When considering potential ERP systems, SAP S/4HANA is on the short-list of many organizations. As one of the top ERP systems in the market, SAP has become a go-to option for larger and mid-size organizations.
Just like any ERP software, S/4HANA has strengths and weaknesses. It is rarely (if ever) a perfect fit for most organizations, but it has distinct pros, cons, and tradeoffs. In our years of helping clients evaluate and implement SAP S/4HANA – along with our experience helping remediate SAP implementation failures – we have been exposed to the good, the bad, and the ugly of the product.
The strengths and weaknesses of the product can be summarized in several categories. Please note that Third Stage is not affiliated with SAP, so this is intended to be a completely independent and agnostic review of the product. This video outlines some of these strengths and weaknesses as well:
One of SAP S/4HANA’s biggest strengths is that it enables more standardized business processes. It is built for big organizations that value scale and volume, so the product is generally good at providing a common business process framework across multiple locations and geographies. The dark side of this strength is that organizational change management is generally more difficult on S/4HANA engagements since people are required to change to fit the software more than the software is changed to fit the people.
The downside of S/4HANA’s standardized business processes is a relative lack of flexibility. For example, when comparing SAP S4/HANA vs. Oracle ERP Cloud or S/4HANA vs. Microsoft Dynamics, we find that SAP is often not as flexible as other products. This can be a good thing if you want to force a degree of standardization, but it can be a liability if your organization values flexibility or decentralized operations.
SAP S/4HANA is generally able to handle a broad variety of business processes and functions. Many larger, complex, and more diversified organizations use S/4HANA, so it is able to handle diverse functions ranging from basic financials to more advanced planning, analytics, and other capabilities. It also provides functions and capabilities that span multiple industries and geographies, which can be particularly beneficial to diversify and multi-national companies.
When compared to legacy SAP products such as ECC or R/3, S/4HANA is relatively new. It isn’t as developed or as battle-tested as these more established products, so existing SAP customers often find S/4HANA to be lacking. SAP is aggressively investing in S/4HANA to shore up some of its deficiencies and gaps but is generally not as mature as ECC and R/3. Companies upgrading from ECC to S/4HANA should be aware of these limitations, especially in the short-term.
SAP developed the HANA database to eliminate its dependency on Oracle databases as the core engine of the software. In doing so, it has created a fast-performing database that can provide real-time access and insights into day-to-day operations and results. While all ERP vendors provide this capability to some degree, the HANA platform is uniquely architected to provide faster processing and speed.
As the leading ERP vendor in terms of market share, SAP has a large R&D budget. This affords the company and its products the luxury of being on the cutting edge of emerging technologies. For example, S/4HANA is helping pioneer how blockchain can be better used in the food and beverage industry and how machine learning and artificial intelligence can automate accounts payable processes. These and other R&D investments will ensure that S/4HANA customers will be likely to be on the forefront of technological advancements in the future.
Generally speaking, S/4HANA implementations tend to consume more time, cost, and risk than other ERP vendors in the market. Part of this is due to the complexity and breadth of the product itself, while some of this is because of the complex nature of organizations implementing the software. Either way, you will want to be sure to realistically estimate your S/4HANA implementation time and cost before forging ahead with your transformation.
It is important to understand both the strengths and weaknesses of SAP S/4HANA as part of your ERP software selection process. Even if you already know you are going to move forward with S/4HANA, you will want to poke holes in the software to understand where the risks are. These are important steps to ensure a successful S/4HANA implementation.
Independent ERP consultants such as those on our team at the Third Stage can objectively help you decide how to best move forward. Please feel free to contact me to brainstorm ideas related to your digital transformation. My team and I are happy to be an informal sounding board as you continue your journey!