Business transformation and digital transformation are big words, but what do they mean for business?
We sat down with the Vice President of Sales at Cognitus EMEA to discuss business transformation and what it means for the organizations taking the leap. He brings his experience at Hewlett Packard and Micro Focus to share insight into the business transformation.
His takeaway? It doesn’t matter how much you spend on new systems, if they don’t support business goals and needs, you’re wasting money. Support for legacy SAP systems is set to end in 2027 and René van der Zanden says you should never waste a crisis, taking this opportunity to optimize and standardize business processes can reduce costs and improve the way you do business for the foreseeable future.
Today, most organizations are still on legacy systems. Those were most often introduced between 2002-2005 and the development and market for those environments was completely different than is needed today. Here, the most dramatic change is that the demand for online, real-time, and digital twin data has increased significantly since the introduction of legacy systems. Today, IT and ERP struggle to support that.
Customer expectations and how they interact with systems has also changed. For example, customers are more integrated with new ecosystems, with smartphones, business data that has to be everywhere, and what you see is what you get. Customers want real-time data and self-service on their personal devices.
With legacy ERP, organizations often can’t accommodate that. We can barely talk to our customers. So, from a business perspective, things have to change. But, for IT, there’s no real benefit. Taking steps to communicate with customers in the IoT environment of today means integrating with environments in ways that IT doesn’t need.
When IT Departments look at business transformation, they do so from a business perspective. When they want to transition to a new system, they tend to approach it from a business and efficiency perspective. E.g., “over the next 3 years, we’re going to consolidate from 40 to 20 to 10 to 5 SAP Systems”. From an IT perspective, that’s cost savings.
Yet, at the same time, the business is still running on legacy environments. It might be struggling to meet customer needs in terms of communication and integration. Service and sales don’t have tools to immediately interact with the customer, to upsell the roadmap, or even to see existing customers inside the system. If they do, it’s because of numerous integrations and a complex network of technology.
S/4HANA offers much more capability on that front. Making the transition means innovating and bringing in new capabilities, for sales, for marketing, and for long-term customer management. So, IT can show thought leadership, and that it understands not just IT goals, but also business goals. Making the transition to S/4HANA isn’t just about consolidating systems and saving costs, it’s about adding value by optimizing the business, customer service, upselling, and future integrations.
When the overall objective is linked to achievements and business objectives, not just to IT, IT can add value to the business, while driving buy-in from stakeholders and key decision makers.
Making the shift to S/4HANA makes way for two kinds of transition. The first and most obvious is the digital transformation. Leveraging the apps and native integration of the S/4HANA environment means integrations, communication, and even data collection happens in a much more integrated way. Moving from a legacy system to S/4HANA means integrations and cooperation between supply chains, departments, manufacturers, transportation, and customers all happens in a much more streamlined way. That all happens with the digital or technical transformation.
But, making that transformation also presents an opportunity to change the organization. If you make an impact with digital transformation, you have an impact on business transformation. Migrating processes gives you opportunities to look at those processes, to look at systems, and to see what works and what doesn’t. How are processes handled in your organization? Do you use best practices?
Often, the answer is no. That’s because when many of the legacy ERP systems we use today were implemented, the focus was on customization, on building custom-fit solutions, and on doing things your way. You invested significantly in a custom implementation and then always built on top of that customized environment.
What that means today, in an age of digitization, rapid transformation, and standardized processes, is that your methodology is suboptimal.
Today, any organization on SAP has just 5 years to migrate to S/4HANA before support for the legacy system is dropped completely. That push is sending organizations to migrate, sometimes years before they thought they would. At the same time, new innovations are only developed for the S/4HANA platform. Therefore, being forced into digital transformation is an opportunity for business transformation.
“A lot of organizations focus on the digital transformation and forget the business transformation; you need both to be successful”
SAP S/4HANA delivers standardized business practices which you can adopt to optimize processes, to do things more quickly, and to ensure they’re handled in the most efficient way. That’s important in the cloud, because cloud offers fewer opportunities for customization than an on-premises installation does. If you want to adopt the cloud, you have to adopt SAP’s best practices. Most importantly, that “Crisis” is an opportunity to go back to industry best practice standards to make sure your processes are as good as they can be.
Often, organizations making the transition from legacy systems to S/4HANA underestimate the amount of customized code they have. That means underestimating the impact of the change and how much it impacts how people work after the transition.
That’s where Cognitus’ standardized approach become valuable. By ensuring you have a vanilla base, you can see what does and does not meet standard, so you can map out customizations. That offers insight into what kinds of transitions you have to make, so you can avoid the pitfalls of sudden and dramatic change.
For example, with Gallop Discovery, we assess your current environment, licensing, systems, and customization. This allows us to get a full picture of the environment and to build a migration plan with next steps, optimization suggestions, and possible impacts on those environments.
We also assess required resources, like costs, required people and expertise, protentional ROI, the business case for the transition, so you understand the full impacts of moving to the S/4HANA cloud. We leverage our experience to offer that information, which can have a huge impact on your transition.
Most importantly, because we’ve handled this type of transition again and again for our clients, we understand the process, the pitfalls, and what often goes wrong. Our goal is always to prevent those potential problems and to build a long-term relationship with your organization – because addressing the challenges in how you work is a long-term problem.
Eventually, moving from a legacy system to a new means setting the right expectations, taking the right steps, and addressing challenges and objectives together.