Today, SAP released its next generation ERP platform, SAP® Business Suite 4 SAP HANA® or SAP S/4HANA for short. Quoting from the press release:
“Today SAP is redefining the concept of enterprise resource planning for the 21st century. SAP S/4HANA is about uniting software and people to build businesses that run real-time, networked and simple,” said Bill McDermott, CEO of SAP. “When Hasso Plattner invented SAP HANA, we knew the day would come for SAP Business Suite to be reinvented for the digital age. At a moment when businesses around the world need to enter new markets and engage with their consumers in any channel, there’s now an innovation platform designed to drive their growth. This is an historic day and we believe it marks the beginning of the end for the 20th century IT stack and all the complexity that came with it.”
If you’re at this page, you’re probably wondering what S/4HANA is all about. Here’s what you need to know.
- What is SAP S/4HANA?
- How strategic is S/4HANA to SAP?
- What does the “S” in SAP S/4HANA mean?
- What databases will SAP S/4HANA run on?
- What will S/4HANA look like?
- What is SAP HANA?
- Why is there no support for other DB vendors?
- What if I am still on Oracle. Will I still get support from SAP?
- Will I still get innovation if I do not move to HANA?
- Does SAP S/4HANA still run on the ABAP platform?
- Is SAP S/4HANA Backwards Compatible?
- What modules are available for SAP S/4HANA?
- What’s the difference between SAP S/4HANA and the existing Business Suite powered by SAP HANA?
- What is the upgrade path to SAP S/4HANA?
- What is the business case for SAP S/4HANA?
- Will SAP S/4HANA run on-premise or in the cloud?
- SAP S/4HANA Public Cloud
- SAP S/4HANA Private Cloud
- SAP S/4HANA On-Premise
- Is S/4HANA Cloud Multi-Tenant?
- What is the roadmap for application delivery?
- What skillsets are required?
- Does this have an impact on the SI market?
- Why isn’t S/4HANA based on byDesign?
- What are the licensing implications for SAP S/4HANA?
SAP S/4HANA is a replacement to the SAP R/3 or Business Suite platforms that have been in place in many global businesses since the release of SAP R/3 in 1992.
The important thing about the SAP S/4HANA launch is that it clearly lays down SAP’s software strategy for the next 10 years. The launch is done in parallel with a Capital Markets day, which means that SAP is looking to immediately explain the impact to investors and customers.
To put this into context, Hasso Plattner, SAP Chairman of the Executive Board, was quoted as saying:
If this doesn’t work, we’re dead. Dead in the water.
SAP is committing all of it's development resource to rewriting some 400m lines of code – so this is the most strategic development decision in SAP’s 40-year history.
The “R” in SAP R/3 stood for “Real-time”, and whilst S/4HANA is all about the real-time business, SAP chose to use “S”, meaning Simple.
When SAP built R/3, it was built to run on any database (AnyDB), and used the capabilities of the lowest common denominator. This led to tremendous complexity in the software design which has persisted through over two decades.
With S/4HANA, SAP is rewriting the software layer to take advantage of the tremendous performance of SAP HANA, which leads to a dramatic simplification of the data model and software. Data size is reduced 10:1 and even the number of database tables is reduced 10:1 in many areas.
In addition, several decades of experience have been used to simplify the user experience with the SAP Fiori UX front end, with a modern user experience and fewer screens and clicks.
SAP S/4HANA is no less real-time, but it is simpler too.
As its name suggests, SAP S/4HANA will only run on SAP’s HANA platform, and it will not run on any other platform. This is extremely significant because previously, all SAP products were designed to run on any database platform, including those from Oracle, Microsoft and IBM in recent years.
To be clear, SAP S/4HANA will run only on the HANA platform.
The User Interface for S/4HANA is SAP’s Fiori responsive UX. This will be the front for on-premise S/4HANA, cloud S/4HANA and all the centralized cloud applications that form part of S/4HANA including Concur, Fieldglass, Cloud for Customer and Success Factors.
I wrote about that in a lot of detail in the SAP HANA FAQ, but SAP HANA is a next-generation database technology, which runs in main memory and processes information extremely fast. It’s so fast that it does not need a separate operational analytics system or data warehouse.
It is the platform for all of SAP’s innovation. Because it is so fast, it is no longer necessary to hold all of the duplicate data in a transactional system including calculations like percentages, totals, indexes and aggregates. This leads to a much smaller data footprint and dramatically faster processing.
The SAP strategy since 1992 was to support all vendors. This happened at a time when UNIX systems were prevalent, and every IT department had their favored database and platform.
At that time, SAP was displacing mainframe vendors, IT spending was focused on the millennium bug and databases were broadly equivalent in functionality. SAP focused on an open platform that built on any RDBMS and this contributed to the dramatic rise of SAP in the Enterprise.
