Migrate to SAP® S/4HANA…without Overpaying

An essential guide for forward thinking IT leaders

SAP have extended support for Business Suite 7 core applications until 2025; their aim to give customers, in particular those running older ERP systems, a route to the cloud through switching to S/4HANA in a realistic time frame.Migrating, as we all know, is a mammoth task so it’s unsurprising the rate of adoption has been slow. Migration is a time-consuming and costly process that many organizations shy away from; some already feel that SAP will move 2025 out further, while some larger, more complex organizations will continue to work on an older system.

An incentive for progress

SAP offer businesses attractive financial incentives to move to S/4HANA to encourage adoption. Customers who migrate are entitled to 100% credit in 2019 which means there has never been a better time to de-clutter your SAP® estate and put yourself in the best position to negotiate the most favourable migration deal.

Beyond the financial incentive, the migration to S/4HANA offers businesses a real chance to resolve legacy issues by abolishing obsolete processes, contracts and technologies. The migration also provides the opportunity to free up unused licenses and establish a robust inventory that ensures organizations only pay for what they need in their new system.

In this practical, step-by-step guide, we’ll look at what you should consider before starting a move to S/4HANA and provide you with everything you need for a well planned migration including:

• Details of what’s involved in the migration process

• Guidance on how to assess whether you are ready to move

• Visibility of your assets and how to optimize to achieve the best outcome for your business

• Understanding the new licence types

• Getting the most from your negotiation with SAP

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What’s involved in S/4HANA migration?

S/4HANA is much more than just a technological change. It represents a fundamental shift in the way SAP operates as a vendor and a significant change to its relationship with customers. What’s more, it’s a far more complex migration process than the move from R/2 to R/3, SAP’s previous major technological change.In this section, we’ll look at the first two key decisions SAP customers need to make as well as the information that is available to help ensure migration goes smoothly.

Am I ready to migrate?

When contemplating migration, it’s important to remember that you don’t need to make a complete and immediate change. Purchasing S/4HANA now does not mean you have to migrate your entire SAP environment right away. There is plenty of time to adopt a phased approach. In fact, very few organizations will be able to do otherwise. Even with the support of an experienced consulting firm, the first phase migration of an existing SAP system to S/4HANA could take at least a year, and probably two, to reach the level of operational functionality like the existing system.

Decision 1: Green field of brown field?

The first choice organizations must make is whether to opt for a completely new implementation of S/4HANA, or to migrate their existing processes and data to S/4HANA.

• The first, green field approach, is simpler and can support faster innovation and adoption. To date, about 40% of S/4HANA software sales have been to new SAP customers with implementations starting from scratch

• The second, brown field approach or conversion, is best for those looking to minimize changes to existing business processes as it enables a smoother transition

Decision 2: Contract conversion

Existing SAP customers will have a second decision to make around system conversion. Moving and upgrading your ERP system is a major project, particularly for large, established organizations and complexity is unavoidable. You will need to consider:

• Conversion planning and infrastructure design

• Custom code removal/conversion

• S/4 functionality differences; Fiori user interfaces and new ways of reporting

There are multiple SAP S/4 transition journey options, but the key to a successful migration is to focus on protecting your investment and avoid parallel or double licensing.

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Optimization

SAP licensing is complex, so you need a process in place that protects your investment by accurately determining which product or contract conversion is best for your organization. Above all, it is important not to leave the old contractual world until you know exactly what you need in the future.

The all-important process of right-sizing your software assets and calculating their value can be broken down into four steps:

1. Stock-taking: This includes contract analysis (inventory and compliance), tool-based usage analysis (what do you use?), tool-based needs analysis (what do you need for S/4HANA?)

2. Clean-up: As part of this process, calculate your initial software asset value, free up inactive or duplicated user licenses, and rightsize user licenses to optimize your existing license requirements based on actual usage

3. Adjustment: At this stage, you could introduce an authorization concept that accounts for license metrics and adjusts authorizations to usage

4. Cost analysis: When migrating to S/4 HANA, look at which transition model saves your organization the most

Using an appropriate software asset management tool, such as Snow Optimizer for SAP® Software, automates and streamline the process following these four steps. This will provide complete transparency over your user license requirements, even in a new hybrid system landscape.

