Today’s always on digital economy and the ever-changing environment demands ERP applications to evolve from being a mere transactional application to providing the foundation for building a modern enterprise. As organizations increasingly adopt digital technologies, they must transform their business models, operations, and processes to support the growth of their business. In other words, they must modernize their ERP.

In this blog, I will help you understand the various approaches to building your ERP migration strategy to SAP S/4HANA.

SAP S/4HANA is a modular ERP from SAP designed to support an organization grow into an intelligent enterprise by transforming both business and IT through automation, data model simplicity, and process standardization.

Though SAP has promised mainstream support to ECC application till 2027, it is prudent to evaluate the adoption of S/4HANA right away. We must calculate the cost of delay- both strategic and logistical along with missed opportunity for business improvement. Digitization of the core ERP is imminent and adoption of new generation ERP solutions like S/4HANA is more a question of when then why.

Understanding Greenfield, Brownfield, and Hybrid approach to ERP migration

There are three broad adoption options for your ERP application to move to S/4HANA:

1. Conversion to S/4HANA or Brownfield: This approach reuses existing processes with minimum disruption to the business. This allows you to adopt your current business processes to the new technical platform and set the pace for adopting other S/4HANA innovations at you own convenience.

You may choose this option if you have any of the following needs:

• Migrate your current business processes to the new platform/application quickly without re-implementation.
• Retain high degree of client-specific custom development or processes
• Preserve all historical data and convert to new data model in S/4HANA
• Adopt new innovations at your speed and time and in a phased approach
• Ease change management with minimal disruption to existing business processes

The key challenges faced in this approach are

• Downtime optimization- downtime can be reduced using data management activities and using near zero downtime or downtime optimized conversion approach by SAP
• Making customer IP (code) work in the new environment- a large component of code remediation can be automated using tools- both SAP and system integrator provided

2. New Implementation or Greenfield: Greenfield approach is the installation of new SAP S/4HANA system which replaces legacy ERP (SAP or non-SAP). This helps to reengineer and renew the ERP estate by doing away with customizations that are not needed and adopting the process innovations offered by S/4HANA. It is important to note that adoption of S/4HANA Cloud ERP (SAAS) is only possible with new implementation route.

You may choose this option if you have any of the following needs:

• Re-engineer, simplify, or standardize processes based on latest S/4HANA innovations
• Implement S/4HANA Cloud ERP (Software as a service ERP by SAP)
• Migrate from non-SAP / 3rd-part legacy system
• Cleanse, transform data or construct new data
• Ease deployment with phased implementation

The key challenges faced in this approach are

• Accelerating the design & build – this can be achieved by using industry reference solution or best practices provided by SAP or system integrator
• Keeping the ERP core clean- using the process standardization, extensibility guidelines and moving the code to cloud for consumption as a service will help to keep the core clean/light and ease the future software upgrades

3. Selective Data Transition or Hybrid: This approach combines the best of both greenfield and brownfield implementations. This value driven migration approach allows you to retain most of the existing process and enterprise setup, while selectively transforming a particular entity or line of business. This adoption approach requires specific technology (landscape transformation based) and when carried out by third party SNP, it is referred to as Bluefield.

You may choose this option if you have any of the following needs:

• Focus only on business processes with high ROI for changes introduced with the lowest TCO
• Rework or redesign only those parts that are not functioning well, to the new system
• Avoid any elaborate preparation projects for the brownfield migration due to large number of Add-ons or impacted business functions
• Consolidate the systems landscape
• Unify master data, simplify processes, and merge select entities with SAP S/4HANA

The key challenges faced in this approach are

• Degree of reusability vs change- A Proof of concept (POC) using tool of choice for changes to be done might help to arrive at the balance between how much you want to retain (including historical data) and how much should be changed
• Data volume to be migrated – Take the decision based on the life cycle of the business document. Typically higher the volume of data to be migration- higher the risk & complexity.

Before choosing between the three options, organizations must identify the main drivers for their technology and business transformation. They must assign the necessary weightage and score to these factors to make well informed decisions.

Conclusion

Digital ERP core is a catalyst for growth in today’s economy. Continued investments in legacy landscape may not be offering the same value and it might be beneficial to be on new platform and then make the investment for much higher return. Underlying technology is important than mere process improvement in existing ERP and S/4HANA allows you to realize an end-to-end digital business.

For most of the customers having diverse IT landscape, the answer to the question “how do I adopt S/4HANA” is rarely straightforward, except in case of Cloud SAAS ERP- where at present the only feasible option is greenfield implementation. An in-depth assessment for benefits/value case can help one identify the right approach.

Two primary factors in play are degree of change desired and degree of reusability expected (of existing setup). The brownfield (system conversion) is at one end offering less degree of change but higher retention of data & existing setup, while Greenfield (New implementation) is at the other end giving complete flexibility. For very high degree of change desired, greenfield might be a better option as it gives you a clean slate to start with, while a desire to retain almost everything including transaction data fairly indicates brownfield as a potential option (provided single step conversion is possible without elaborate pre-project). Hybrid is somewhere in between giving best of both worlds. It gives a choice to reuse your existing setup & process, while giving you the ability to change what is required. However, there is a fine balance to be achieved here between how much you want to retain (including historical data) and how much should be changed.