Executive Overview Expanding the Scope of the Digital Core

Q: Can you share the highlights for SAP S/4HANA in 2015?

A: In 2015, we had the biggest launch in SAP’s recent history — SAP S/4HANA — which achieved unprecedented customer adoption that more than doubled in the last quarter of the year. With more than 2,700 customers in less than a year since launch, SAP S/4HANA is our fastest-growing solution.

2015 was also the year in which customers no longer had to make the hard choice between investing in renovating their core, mission-critical systems and investing in new innovation projects and initiatives. With SAP S/4HANA as the new digital core, customers can now accomplish both goals: They can modernize their existing core systems and leverage SAP S/4HANA as a springboard to kick-start new innovations in areas such as the Internet of Things (IoT) and business networks.

When we first launched SAP S/4HANA, the focus in terms of business scope was on finance, as this is the starting point for moving into an integrated business suite for many companies, and it is an area that brings immediate benefits, such as insight to action, real-time decision making, and faster closing cycles. Only nine months after the initial launch, we released our first solution update in November 2015 — dubbed the 1511 release — covering nine additional lines of business: the supply chain, manufacturing, asset management, research and development, sourcing and procurement, sales, service, marketing and commerce, and HR. SAP S/4HANA has now reached business functional parity with SAP ERP 6.0, which means that customers can run end-to-end, fully digitized business processes, such as procure to pay, plan to product, and order to cash, in SAP S/4HANA. In 2015, we also released the SAP S/4HANA cloud editions for customers who prefer software-as-a-service (SaaS) deployment models with additional targeted scenarios for marketing and project services.

Q: What is the significance of the 1511 release to customers?

A: Most significantly, the innovations and simplification aspects of SAP S/4HANA are now available to other business areas — not only finance — to enable digital transformation across the entire enterprise. For example, in the area of materials management and operations, we have massively simplified the data architectures in logistics, eliminated redundancies, and optimized business processes such as production planning, inventory management, available to promise, and material valuation by adding real-time capabilities, automated decision support, and embedded analytics. We’ve also built new, personalized SAP Fiori-based cockpits that are not only easy to use but that can also help business users transform their working models.

The age of “customers can order any color as long as it is black” is over. If a given product and service is not specifically customized to customers’ preferences, the next competitor is only a click away. With the expanded scope of SAP S/4HANA, companies’ materials management and operations efforts will be transformed, as they can better respond to demand and supply changes in real time and move from mass-manufacturing processes to more individualized, personalized production models with smaller lot sizes.

Q: What role does SAP HANA Cloud Platform play in SAP S/4HANA deployments?

A: SAP HANA Cloud Platform is the agility and integration layer that can help customers extend both the reach and scope of their SAP S/4HANA deployments. In terms of reach, customers can quickly build new, innovative SAP Fiori-based mobile applications, which can connect to back-end SAP S/4HANA data, on SAP HANA Cloud Platform in a matter weeks and roll them out to new employees, partners, or even to their end customers. We are already seeing customers planning innovative projects in this way. In terms of scope, customers can leverage SAP HANA Cloud Platform to integrate with other SAP cloud solutions, such as SAP Ariba and Concur solutions, or use it to build front-end applications that connect SAP S/4HANA with third-party solutions. As a result, customers can extend their investments in SAP S/4HANA and build new capabilities that are unique to their digital transformation journey.

Q: How are partners involved in the adoption of SAP S/4HANA?

A: Our partner community and ecosystem has been instrumental in SAP S/4HANA’s rapid customer adoption, playing an influential role in more than half of customer projects. And many of our customers’ go-live projects are managed by our partners. Given the importance of partners’ involvement, we are actively building tighter relationships with them in 2016. For example, in January we signed a new development and go-to-market partnership with one of our strategic partners, Accenture, that will further accelerate adoption and implementations for our customers.¹ This partnership will result in new SAP S/4HANA-based industry and line-of-business-specific solutions, and it exemplifies how we can accelerate momentum with our strategic partners. It is only one of many cases of collaboration; we are working intensively with other strategic partners to further simplify and support the customer journey to SAP S/4HANA.

Q: Who are some of the customers leveraging SAP S/4HANA for their digital transformation?

A: Many companies, including Asian Paints, La Trobe University, Florida Crystals, Swiss Re, Deloitte, and Geberit, have already realized benefits with SAP S/4HANA and have shared their digital transformation stories.² But we are also seeing many new customers as well. For example, in December 2015, Wipro announced that it is extending its SAP footprint to include SAP S/4HANA and is planning to go live this year. In January 2016, the Defense and Space division of Airbus announced that it went live with SAP S/4HANA as the digital core to help drive its financial transformation. This move to SAP S/4HANA marked a major milestone within the group’s financial digitalization initiative. And during the SAP Capital Markets Day event in February this year, SWISS PROPERTY³ and Hewlett Packard Enterprise4 both shared their SAP S/4HANA stories. As more customers go live with the solution, we expect to hear more transformation success stories.

Q: Can you explain the licensing model for SAP S/4HANA?

A: In January 2016, we introduced a new, simplified licensing model for SAP S/4HANA.⁵ SAP customers who have an existing SAP ERP license will only have to pay a nominal flat fee to license SAP S/4HANA for like-for-like functionality. That is, of course, in addition to licensing SAP HANA as the underlying platform as either a limited or full-time edition. This nominal fee is to acknowledge the previous investments that SAP customers have made in their existing SAP ERP implementations and landscapes.

For new customers who do not have an SAP footprint, we have rolled out a new licensing model that won’t require customers to license the engine and users separately, as was required in the past. New customers will now only need to pay a user license and will have the option to choose from three types: Professional User, Productivity User, or Business Partner Access.

Q: What should customers expect in 2016?

A: We have committed to an annual update release for the on-premise version of the solution — the next update is planned for the fourth quarter of 2016 — and a quarterly release for the cloud version. We are delivering on this promise to our customers. We are continuing our efforts of simplifying more business processes and building new, personalized SAP Fiori-based cockpits for key business users, but we are also working on driving tighter integration of our line-of-business and cloud solutions with SAP S/4HANA Enterprise Management.

Our customers’ financial transformation with SAP S/4HANA Finance began in 2015. That transformation will continue in 2016, but will now also cover the extended supply chain and other lines of business thanks to the expanded business scope of the 1511 release.

With the digital core now at the center of our customers’ digital transformation strategy and its scope covering end-to-end business processes across the enterprise, we expect to see faster adoption from customers and more transformative use cases as customers go live with the solution. To learn more, visit sap.com/s4hana.

^{1 SAP, “SAP and Accenture Join Forces in Core and Industry Platform Development and Go-to-Market for SAP S/4HANA” (January 2016; https://news.sap.com/sap-and-accenture-join-forces-in-core-and-industry-platform-development-and-go-to-market-for-sap-s4hana). [back]}

^{2 You can read about these customers’ successes in the article “A Preview into Digital Transformations” in the July-September 2015 issue of insiderPROFILES (bit.ly/digitaltransformations). [back]}

^{3 See https://youtu.be/3D8AJkX6Ios. [back]}

^{4 See https://youtu.be/9sT3MeFO1ys. [back]}

^{5 In 2015, existing SAP customers who already had a valid SAP HANA license were eligible to upgrade to an SAP S/4HANA license at no additional charge. That promotion has ended. [back]}