In doing so, SAP built applications based on the lowest common denominator of all database features, and was unable to take advantage of database-specific functionality like stored procedures.
In the last decade, there has been three intervening factors.
- The rise of cloud platform-based competitors like Salesforce and Workday means that applications exist that are deeply integrated into the database layer, and perform better for it
- There is less of a focus on openness of what platform software runs on, and more of a focus on openness of integration and APIs. The DBA no longer has the power-base in the Enterprise
- SAP built its own database with SAP HANA, that has the capability to be incredibly differentiating, but performs much like any other database when running the “lowest common denominator” code.
For these three reasons, SAP had to re-platform to what it calls “the fastest mover” – its SAP HANA platform. Unfortunately, SAP HANA is sufficiently innovative that the rewritten S/4HANA software performs terribly on the traditional RDBMS systems.
Yes, and we can expect SAP to retain its relationships with other database partners. There is an install base of tens of thousands of Business Suite customers running other databases, and these will not be forgotten.
It’s important to remember that ERP systems have extraordinary longevity – the lifespan can be 10-20 years or more, and SAP will continue to support existing systems in the long term.
SAP notes that it will continue to innovate in the Business Suite for AnyDB – for example, by porting any innovations which are created for S/4HANA which will run on AnyDB back to the Classic Business Suite code base.
In practice, this means that existing Business Suite customers will continue to be supported, but those that want innovation will need to move to S/4HANA.
SAP will certainly provide security and regulatory fixes for what they call AnyDB customers (Oracle/Microsoft/IBM) but innovation will be focused on HANA.
This already happened in the SAP BW data warehouse software: in the latest SAP BW 7.4 release, almost all the innovations for customers are only available for the HANA DB.
Yes, S/4HANA will be based on SAP’s ABAP platform.
The primary extension framework for all S/4HANA systems is the HANA Cloud Platform (HCP) Extensions. This allows customers, SIs and ISVs to extend S/4HANA in a compatible way.
ABAP changes will be restricted to Private Cloud and On-Premise versions.
Once you have moved your Business Suite to the HANA platform, either on premise or in the cloud, it will be possible to take advantage of SAP S/4HANA components as they become available.
Existing code will continue to run because ABAP is compatible with HANA. Some code requires optimization when customers move to the HANA platform, but this is normal.
Currently, there is support for core finance (GL). This will be extended to Logistics in 2015, and other modules will follow. It’s worth noting that the existing Business Suite code lines are backwards compatible with HANA, so all the existing supported modules will run.
SAP will rewrite the existing modules for HANA over a 3-5 year period, based on popularity.
Today, there is no difference. Simple Finance is available on premise or in the cloud and it is an add-in to the existing Business Suite.
With Simple Logistics, we expect the first cloud-first release of a SAP ERP product. This likely will pave the way for a separate installation for SAP S/4HANA through 2016 and the regular Business Suite and S/4HANA will part ways.
The initial path is to move to the Business Suite on HANA platform, and the SAP S/4HANA move will be possible. For example, the conversion to Simple Finance is an automated data migration.
Here’s an excerpt from SAP CTO Irfan Khan’s blog post:
Moving to SAP S/4HANA for a typical existing SAP ERP 6.0 customer will require a database migration from any database to SAP HANA, combined with a move to the latest enhancement package and the deployment of the exchange innovation, meaning the current code is replaced by the new one. Moving to SAP S/4HANA for an existing SAP Business Suite powered by SAP HANA will be even faster as only the deployment of the exchange innovation is required where current code is replaced with the new one.
There are some generic IT-based business case points for SAP S/4HANA: reduction in data footprint, TCO, development costs and faster transaction processing and reporting.
On the business side, each specific Line of Business module will have specific benefits. For Simple Finance these are focused around the CFO: faster close, reduced debtor days, lower training costs, streamlined approvals. Since other modules are not yet available, their specific benefits have not been addressed yet.
SAP came under a lot of pressure in 2014 from the User Groups to deliver information about business value with its technology, and we can expect SAP to be extremely explicit about the benefits of moving to SAP S/4HANA.
It’s clear that cloud computing is SAP’s stated direction. SAP S/4HANA will have three modes – a Public Cloud, Private Cloud, and on-Premise. It will be “cloud first” approach and the cloud versions will provide innovation earlier than the on-premise version.
The public cloud will be a shared HANA multi-tenant database using the HANA multi-tenancy database option. This will have mandated quarterly releases containing new functionality, and there will be one code-line for all customers.