Once optimization is complete, you can calculate the difference between the original and rightsized software asset value to assess the amount of credit that could be used toward S/4HANA costs by:

1. Performing a baseline assessment of all users and licenses within the SAP environment to see which licenses have been assigned to each user

2. Gathering all contracts, addendums and entitlements

3. Combine this data to identify the total value of your assets

Any unused licenses and software, known as shelfware, can be used in negotiations with SAP.

Using Snow for SAP®

Snow for SAP® can help provide you with a complete overview of your current SAP license landscape before zyou enter your contract negotiations, making it easier to identify what you need for S/4HANA. In addition to the analysis of existing SAP contracts (analysis of license inventory) and the requirements analysis (SAP S/4HANA product list and number/costs of requirements, total volume and maintenance), Snow for SAP® provides a complete usage analysis and can help you answer the following important questions:

• Who is using which SAP System?

• How do they use it?

• Which new SAP S/4HANA user licenses are required based on this usage?

• How much will this cost me?

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Getting the most from your negotiation with SAP

S/4HANA is one of the most expensive databases on the market so negotiation is important to ensure you keep your costs under control. As with any negotiation process, there are many different opportunities and steps that can help you ensure you get the best deal. In this section, we’ll look at how gaining visibility over your portfolio can strengthen your position when it comes to renegotiating contract conditions, protects your business from future pricing changes.

Visibility, the essential step

A key advantage of switching to S/4HANA is that it creates an opportunity to renegotiate your entire license inventory. By transforming shelfware into valuable assets, you can also achieve the additional benefit of reducing annual run-time licenses and maintenance.

Understanding product conversion

As well as offering financial incentives to migrate, SAP is further easing the migration path by giving its customers the opportunity either to migrate gradually with each product,

or to negotiate an entirely new contract without updating their previous licenses. Old contracts can be replaced with a single new contract making it far simpler to manage into the future.

Switching to a new S/4HANA contract simplifies the migration. It allows purchase of what you need for S/4HANA and the costs replace your previous license costs. It’s important to note, however, that the massive discounts on offer do not extend to maintenance and the cost for this is still calculated on list price.

Compatibility packs

S/4HANA Compatibility Packs offer customers an opportunity to continue using previously licensed functionality in the new S/4HANA world.

Some transactions have been replaced by new transactions and/or SAP Fiori apps whilst some have been deleted without replacement.

Product conversion – phased approach

Contract conversion – for customers committed to S/4HANA

Considerations Benefits

You keep your existing contract You can do a step-by-step conversion

You can’t convert to products you don’t already own No need to re-license everything; you can focus on one at a time, e.g. engines

SAP gives you 100% credit in 2019 You can still use SAP “classic” apps until 2025 even after you converted them

Considerations Benefits

You negotiate a new contract Move to next-gen ERP and database tech

You migrate to the new S/4HANA software use rights Opportunity to reconfigure landscape

You can choose the products you want Opportunity to renegotiate T&Cs – simpler contract

SAP gives you 100% credit in 2019 of existing licensing to a maximum of 90% new contract value

You can still use SAP “classic” apps until 2025 even after you converted them

Not all ECC products have a successor in the new S/4HANA world yet. Any future contract must regulate how these licenses are handled, particularly regarding maintenance.

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Understanding the new licensing model

As well as providing the opportunity to renegotiate your contract, S/4HANA has a range of new license types which offer advantages, especially for manufacturing companies who have many external users.Crucially, licensing of S/4HANA is based on potential use, which means that the assigned authorizations for the necessary license types should be taken into consideration rather than the actual usage.

New licence types

S/4HANA brings four new user licence types:

• Developer Access

• Professional Use

• Functional Use

• Productivity Use

To ensure licenses are used correctly, it makes sense to match user authorizations to the underlying solution functions. For this to work however, the organization must also fit its usage to the new license types. This is difficult for those who have made extensive use of the Limited Professional, Worker User and Special User license types and now have nothing to replace them with. In such cases, it makes sense for customers to negotiate with SAP over functionality.

Developer

Access

Productivity use• Goods Movement• Warehouse Management• Shipping• Available to Promise• Material Requirements Planning• Production Control• Production Execution• Maintenance Execution Self-Service Requisitioning• Organizational Management• Time Sheet

Professional useThis license allows performing all role required operations, including management and system administration tasks.

