How to Best Understand ASUG on S/4HANA at REV Group
Executive Summary
- ASUG proposes that S/4HANA should be customized in a particular way.
- We evaluate the accuracy of ASUG on this topic.
Introduction
In the reviewed ASUG article, logic is given for moving from S/4HANA to ECC. One logic used to justify the move to S/4HANA is not only an ERP system but a platform. Another is that S/4HANA provides a standardized model and a simplified model. There are many deceptive descriptions around change management.
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Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.
Quotes from the ASUG Article
“When a company grows through mergers and acquisitions, that typically leaves a mess of various enterprise systems. That’s the case at REV Group, which is implementing SAP S/4HANA after first getting a taste of SAP through an acquisition.
“REV is an amalgamation of several disparate specialty vehicle companies that was at one point utilizing 30 different ERP systems and Excel spreadsheets,” says Tim Sullivan, CEO at REV Group. “You can imagine the impossible task of assimilating our business operations with such a complex IT system.”
REV first implemented a Baan ERP system to try and bring together the organization, but after an acquisition of a company that had been using SAP, REV decided to upgrade and standardize to one instance of SAP ERP. The company found the increases in efficiencies and reduction in operating expenses associated with implementing SAP were enough to be convinced that upgrading to S/4HANA was the right move. Sullivan believes that running S/4HANA will provide an estimated $15 million in annual operational savings.”
None of the information provided in this quotation is a reason for migrating to S/4HANA. REV had standardized on one instance of ERP. But that does not mean that moving to S/4HANA is a good move. ECC is far more mature than S/4HANA and has a lower TCO.
And Tim Sullivan’s estimate of a $15 million in annual operational savings cannot be correct. This is because REV will learn that it is tough to get any ROI out of S/4HANA in its present state. Most likely, Tim Sullivan is underestimating the costs of the implementation, along with the costs of long-term maintenance.
Going Vanilla Versus S/4HANA Customizations?
“The move to S/4HANA hosted in a managed cloud environment is a gradual one for REV, with a division-by-division implementation approach, says Prasanth Sharma, VP of business solutions at ThoughtFocus Technologies, the key partner on REV’s S/4HANA project. As has been the case with many early S/4HANA adopters, REV is attempting to customize as little as possible.”
This is how any move to S/4HANA would have to be because S/4HANA is still not ready to be implemented.
This concept of not customizing SAP ERP has been a long-term message from SAP. However, the problem is that studies show that around 92% of SAP implementations are either moderately or extremely customized. And S/4HANA has less functionality than ECC, so there is little reason to think that S/4HANA will have less customization than ECC. In fact, given the drop in functionality, it should have more.
Constant SAP Consulting Partner Lying About S/4HANA Customizations
SAP and SAP consulting partners nearly universally mislead their prospects during the sales cycle by getting them to believe that SAP will cover more of a company’s requirements than they actually will. The consulting partners are critical in this, as they gather the requirements before the software selection. After the software has already been purchased and the consulting project has begun, customizations begin to be added. At that point, the customer is not able to go back and switch to a different vendor. Therefore even though the approach to using vanilla SAP has been disproven over decades of SAP, SAP and the consulting companies continue to propose it.
“We use off-the-shelf modules, and we don’t allow any customization of the software at all. We adapt our business processes to the software, not the other way around. This significantly accelerates the implementation cycle, and it guarantees one instance of the software,” says REV Group’s Sullivan. “Future training, maintenance, and updates are infinitely simpler and cost effective. I would never allow customizing of any software.”
Good luck with that, Tim Sullivan. REV is about to get the surprise of their life.
S/4HANA Customizations Free Approach is the Way to Go?
“Sharma says the customization-free approach is the way to go for a company like REV looking to bring many divisions under a single umbrella—achieving standardized processes is key.
“The vanilla philosophy is a brilliant approach to take for businesses that have disparate divisions,” says Sharma. “You need a platform that brings them together—a standardized model with S/4HANA makes it very easy to do that, and very easy to manage as well.””
A better word than brilliant would be “unattainable.”
Sharma is completely lying here. S/4HANA is not a platform any more than ECC was a platform, and ECC has, as already stated, historically had a lot of customizations.
Furthermore, it is unclear what standardized model S/4HANA has that Sharma is talking about. S/4HANA has a listing of functionality that is lower than ECC’s functionality list. Any functionality that does not cover REV’s requirements will have to either be customization or another application.
The Challenge of IT Change Management
“The key challenge in any “vanilla” implementation is acclimating people to an environment where they are adapting their work processes to a system, rather than adapting a system to their work processes. That means a change management strategy is as important as a technology strategy.”
This has been the boilerplate statement of SAP and SAP consulting companies for decades. Yet, it is complicated to find SAP implementations that don’t have moderate to extreme customization. And it is not like these previous projects did not have change management as a concept.
Secondly, the issue of entirely relying on change management does not solve the problem. There are often processes that do not make sense to change to SAP’s way of doing things. These may be key business requirements for the company that they can’t change. For example, ECC has always been weak in process industry manufacturing. Companies cannot merely adopt ECC’s functionality for process industry manufacturing because they don’t make any sense. Doing so would be a force fit that would leave the company unable to function correctly.
SAP is often confused, thinking that everything the company does must be sacrificed at the altar of how SAP works.
However, there is a different idea that the software should support what the company wants to do.
Change Champions?
“The only way you can crack that nut is by not only having change champions within the organization but by also simplifying the solution as much as possible,” says Sharma. “People will accept change only when they know that their job is going to be easier.”
Here Sharma is commingling two issues into “change management.” One is the issue of simplification and change resistance, and the other is the company’s requirements. In the example of the process industry, it is not a question of simplification of the process. The issue is that process industry companies perform manufacturing in a way that SAP does not effectively model. Any process industry manufacturing company that uses vanilla ECC or vanilla S/4HANA will lose money if they don’t customize ECC or S/4HANA or use other applications to perform some of the functions and then integrate back to ECC or S/4HANA.
This example does not have anything to do with people resisting change to resist change. SAP and their consulting partners enjoy placing any resistance to SAP into the category of “resisting change,” but this is inaccurate. Resisting change due to being set in one’s ways can occur, but it is not the majority of SAP resistance generally. The main reason for resisting SAP is that SAP cannot meet specific business requirements.
Returns from S/4HANA
“He says managers that didn’t embrace or commit to the process slowed the implementation down—but that situation was an isolated one and calls the project at all other locations “flawless.”
So far, Sullivan is “very pleased” with the returns on S/4HANA. The company can close months faster than before, freeing staff up to examine areas where REV Group can be more efficient.”
This is somewhat amusing that the implementation of S/4HANA was flawless in that S/4HANA is still such an immature application.
The statement made by Tim Sullivan regarding closing months faster than before is false if he means when compared to ECC. Brightwork has previously analyzed this argument in the following article Does S/4HANA Actually Have a Simplified Data Model?
Conclusion
As with any ASUG article, it is difficult to tell how much of it was written by SAP, but just about every sentence in this article by ASUG is false. Once again, ASUG stopped being independent of SAP a long time ago.
This article by ASUG receives a Brightwork Accuracy Score of 2 out of 10.