In the quarterly releases starting in Q1 2015, there are three initial options:
- Finance: Simple Finance
- Professional Services: Project Systems, Fieldglass, Employee Central
- Sales: Simple Finance, Hybris, Cloud for Customer
The user interface will be Fiori across the board for all the options, and note that Fieldglass, Employee Central, Hybris and Cloud for Customer all run on their own cloud and are shared by all customers.
Despite the fact that there are disparate clouds, the user experience is designed to seamlessly knit the products together into one interface.
The S/4HANA Private Cloud is designed for customers who are looking for increased security and privacy and who don’t want to share a database container with other customers. Despite that, quarterly releases will be mandated for Private Cloud customers.
The scope for the private cloud will be delivered at SAPPHIRE 2015, in May, but it is designed for larger scale adoptions, with customizations, and the consumption and conversions of on-premise Business Suite systems.
The SAP S/4HANA on-premise option will lag behind the Public and Private Cloud offerings and this is deliberate. On-Premise customers tend to update less frequently, so yearly updates are planned.
In addition, it will be possible to migrate a Business Suite system into the SAP S/4HANA cloud, and then migrate it back into an on-premise system.
The Concur, Fieldglass, Ariba and SuccessFactors clouds are already truly cloud multi-tenant.
The Public Cloud version will use database multi-tenancy, which is quasi-multitenant from a cloud perspective. ABAP Code-lines, configuration tables etc. will not be shared yet between customers on one SAP HANA container database. This is expected to come in time, as SAP HANA supports true cloud multi-tenancy.
SAP has stated a “Phased Roll-out” strategy which will take years rather than months to deliver
The first two modules will be Simple Finance (available now) and Simple Logistics (available soon). Following that, we expect functionality to compete with Salesforce and Workday – Sales, and HCM – to be delivered in 2015. Further modules will follow that based on popularity.
There is also a long tail of functionality that has low adoption: add-ins with minimal adoption will be supported on S/4HANA but may never be optimized.
The roadmap is expected to be released at the annual SAPPHIRE conference in May 2015. This roadmap is expected to be closely tied to customer journeys and business value including ROI and TCO models.
As previously explained, the Private Cloud version will require HANA Cloud Platform (HCP) Extensions. These will be a key commodity in all S/4HANA projects.
In addition, the ABAP programming language didn’t go away, and ABAP OO programmers will be as popular as ever.
HANA DB skills won’t be lost, although SAP plans to take care of the feeding and watering of the systems in the Public and Private clouds.
More significantly, there is a new role emerging in the market for business-savvy configuration experts who will quickly tailor S/4HANA systems for customers using the new guided procedures for configuration.
Yes it does, and this continues a trend that has been happening for some years outside the SAP Ecosystem.
SAP S/4HANA projects will be faster and cheaper, and there will be less time spent doing configuration and development. Business Consulting skills will be in-demand, but ERP configuration skills will slowly wane away.
Do note that from a consulting perspective, the transition to S/4HANA will take 10 years or more – Enterprise ERP systems are extremely sticky.
When SAP built byDesign, they elected to completely change the data model. The programming language is different, which meant that a move to byDesign is effectively a complete data migration and rewrite.
SAP realized that Business Suite customers wouldn’t want to undergo this level of change, and so they built S/4HANA on the original Business Suite.
For various reasons, SAP S/4HANA is a new product SKU, which means that it does have to be purchased by customers. Existing customers will not get SAP S/4HANA licenses included in the maintenance of their SAP Business Suite, but existing SAP Business Suite for SAP HANA customers are covered.
SAP has also been clear that they are looking to take a larger portion of customer spend in the cloud – the average revenue per customer over 5 years is higher than for on-premise software.
The existing 15% SMBV license will be available for SAP S/4HANA for any customer who makes a purchase in 2015 and is set to include all the future S/4HANA innovations.
Make no doubt – SAP S/4HANA is the biggest announcement SAP have made since R/3 in 1992. It is a significant event for the business economy of the world as a whole, and a very significant event for SAP customers.
SAP is doing a significant financial promotion this year, no doubt with the intent of putting a S/4 HANA purchase on every CIO’s consideration in 2015.
More than anything, it makes a very clear statement about SAP’s product direction, and customers will appreciate this.
Acknowledgements: Thanks to the usual suspects – Jon Reed, Mico Yuk, Holger Mueller, Dennis Howlett, Frank Scavo, Dick Hirsch and Brian Sommer for asking the smart questions that allowed me to put this together.
Thanks to the SAP folks who fielded my endless questions herded by Mike Prosceno: Hasso Plattner, Bill McDermott, Rob Enslin, Bernd Leukert, Steve Lucas, Quentin Clark, Sven Denecken, Rudolf Hois.
And thanks to the many people who sent questions and corrections for the grammar in the first version of this blog!