90% of companies kicked off their SAP S/4HANA implementation process

Eight years after the launch of SAP S/4HANA, over 90% of the companies using SAP have started their transformation to the cutting-edge platform – although the large majority of those companies are still on their way to their final setup. That is according to the ‘Business Transformation Unlocked’ study from Horváth.

Unveiled to the world a decade ago, SAP S/4HANA is SAP’s flagship enterprise resource planning (ERP) system, running fully in the cloud and fitted with the latest technologies (including AI). Based on a survey of more than 200 executives from companies using SAP, the Horváth study has found that the majority of companies still haven’t completed their (full) move to SAP S/4HANA.

More than 90% have started their transformation, of which over half are in the Prepare, Realize or Deploy phases. 3 in 10 companies have already gone live with SAP S/4HANA, of which 11% are in the Run phase (optimizing performance post go-live) and 19% have fully completed the transition (meaning SAP S/4HANA has been transferred to the standing organization).

Wherever companies are in the implementation phase, the report found that challenges and even disappointments are a common denominator, with such ERP migrations among the most complex transformations of any kind due to their multi-year time span, organization-wide impact, and the titanic impact they have on the entire IT infrastructure as well as data landscape.

Indeed, 65% of leaders acknowledged that they missed their initial targets for quality, while 60% said they suffered overruns in planning. “On average, SAP S/4HANA implementations take 30% longer than originally anticipated,” commented Saad Hamam, partner at Horváth in the Middle East.

In the case of budget, over half (55%) of executives that can look back at a (near) completed SAP S/4HANA migration said that they ended up spending more than outlined in the program budget.

The caveats

So what are the main issues hitting time, budget and quality? “The expansion of the project scope during the transformation is the main reason,” said Hamam, followed by suboptimal project delivery, a poorly managed data transition, a blueprint that is not fixed but revised along the way, and a lack of clear governance and support from the top.

Another common caveat is the lack of alignment at portfolio level. Large companies typically run several change programs simultaneously, meaning that important risks, dependencies and impacts need to be weighed carefully. “In today’s fast-paced environment, companies tend to manage too many topics at the same time. This missing prioritization leads to a mismatch in project targets and in a deterioration in portfolio performance.”

Meanwhile, the report emphasized that while end users ultimately are the ones that will have to use the new system, the soft skills and capability building required to make that happen are often overlooked. Hamam: “A robust approach for successfully delivering ERP migrations should include efforts aimed at building leadership commitment and alignment, and support across all levels of the organization through communication, change management and training.”

The report emphasized that while the key pillars and success factors of a transformation can be prepared for, there is by no means a one-size-fits-all approach. Instead, the approach should be aligned to a variety of specifics, including company size, migration approach, organizational complexity, track record in IT implementations, and more.

The migration wave ahead

Horváth’s report sheds light on the journey ahead for many companies that use SAP systems. In 2027, SAP will cease support for its legacy ERP systems (ECC and R3), meaning that companies will by then have to have completed their migration to SAP S/4HANA. With less than 30 months on the clock, executives that up until now have been hesitant in kickstarting migration planning will start to feel the heat.

“There are clear learnings that can be taken from the good and bad past experiences,” noted Hamam. “Those that embed those into their approaches will significantly lift their odds for success, and be more successful in tapping into the benefits of using SAP S/4HANA to its fullest potential.”