAP S ... While a base-level familiarity

Is the Business Ready to Adopt a Digital Core? Exploring Customer Strategies for SAP S/4HANA

An insiderRESEARCH study, commissioned by

May 2016

2An insiderRESEARCH study, commissioned by HCL

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.

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


Executive SummarySAP 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.

1news.sap.com/sap-announces-preliminary-first-quarter-2016-results/


About This Report

DemographicsThis report is based on 110 responses to an online survey conducted by insiderRESEARCH in March 2016.

Consumer ProductsRetail

Banking & Financial ServicesProfessional Services

AutomotiveEngineering, Construction, & Operations

High TechManufacturing

Pharmaceuticals & Life SciencesTransportation & Logistics

OtherUtilities

Wholesale DistributionChemicals

EnergyLife Sciences

MediaMining

Oil & GasSoftware Provider

Defense & SecurityInsurance

Systems IntegratorBuilding Materials

HealthcareHigher Education & Research

Industrial Machinery & ComponentsPublic Sector

Telecommunications

9%7%

6%6%

5%5%

4%4%

5%5%5%5%5%

3%3%3%3%3%3%3%

1%1%1%1%1%1%

2%2%2%

United StatesGermany

United KingdomBelgium

IndiaAustralia

CanadaSingapore

SwitzerlandNetherlands

NorwayHong Kong

ThailandMalaysia

MexicoNew Zealand

Philippines

43%10%

6%5%5%

4%4%4%4%

3%3%

2%2%

1%1%1%1%

Consumer ProductsRetail

Banking & Financial ServicesProfessional Services

AutomotiveEngineering, Construction, & Operations

High TechManufacturing

Pharmaceuticals & Life SciencesTransportation & Logistics

OtherUtilities

Wholesale DistributionChemicals

EnergyLife Sciences

MediaMining

Oil & GasSoftware Provider

Defense & SecurityInsurance

Systems IntegratorBuilding Materials

HealthcareHigher Education & Research

Industrial Machinery & ComponentsPublic Sector

Telecommunications

9%7%

6%6%

5%5%

4%4%

5%5%5%5%5%

3%3%3%3%3%3%3%

1%1%1%1%1%1%

2%2%2%

United StatesGermany

United KingdomBelgium

IndiaAustralia

CanadaSingapore

SwitzerlandNetherlands

NorwayHong Kong

ThailandMalaysia

MexicoNew Zealand

Philippines

43%10%

6%5%5%

4%4%4%4%

3%3%

2%2%

1%1%1%1%

Respondent Industries

Respondent Geographies


Respondent Roles

54%

26%

11% 9%

Director

C-level (CEO, CFO, CIO, CTO, etc.)

Senior Management (SVP, EVP)

Vice President

IT Professional

Business Professional

Both

$1 billion − $2 billion

Over $10 billion



40%

30%

30%

12%

27%

16%45%

IT or Business Professional

54%

26%

11% 9%

Director



Vice President

IT Professional


Both


Over $10 billion



40%

30%

30%

12%

27%

16%45%

Respondent Company Size

54%

26%

11% 9%

Director



Vice President

IT Professional


Both


Over $10 billion



40%

30%

30%

12%

27%

16%45%


Familiarity with and Evaluation of SAP S/4HANA

While a base-level familiarity with SAP S/4HANA is to be expected with more than a year having passed since

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 some-

what familiar with the product.

Conversely, just 21% of those polled indicated they were very familiar with SAP S/4HANA. If being very familiar

with the product sets the base-level bar for taking steps toward adoption, then we would expect familiarity

percentages to roughly match up in regard to SAP S/4HANA adoption.

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%).

How familiar are you with SAP S/4HANA?

Familiar

Somewhat familiar

Very familiar

Not very familiar

36%32%

21%

12%

We’re seriously evaluating it

We’re interested in learning more about it

We’re preparing our landscape for implementation

We have already deployed

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%

18%

13%

13%

10%

8%

6%

SAP S/4HANA adoption

Familiar

Somewhat familiar

Very familiar

Not very familiar

36%32%

21%

12%

We’re seriously evaluating it

We’re interested in learning more about it

We’re preparing our landscape for implementation

We have already deployed

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%

18%

13%

13%

10%

8%

6%


Some indecision is also reflected in responses regarding the deployment timeline. The survey asked all except

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

months, with only 16% saying in the next six months. Another 36% were unsure.

An Analysis of Stated SAP S/4HANA Benefits

When do you plan/expect to deploy SAP S/4HANA?

Not sure 6 − 12 months

12 − 18 months 18+ months

3 − 6 months 0 − 3 months

We want to enhance the SAP user experience

We want to implement new SAP functionalities that come with SAP S/4HANA

We’re looking for simplification and process efficiency

It’s part of our digital transformation strategy

We want to get a competitive edge with SAP S/4HANA

It’s part of our SAP cost reduction strategy

We are impressed by the SAP S/4HANA product roadmap

We want to ensure license support compliance

Not sure

We are typically always early adopters of new solutions

Other 4%

4%

5%

12%

14%

26%

30%

36%

48%

52%

55%

36%

23%

13%

13%

12%

3%

Why is your organization considering SAP S/4HANA? (select all that apply)

Not sure 6 − 12 months

12 − 18 months 18+ months

3 − 6 months 0 − 3 months

We want to enhance the SAP user experience

We want to implement new SAP functionalities that come with SAP S/4HANA

We’re looking for simplification and process efficiency

It’s part of our digital transformation strategy

We want to get a competitive edge with SAP S/4HANA

It’s part of our SAP cost reduction strategy

We are impressed by the SAP S/4HANA product roadmap

We want to ensure license support compliance

Not sure

We are typically always early adopters of new solutions

Other 4%

4%

5%

12%

14%

26%

30%

36%

48%

52%

55%

36%

23%

13%

13%

12%

3%


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 — name-

ly 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 simplifica-

tion 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)

