Your organization is planning on moving to S/4HANA in the near future. And that’s a good thing. Your IT team have been planning for months/years, they are primed and ready to make it happen. But deep down, some doubts are beginning to surface no matter how hard you try to quell them. Will this new implementation be as rough as the last go-live? Will you have better data this time, will users be adequately educated on how to use the system effectively, will there be sufficient support for the change the organization will go through (again), and will the design match business needs this time around?
If thoughts like these are keeping you up at night, you are not alone. Many COOs are hesitant to move forward because of their fear of the implementation trap. Last time, the IT team viewed the implementation as a huge success, but the business team? Not so much. Ask and they will tick off the problems: users only know a limited scope of functionality within the system: no real data ownership was established and there were issues with ongoing data housekeeping activities. Lack of transactional excellence such as, timely data capture, limited audit trails and transparency . A large amount of manual activity was expended with third party tools and the proliferation of spreadsheets usage. The result of all this was mistrust of the data, frustration with the system, degrading of service levels, increased demand for IT support, and rising operating costs.
Conversely, with the Optimized Brownfield approach, you optimize business processes and systems and align people first and then migrate the optimized processes, data and best practices. The value you save pays for all or part of the migration.
How exactly does that work? When you mature and optimize your business processes and practices, you can anticipate savings of around 1% to 2% of revenue. You preserve your investment in your current SAP solution by maximizing business processes and strengthening the value of your people working in the system. Once the processes and human capital are working the way they should be, you are ready to rapidly convert the improved and optimized business processes/practices and master data to S/4HANA. The result is less risk, less disruption, less effort, less radical change, and no reimplementation that causes disruption in current practices.
From a dollars and cents standpoint, the Greenfield “optimize later” approach will likely cost you $20-to-$50 million (based on the cost of 2% - 5% of revenue for a $1b company). The Brownfield “optimize first” approach, on the other hand, will likely cost only a tenth of that or less— $2.5 million. That is a hefty savings. Lets’ break that down:
- Optimizing the business processes and system and aligning people at a cost of approximately .025% of revenue, which translates to around 1-2% of revenue operational cost savings. Using our $1b company example, that is a net savings of $7.5 to $17.5 million.
- Migrating (Optimized Brownfield) the newly optimized processes, data and best practices costs around 1-2% of revenue (or $10->20M)
A $1 billion business can anticipate a $20-<50M price tag for a Greenfield implementation when all is said and done and a $2.5M price tag for an Optimized Brownfield implementation. Suddenly, the fog begins to lift, and the choice becomes clearer. For most organizations, it makes more sense to choose to optimize first, not later, because the Brownfield approach is almost self-funding. And as an added bonus, the value you receive from your optimization effort becomes the blueprint for the S/4HANA migration.