• Inventory Analytics• Returnable Packaging Logistics• Transportation Management• External Processing• Subcontracting• Just-in-time Inbound Processing• Kanban• Repetative Manufacturing• Quality Engineering• Quality Improvement• Quality inspection• Manufacturing Analytics• Maintenance, Planning & Sched.• Master Data Maintenance• Project FInancial Control• Project Logistics Control

• Production BOM Management• Recipe/Routing Management• Variant Configuration• Inspection Planning• Product Development Foundation• Warranty Management• Service Request Management• Service Order Management• Service Fulfilment• Service Billing & Settlement• Multi-Channel Customer Engagement• Sales Order Management and Processing• Opportunity Management• Sales Lead Management• Activity Manegement

Functional use

€3,200

Professional Use€3,200

52 Professional

Functional Use€1,200

Productivity Use€300

On average 45% more expensive

€1,200 €1,200 €600€400

53 Limited Professional 54 Employee 71 Special User FX Worker User

An optimized authorization concept, which also takes the license metrics into account, is the foundation for the best S/4HANA license migration. Since there will be new transactions and old ones will become obsolete, the rights concept must also be technically reviewed and adapted – it is advised that both of these are done at once. Snow can help you set authorizations correctly, putting you in the best possible position before the migration.

This new licensing approach is meant to simplify the process, however, this does come with a cost; the new licensing model removes most of the special license types that SAP customers relied on to reduce licensing costs.

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Cost comparison

If you are over-licensed and over-paying with the legacy model, you will likely be paying even more after migrating to S/4HANA. Additionally, there is also maintenance impact: Even if your maintenance decreases from 22% to 15%, the maintenance will still be higher as the base cost is higher.

Developer

Access

Productivity use• Goods Movement• Warehouse Management• Shipping• Available to Promise• Material Requirements Planning• Production Control• Production Execution• Maintenance Execution Self-Service Requisitioning• Organizational Management• Time Sheet

Professional useThis license allows performing all role required operations, including management and system administration tasks.

• Inventory Analytics• Returnable Packaging Logistics• Transportation Management• External Processing• Subcontracting• Just-in-time Inbound Processing• Kanban• Repetative Manufacturing• Quality Engineering• Quality Improvement• Quality inspection• Manufacturing Analytics• Maintenance, Planning & Sched.• Master Data Maintenance• Project FInancial Control• Project Logistics Control

• Production BOM Management• Recipe/Routing Management• Variant Configuration• Inspection Planning• Product Development Foundation• Warranty Management• Service Request Management• Service Order Management• Service Fulfilment• Service Billing & Settlement• Multi-Channel Customer Engagement• Sales Order Management and Processing• Opportunity Management• Sales Lead Management• Activity Manegement

Functional use

€3,200

Professional Use€3,200

52 Professional

Functional Use€1,200

Productivity Use€300

On average 45% more expensive

€1,200 €1,200 €600€400

53 Limited Professional 54 Employee 71 Special User FX Worker User

Mind the Authorization GapOptimize your named user licenses, then close the gap between your license authorizations and their use. Make a cost-effective decision; trade your unused legacy licenses for credit.

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With Snow Optimizer for SAP®, you’ll get a clear picture of your current SAP license landscape to give you transparency prior to your contract negotiations for S/4HANA.

In addition to the analysis of existing SAP contracts (analysis of license inventory) and the requirements analysis (SAP S/4HANA product list and number/costs of requirements, total volume and maintenance), Snow Optimizer for SAP® provides a complete usage analysis and answers the following questions, among others:

• Who is using which SAP System?

• How do they use it?

• Which new SAP S/4HANA user licenses are required based on the previous usage?

• How much will this cost me?

• How much shelfware do I have to negotiate with?

ConclusionMigration to S/4HANA is a huge undertaking for SAP customers. Yet as we have seen, by laying the foundations now and taking the opportunity to optimize the licensing environment, organizations will be able to smooth their migration path. Additionally, organizations can take giant leaps in their overall digital transformation journey through increasing visibility and transparency within their software estate.

What’s more, the principles inherent in this migration; optimisation, new licensing models and negotiating around potential use, are models that will stand IT leaders in good stead for a successful, cloud-based future.

How can Snow Help?

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Snow Software is changing the way organizations understand and manage their technology consumption. Our technology intelligence platform provides comprehensive visibility and contextual insight across software, SaaS, hardware and cloud. With Snow, IT leaders can effectively optimize resources, enhance performance and enable operational agility in a hybrid world. To learn more, visit www.snowsoftware.com.

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