Digital transformation and the world of business software: surviving the fourth industrial revolution

    Tamas Szirtes |

    The world of business software has changed quite a lot over the last few years. Business drivers like digital transformation require much more flexibility and agility than before and the cloud has definitely made its big entrance into the ERP and other markets. Time for a Q&A with Dr.  Tamas Szirtes, Group Innovation Director of SOA People.

    What are today’s Digital Transformation trends in the world of business software?

    Digital transformation often starts with the growing expectations of customers. People expect next day or even same day delivery and they expect to be able to customize and personalize products and services. Everything is digital, software is everywhere and every improvement consequently leads to even higher expectations. What used to be special is becoming the norm and companies need intelligent and flexible business software to live up to these expectations.

    Then generally speaking everything becomes more digital and data driven. Everyone knows the highly visible examples such as Uber, but there are far more good examples. Amongst our customers we now see a big demand for B2B portals to communicate with suppliers and customers. Of course this is not new. At SOA People we have been building those for more than 10 years, but the big difference today is that digital communication is becoming more mainstream, even for smaller sized companies.

    The third big trend we see is real time analytics. People expect that if something can be known, they want to know it immediately. Whether it is the actual versus projected planning of a project or financial KPI’s, it must all be just one mouse click away. We are now moving towards predictive analytics, artificial intelligence and machine learning to reduce manual work, speed up processes and improve quality and efficiency.

    And then of course there is the whole connectedness which ties these trends together. Everything is connected to everything: people to machines, machines to machines, whether cars, production lines or your coffee machine. The Internet of Things opens up whole new and interesting personal and business opportunities.

    Why should organisations move along in the digital transformation trend?

    Basically I think organisations don’t have a choice; it’s happening anyway. The World Economic Forum says we are already in the fourth industrial revolution. We all learned in school how previous revolutions changed industries and basically the whole world and this is happening again at an unprecedented speed and scale. There are many facts supporting this. The largest companies in the world are now IT companies, no longer the oil companies etc. Companies have to adapt to survive: without the ability to change, their expected lifetime shortens dramatically.

    Can you give an example of a company that has gained competitive advantages by implementing the latest SAP ERP technology?

    I will highlight some of our customers to explain the business benefits they gained from their SAP S/4HANA implementation. Mega Gruppe from Germany, an existing SAP customer, has been able to improve their accounting after moving to S/4HANA. Van Leeuwen Buizen is an international trading company with its headquarter in the Netherlands. They improved transparency and insight into their business processes through the embedded analytics, are better connected with customers and suppliers and the integrated automation has improved their efficiency. Belgian company Bleckmann shortened their month end closing process from three weeks to five days, which streamlines their invoice cycle and improves cash flow. They also only need two instead of six people to process workflow approvals.

    How did they realize these advantages?

    There are two ways to implement a new ERP system. Some companies take a more technical approach and try to replicate the functionality of their existing system, making the project as small as possible. The customers I mentioned before, have taken a different approach: they have tried to maximise their benefits from the new system. A successful ERP implementation starts with asking yourself how you can work better, smarter, more productive and effective. You can still implement the software in phases, but this way Mega Gruppe, Van Leeuwen Buizen and Bleckmann were able to maximize the business impact and ROI of their S/4HANA implementation.

    Is SAP software also interesting for small and midsized companies?

    Absolutely. Of course SAP is well known for what they do for the enterprises, but they have offerings for really small businesses too. I know companies that have a very limited numbers of employees and successfully run S/4HANA in the cloud, which is a good example of software that supports all sizes of business. For smaller companies often cloud is the better choice, because of the fast implementation and the fact there is no local infrastructure needed for the business software.

    Which aspects can help decide whether to choose on premise or cloud solutions?

    For a well-balanced decision you have to separate and evaluate two aspects: the cloud value and the scope value.

    One of the main cloud values is the fact that the solution provider can deliver innovation faster. SAP for example publishes updates four times per year: they push it, you use it. With an on premise implementation you have to upgrade and test your systems with every release and when you choose to skip an update, you get behind on your innovation agenda. With a cloud solution the initial implementation typically is shorter too, because it is a more standardized product with less options to choose from. In general, cloud solutions have an open architecture which allows easy integration with other systems. And of course there are the financial aspects. With cloud solutions, you have an OPEX model (operational expenditure) as you only have the ‘running costs’ of subscriptions. With on-premise you have to factor in CAPEX (capital expenditure) because of the investments in hardware etc.

    The other aspect is what we call to scope value: what is the scope coverage of the on premise versus the cloud solution? If you look at the SAP offerings, for professional services organisations the scope in the cloud is bigger than on premise, because of the ‘cloud first’ development strategy of SAP for this market. But if you take for example a complex supply chain, the scope value of on premise is higher than in the cloud. Besides the functional scope you have to evaluate the geographical scope: not all countries are supported yet in S/4HANA Cloud at the moment.

    How can organisations decide whether to go for private or public cloud solutions?

    This comes predominantly down to a choice between the desired levels of customizability and extensibility versus price.

    From SAP, customers can get a full public cloud solution. This is multi-tenant, which means that multiple customers share the same system, wherein of course their data is strictly separated. With this system, you will get certain functionality and services and basically that’s it. There is some room to build extensions, but the system has clear boundaries when it comes to customization and further extension.

    Another option from SAP is a single tenant which is dedicated for the customer. This gives more flexibility, but still works within the SAP framework – so it is based on specific SAP guidelines on how it is configured, managed and so on.

    A private cloud solution from SOA People is virtually without limitations. In your private cloud we offer S/4HANA with all functionality, customization and services your organization requires. Of course we will help our customers stay as close to the standards as possible to minimize the impact of implementation, maintenance and upgrades. Interesting to know: our S/4HANA private cloud solution is priced more competitively than many people would expect.

    What are the ideal circumstances for selecting an SAP cloud system?

    Customers start realizing the value of standardization. I see a lot of companies that spent many years and big budgets on customized solutions, which eventually have become too difficult and expensive to maintain as expertise leaves the company. In those cases, S/4HANA offers the right momentum to go back to a more standardized yet still flexible solution.

    Another good indicator is what I call the ambitious plan. If a company foresees a big growth they should invest in a platform that supports that future growth. Modern and intelligent cloud solutions are a crucial enabler of digital transformation and help improve speed, agility and flexibility.

    Mergers and acquisitions also provide a good momentum to review the IT landscape. S/4HANA Cloud is ideal for subsidiaries as a less complex and faster to implement solution, but still with full integration with the corporate SAP environment in the HQ.

    And the last one is a very practical driver: hardware that has become end of life or is no longer supported by the vendor, can be just the cause to build a strong business case for an SAP cloud solution.

    Thank you for the valuable insights you have shared with us. Do you have a final recommendation for the readers?

    We have covered some of the most important aspects of the impact of the industrial revolution we’re in right now. My most important advice for the readers is to start acting now, since revolutions wait for no one. I recommend to start investigating the endless innovation and business agility a platform such as S/4HANA (Cloud) has to offer. And for existing SAP customers our SAP S4/HANA migration workshop may just be the right first step on your journey to digital transformation!