Budgeting For S4HANA: Mistakes You Can't Afford To Make
With technology moving faster than ever, your digital transformation strategy needs to keep up the pace to survive.
A key part of that transformation is transitioning from the SAP Business Suite to SAP S/4HANA. Something you can no longer put on the back burner with the migration deadline closing in.
Moving your SAP ERP to the advanced SAP HANA database, which offers a simplified data model and real-time analytics will change your entire business for the better. But with these changes comes a great deal of planning to get the migration right.
One area we often see clients fall down in is budgeting for S/4HANA migrations, which can lead to a lot of unnecessary stress and financial strain.
To help you avoid this, here are the top five budgeting mistakes we see companies make and how to avoid them.
1. Underestimating total costs
Financial planning is a rigorous activity when looking at ERP software like SAP S/4HANA.
While businesses applaud the efficiency of SAP HANA, many overlook hidden costs, like infrastructure costs and specific training for components like Supplier Relationship Management (SRM) and Customer Relationship Management (CRM).
The dangers of overlooking SAP HANA costs
- Stalled projects: Running out of funds can halt momentum, causing potential delays or even termination of the S/4HANA upgrade.
- Compromised quality: Insufficient budgets may lead to corners being cut, affecting the upgrade's overall efficacy.
- Stress and overstretching: Financial strains can put undue pressure on teams, leading to mistakes and burnout.
How to avoid this mistake: Comprehensive budgeting
By making a proper budget assessment, you’ll avoid overspending or underspending and ensure the right resources are in the right places.
- A layered approach: Segment the budget based on stages of the SAP ERP system upgrade. Set funds for planning, execution, post-launch, and a contingency portion.
- Contingency planning: Always set aside a budget section for unforeseen circumstances. This helps safeguard against unexpected SAP released updates or alterations.
- Monitor costs: Regularly review and adjust these sections to ensure you're always in control and aligned with the best business models.
2. Neglecting pre-upgrade assessments
In the grand scheme of an upgrade, cutting corners with pre-assessment may seem tempting. But it's a gamble that rarely pays off.
The dangers of skipping assessments
Cutting corners during pre-assessment is tempting but risky. Ignoring it may lead to:
- Operational disruptions: Unexpected system clashes disrupt daily operations.
- Resource wastage: Without a roadmap, resources might be wasted, affecting supply chain management and business processes.
- Elongated timelines: Unexpected challenges can stretch the project duration.
How to avoid this mistake: Perform an in-depth assessment
By investing time and energy upfront understanding your current landscape, you’ll be able to identify and mitigate potential risks.
- Collaborative analysis: Collaborate with departments to get insights about system dependencies and potential challenges. This includes things like understanding SAP ECC dependencies before transitioning.
- Hire S/4HANA experts: Engage SAP consultants who are well-versed in SAP ERP, SAP HANA database, and SAP S/4HANA.
- Gap analysis: This involves understanding the difference between existing business processes and the capabilities of the new ERP system.
- Use assessment tools: Tools like SAP’s Readiness Check can streamline pre-upgrade processes, allowing for a smooth system conversion.
3. Failing to prioritise change management
Digital transformation affects more than just business models; it impacts people.
The human aspect of any technological transition is often the most unpredictable. People have their comfort zones, and nudging them out requires a solid change management strategy.
The dangers of overlooking change management
- Reduced Productivity: Teams unfamiliar with SAP HANA S4 and its simplified data model might struggle initially.
- User Resistance: Those accustomed to the SAP Business Suite might resist the new ERP software.
- Increased Training Costs: Addressing issues after the upgrade might require additional training sessions, especially in areas like supplier relationship management.
How to avoid this mistake: Prioritise people
Incorporate risk management best practices to address possible change resistance.
- Embed Change Management: Address concerns, highlight SAP HANA's benefits, and offer training.
- Regular Communication: Keep teams updated on digital transformation, new business models, and SAP announced changes.
- Flexible Training Modules: Cater to varied learning curves, from basics like financial accounting to advanced topics like machine learning.
Learn more in our guide, “Upgrade To S/4HANA With Confidence: The Critical Role Of End-User Training.”
4. Overlooking data migration complexity
While the idea of data migration might seem clear-cut, its real-world execution is layered with complexities. Many assume a plug-and-play approach, but crucial steps like data validation, data cleansing, and ensuring data format consistency are essential.
The dangers of mishandling data migration
Data migration is more than moving business data from one place to another. Ignoring its complexity can lead to:
- Loss of Critical Data: This can hamper supply chain management, inventory management, and customer relationship management processes.
- Operational Delays: Rectifying migration errors can cause downtimes.
- Compliance Violations: Mishandling financial data can breach regulatory guidelines.
How to avoid this mistake: Detailed data oversight
Recognising where data originates, how it's processed, and its end destination can streamline migration. SAP’s Data Migration Option (DMO) can simplify this.
- Regular backups: Safeguard financial data and other crucial ERP system info.
- Migration test runs: Test before migrating to SAP HANA S4 to catch potential issues.
- Simulation tools: Use tools to mimic SAP ERP system scenarios and test the migration process.
5. Investing in skilled S/4HANA talent
As with any endeavour, the right people make all the difference. This is particularly true for an S4HANA upgrade.
The dangers of skimping on S/4HANA talent
Cost-saving measures might sway organisations to compromise on talent quality. But in the long run, this can prove costly. Ignoring the need for expertise might cause:
- Extended project durations: Novice teams can stretch out system conversion phases.
- Increased troubleshooting: Inadequate knowledge on SAP ERP systems can lead to errors.
- Reduced ROI: Without experts, you might not fully harness SAP S/4HANA’s potential.
See how much hiring SAP talent will cost with our SAP Salary Insights Report.
How to avoid this mistake – See talent as an investment
Talent familiar with SAP ERP systems, especially those who've worked with SAP ECC before, can offer invaluable insights:
- Hiring: Look for professionals who understand the intricacies of enterprise resource planning and the newer features like predictive accounting. SAP recruitment agencies can connect you with experts in both service industries and consumer industries.
- Continuous Training: Regularly update teams on SAP HANA database advancements, for example, if SAP released new features or modules, like they did with SAP Ariba for operational purchasing.
- Invest in Upskilling: Enhance in-house skills, focusing on SAP ERP, supplier relationship management, and customer relationship management.
Connect with the world’s top S/4HANA experts
When SAP announced the launch of S/4HANA, it was hailed as the future of ERP systems, offering a unified platform for everything from transportation management to inventory management. However, a shift to this platform is not without challenges – especially when it comes to budgeting.
At Red Global, we're more than just SAP recruitment consultants; we're your partners in navigating the complexities of software upgrades. With years of expertise, we ensure your transition is smooth, cost-effective, and tailored to your organisation's unique needs.
By connecting global companies with top SAP talent, we help businesses avoid these pitfalls and make their S4HANA upgrade an undeniable success.
Book a strategy call today to see how we can help.
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