As the deadline set by SAP for migrating to more advanced Enterprise Resource Planning (ERP) systems approaches, businesses are exploring different options to make the transition as efficient as possible.
However, uncertainty still prevails—many companies are unsure about which implementation strategies will yield the best results, what the associated costs for the transformation will be, and the benefits they’ll achieve in the process. That’s why clients often wait until the last minute to make such an important decision.
Due to the complexity of the process and the many available alternatives to achieve it, companies often hire external consultants to handle the assessments. These assessments aim to identify potential benefits of the transformation, design a migration strategy, as well as estimate the financial investment required to complete the project.
However, SAP’s new ERP, S/4HANA, offers a substantial number of changes and improvements that are not always included in these analyses, due to their complexity. These improvements are aimed at promoting companies’ digital transformation, improving the control and quality of information that could make a positive impact on their financial results.
To better understand its business application, at NTT DATA we have designed a business case through which we assess the benefits and efficiency and potencial improvements of implementing S/4HANA. In doing so, we can better guide our customers and provide them with an economic framework to help them make more informed decisions.
Why use a business case?
Some of the advantages of using a business case as a tool to guide the transition to S/4HANA are:
- It provides a more accurate and pragmatic financial perspective on the investment, reflecting the benefits attainable through making the transition.
- The tool is versatile and adjustable to different situations and conditions for each business.
- It provides exhaustive data that allows for decision-making not only based on economic criteria, but also technical and business criteria.
S/4HANA: a comprehensive business case
NTT DATA uses a standardised methodology to quantify costs and savings in its migration assessments. The business case is developed throughout the different stages of the analysis:
• Set up: the initial stage of the process. During this time, we establish the meeting schedule with business and IT teams, and collect the necessary data for creating the business case in an agile manner.
• Discovery: the purpose here is to understand the situation at the starting point. In this phase, we examine the maturity level of the firm’s processes, decide the degree of standardisation or customisation, and then set a baseline.
• Design: at this point, the intended solution model is developed, ensuring that it aligns with the client’s needs. This way, clients can evaluate potential improvements for each metric/ process and module.
• Business case and roadmap: here we outline the most suitable adoption roadmap for the client. To achieve this, it’s necessary to consider the defined model, as well as the corporate and IT strategies. The approval of the business case is fundamental to estimate the Return on Investment (ROI) and the impact on cashflow.
The business case method
The business case is a supplementary tool to traditional analysis. As we have seen, it takes into account factors such as the current maturity level, the solution model to be implemented or the specific modules needed and the potential qualitative benefits. Additionally, during development we determine whether it’s more appropriate to use local or cloud-based infrastructure. Therefore, by considering all of these factors, NTT DATA and the client can holistically estimate the potential expenses and savings resulting from the implementation of systems like S/4HANA.
A study on S/4HANA and the investment necessary for its implementation
Thanks to this case study, it’s possible to create Profit and Loss (P&L) and cash flow statements with ease, along with important investment indicators. These include Net Present Value (NPV), Internal Rate of Return (IRR), and payback related to the client implementing S/4HANA.
All of this supplies clients with a complete economic and financial understanding of the potential investment. This includes both costs and potential savings from divesting the current infrastructure and simplifying the system environment.
Not only does the financial forecast provide the necessary information for the executive team to approve the right investments, but it also serves to establish savings goals to be achieved. In this regard, the business case functions as an economic tracking tool before, during and after the implementation of the new plan.
Benefits and savings in S/4HANA implementation
Thanks to our experience in S/4HANA implementation, NTT DATA has been able to measure the most important qualitative and quantitative values of using its standard version. Among the most relevant, we can highlight benefits and cost reductions in the following areas:
• System architecture
• Cash conversion cycle
• Risk reduction
• Operational KPI improvements
• Time distribution
Ultimately, the Business Case tool is capable of easily adapting and calculating numerous S/4HANA configurations and scenarios depending on the expected success in terms of savings. It can successfully be used with customers from various sectors and maturity levels, providing a complete vision of the achievable benefits.