Independent Comparison of SAP S/4HANA vs. Microsoft Dynamics 365

Written By: Eric Kimberling
Date: September 24, 2018

In years past, most of our larger clients would hone in on SAP vs. Oracle as their primary focus during their ERP selection processes. In more recent years, we saw an uptick in organizations considering SAP S/4HANA vs. Oracle Cloud ERP vs. Microsoft Dynamics 365 as more evaluated the three industry leaders.

Even more lately, we have seen an interesting trend: more companies evaluating a comparison of SAP S/4HANA vs. Microsoft Dynamics 365. Not that this comparison is entirely unusual, but these are two completely different products. They couldn’t be much different. So, it is interesting to see so many companies narrowing their short-list to these two solutions.

The two-tier approach: How SAP S/4HANA and Microsoft Dynamics 365 are increasingly coexisting within the same organizations

In many cases, we are seeing organizations with large, global parent companies on SAP S/4HANA. Some of their subsidiaries – many of which were acquired as part of the parent companies’ growth strategies – run into the question of whether to adapt to the mothership’s SAP system or to venture out with their own digital transformation.

In these cases, the subsidiaries are often too large for a tier II system such as Epicor, Infor, or IFS, but they are too small for SAP S/4HANA. This leaves them with Microsoft Dynamics 365 as a viable option to SAP. Unfortunately, their SAP S/4HANA vs. Microsoft Dynamics 365 decision is often a difficult one. Difficulty making this decision is one of the primary reasons why digital transformation and ERP failures are increasing.

For example, we recently worked with two companies struggling with this very decision. One is a mid-size Canadian mining services company owned by a multi-billion-dollar European mining company. With 600 employees and approximately $300M in revenue, they weren’t sure if they should hitch on to the parent company’s SAP S/4HANA implementation or install their own instance of Microsoft Dynamics 365. We ultimately recommended that they go the Microsoft Dynamics route.

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In another case, a mid-size subsidiary of a very large and well-known consumer products company asked us to help with their decision to either deploy the parent company’s SAP S/4HANA implementation or find an alternative. We are in the process of helping them consider a number of options, including a comparison of SAP S/4HANA vs. Microsoft Dynamics 365.

For these and other organizations we’ve worked with, the comparison of SAP S/4HANA vs. Microsoft Dynamics 365 often comes down to a few primary factors outlined below.

Flexibility is a key differentiator in the comparison of SAP S/4HANA vs. Microsoft Dynamics 365

Level of flexibility is one way that the comparison of SAP S/4HANA vs. Microsoft Dynamics 365 is very different. As a general rule of thumb, S/4HANA is typically better suited for larger organizations trying to scale and standardize operations for global growth. This works well where business processes are complex and need to be standardized, but it can be overwhelming for less complex or smaller organizations.

Microsoft Dynamics, on the other hand, is typically more suitable for smaller organizations that value flexibility over standardized business processes. The software is typically easier to change (without customization) to meet evolving business needs. It’s not quite as robust or broad as S/4HANA, but that’s often okay for a smaller organization or subsidiary.

Openness of architecture can differentiate SAP S/4HANA vs. Microsoft Dynamics 365

Microsoft generally has a more open architecture that is easier to interface with. SAP, on the other hand, generally has a more closed architecture that can be more difficult to interface with. This can be an important differentiator if you have third-party legacy systems that are important to integrate with as part of your digital transformation.

On the other hand, SAP S/4HANA has broader and more robust functionality – meaning that it is less likely that you will need to interface with third-party systems in the first place. But, when you do, that may be more difficult and complex. This is also less of an issue if you are already operating in a legacy technical SAP environment, such as with SAP ECC or R/3.

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Scale and standardization: How SAP S/4HANA Compares to Microsoft Dynamics 365

Larger companies are more likely to use S/4HANA because of its ability to scale and standardize business processes. Microsoft Dynamics 365 and other leading ERP systems can also handle the volume of transactions required by larger organizations, but those larger organizations typically require broader and more robust functionality that often can’t be supported well by Dynamics 365 and other systems. This factor can be a key deciding factor in either a successful SAP S/4HANA implementation or a successful Microsoft Dynamics 365 implementation.

The importance of cultural fit

In many of our client’s SAP S/4HANA vs. Microsoft Dynamics 365 comparisons, it comes down to culture. One product is built for large, complex companies that need to scale and are okay giving up some flexibility (S/4HANA). The other is a more nimble, flexible system that may not scale as well, but doesn’t necessarily need to for the middle-market (Dynamics 365). It is important to compare the culture you are trying to create with the culture that either system will help enable.

Other considerations in an SAP S/4HANA vs. Microsoft Dynamics 365 Comparison

There are a number of other factors we typically help our clients evaluate in the S/4HANA vs. Microsoft Dynamics 365 comparison. Here are a few more examples:

  • Functional fit in key business processes
  • Alignment with longer-term business goals and strategy
  • Internal competencies required to support the system
  • User experience and interface
  • Organizational change management considerations
  • Relative maturity of these flagship cloud solutions

Neither product is perfect, and different clients will come to different conclusions. They both have their advantages and risks. Arriving at the right answer for your organization is an important one.

Feel free to email me if you would like to bounce around ideas on how these two systems compare for your organization. I am happy to help in a technology-agnostic way!

Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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