1 Not important at all 42 53 6 Extremely

important

Access to industry-based solutions with SAP S/4HANA 122122

Added functional enhancements 132921

Increased speed and agility 3110 24

Reduced costs 2311 29

Improved user experience 3310 24

Enhanced user productivity 318 30

Simplified business processes 2710 30

Reduced data footprint 2120 22

Faster transaction processing and reporting 41216

Simplified SAP landscape 2516 25


Digging deeper into the reasons for considering SAP S/4HANA, at least two-thirds of respondents rated en-

hanced 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.

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)

1 Not important at all 42 53 6 Extremely

important

Simplified SAP landscape 3 5 4

Faster transaction processing and reporting 2 4 8

Reduced data footprint 3 3 3

Enhanced user productivity 2 5 5

Improved user experience 4 3 6

Reduced costs 3 1 4

Added functional enhancements 7 3 3

Access to industry-based solutions with SAP S/4HANA 4 3 3

Simplified business processes 2 3 6

Increased speed and agility 2 3 8


Challenges and Roadblocks to SAP S/4HANA AdoptionFor 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%).

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.

What do you consider to be the biggest inhibitors to adopting SAP S/4HANA? (select all that apply)

High cost of deployment

Resource constraints

Not a priority of our leadership/business case not compelling enough

Lack of skills/knowledge

High license cost

High risk of business disruption

Unclear migration path

Unclear product roadmap

Our existing infrastructure is not yet ready for a refresh

Lack of install base

Other

46%

41%

37%

32%

32%

31%

29%

28%

24%

13%

11%

Yes

Not sure

No

57%

19%

24%


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.

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?

High cost of deployment

Resource constraints

Not a priority of our leadership/business case not compelling enough

Lack of skills/knowledge

High license cost

High risk of business disruption

Unclear migration path

Unclear product roadmap

Our existing infrastructure is not yet ready for a refresh

Lack of install base

Other

46%

41%

37%

32%

32%

31%

29%

28%

24%

13%

11%

Yes

Not sure

No

57%

19%

24%

What are/were your biggest challenges in building a business case for SAP S/4HANA? (select all that apply)

Quantifying benefits

Fully understanding the solution’s capabilities

Demonstrating cost reduction

Implementation risks

Not the right time/Not budgeted

Lack of proof points on product performance and benefits

Establishing an executive sponsor

Other

51%

47%

42%

38%

35%

25%

15%

5%

Help create a migration roadmap

Develop a non-disruptive migration approach

Help create the business case for SAP S/4HANA migration

Deliver SAP S/4HANA solutions for our industry

Help integrate SAP S/4HANA deployment with our digital transformation strategy

Bundle SAP S/4HANA into an “as-a-Service” offering

Other

68%

67%

55%

39%

35%

26%

7%

CIO group

IT department

CFO group

Line of business

All of the above

No one/not applicable

COO group

45%

39%

19%

11%

4%

9%

9%


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).

An interesting contrast is that only 25% of respondents said that a lack of proof points on product perfor-

mance was a challenge in building a business case for SAP S/4HANA. This could mean that customers are for

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 about reasons

for considering SAP S/4HANA, it comes back to making that transition from understanding SAP S/4HANA as

a concept to understanding specifically what SAP S/4HANA can do for a particular organization.

To come at this from a different angle, the survey asked about expectations from a service provider perspec-

tive. Answers aligned with the aforementioned challenges; namely the top three expectations were to help cre-

ate a migration roadmap (68%), to help develop a non-disruptive migration approach (67%), and to help create

the business case for SAP S/4HANA (55%).

What are your organization’s key expectations from a service provider related to SAP S/4HANA deployment? (select all that apply)








Other

51%

47%

42%

38%

35%

25%

15%

5%







Other

68%

67%

55%

39%

35%

26%

7%

CIO group

IT department

CFO group

Line of business

All of the above


COO group

45%

39%

19%

11%

4%

9%

9%


Driving the Decision

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 deploy-

ment 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 over-

whelming 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.

Who is driving the SAP S/4HANA evaluation/strategy in your organization? (select all that apply)








Other

51%

47%

42%

38%

35%

25%

15%

5%







Other

68%

67%

55%

39%

35%

26%

7%

CIO group

IT department

CFO group

Line of business

All of the above


COO group

45%

39%

19%

11%

4%

9%

9%


To gauge how preparedness for the cloud translated to SAP S/4HANA, the survey asked how ready organi-

zations 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)

10 We’ve already started

7

9

6

8

5

2

4

1 Not ready at all

3


7

9

6

8

5

2

4

1 Not ready at all

350%

7%

14%

14%

7%7%

32%

10%

8%

18%

9%

8%

6%

3%

2%3%

How would you rate your organization’s readiness to embark on a cloud journey? (Deployed SAP S/4HANA)


7

9

6

8

5

2

4

1 Not ready at all

3


7

9

6

8

5

2

4

1 Not ready at all

350%

7%

14%

14%

7%7%

32%

10%

8%

18%

9%

8%

6%

3%

2%3%


Key FindingsThe 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 uncer-

tainty 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.

Documents

Is the Business Ready to Adopt a Digital Core? Exploring ... · Is the Business Ready to Adopt a Digital Core? Exploring Customer Strategies for SAP S ... While a base-level familiarity