SAP S/4HANA is the next-gen ERP system from SAP which can help organisations transform into an Intelligent Enterprise. We have prepared a definitive guide to everything you need to know about SAP S/4HANA that will help you in understanding the ERP, how it can benefit you and how should you start your transformation to the intelligent enterprise
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What is SAP S/4HANA?
An ERP (Enterprise Resource Planning) system is a software that organizations regularly use to manage day-to-day business activities such as accounting, project management, procurement, compliance, and supply chain operations. ERP systems bind multiple business processes and seamlessly enable data flow between them. SAP S/4HANA is the latest ERP system from market-leading ERP vendor SAP’s software product line.
SAP S/4HANA is an abbreviation of SAP Business Suite 4 SAP HANA, an ERP software package. S/4HANA is the successor to the core product SAP ECC, an intelligent ERP system of the new generation. While the earlier SAP ERP solutions support the most common databases, SAP S/4HANA exclusively uses the SAP HANA in-memory database developed by SAP. The “S” in S/4HANA stands for “simple,” while the “4” refers to the generation sequence.
S/4HANA is the first SAP Business Suite to run only on the proprietary SAP HANA (High-Speed Analytical Appliance) database platform. SAP S/4HANA helps organizations deliver mission-critical applications on a streamlined infrastructure with a single database, OS, and user interface.
SAP S/4HANA integrates and manages business functions – such as human resources, finance, procurement, sales, manufacturing, and service – in real-time. It natively integrates with line-of-business solutions from SAP SE. Along with intelligent ERP functionality, the suite includes customer relationship management (CRM), supplier relationship management (SRM), product lifecycle management (PLM), and supply chain management (SCM) functionality.
Hence SAP S/4HANA serves as the digital core for connecting enterprises with people, business networks, big data and IoT, enabling organizations to make business decisions informed by real-time insights, machine learning, IoT scenarios, and predictive computing. Hence S/4HANA allows the companies to be more responsive, flexible, and resilient to ever-changing business requirements, customer demands, and environmental conditions.
SAP S/4HANA Features
SAP S/4HANA was designed to make ERP better, faster, and easier to use through a simplified data model, lean architecture, and a new user experience built on the tile-based SAP Fiori UX. S/4HANA integrates several advanced technologies, including AI, machine learning, advanced analytics, and IoT.
SAP S/4HANA delivers high-volume real-time analytical processes (OLAP) and high-volume transaction processing (OLTP)based on a unified data model without the redundant data layers typically required by traditional RDBMS-based systems.
The critical SAP S/4HANA features include:
- Smaller total data footprint
- Higher throughput
- Faster analytics and reporting
- ERP, CRM, SRM, SCM, and PLM co-deployed
- Unlimited workload capacity
- SAP HANA multi-tenancy
- New SAP Fiori UX for any device (mobile, desktop, tablet)
- Three deployment options: on-premise, public cloud, and managed cloud.
Significant Differences between SAP ECC and SAP S/4HANA
SAP S/4HANA was initially released as a next-generation financial solution at the SAPPHIRE NOW 2014 Conference under the name SAP Simple Finance. A few months later, SAP announced that it was expanding the solution’s core to become a full-fledged enterprise resource planning platform and eventually named the suite SAP S/4HANA.
It is imperative for SAP ECC users to understand how their current SAP ERP system compares to S/4HANA when considering their options for the future. The most significant differences between SAP ECC and S/4HANA are listed below:
- Database– ECC is SAP’s legacy suite of enterprise applications. It is one of the traditional on-premise ERP systems and is characterized by its modular structure designed to run on a third-party database like Oracle, MaxDB, and IBM. However, SAP S/4HANA only runs on the HANA database, an in-memory modern technology.
- The merger of Controlling (CO) and Finance (FI)- In SAP ECC, FI GL accounts are mapped to CO’s primary cost elements. In contrast, the structure of the universal journal is used to store both cost elements and GL accounts in S/4HANA.
- Customer vs. vendor to Business Partner- SAP ECC maintains separate vendor and customer files, even in those scenarios where an organization partners with a company for both functions. However, S/4HANA combines common data structure elements into a Business Partner record.
- New General Ledger (GL)– SAP ECC can run on either a “new” GL structure or the “classic” GL structure. In contrast, S/4HANA uses only the new GL structure. However, S/4HANA requires the new GL’s functionality as a prerequisite for new asset accounting.
- Primary User Interface– SAP ECC uses GUI, whereas S/4HANA uses Fiori and GUI as secondary.
- Rebates– Customer rebates through existing SD rebate processing in ECC have been replaced by settlement management through condition contracts in S/4HANA.
- Primary data load tool- Legacy System Migration Workbench (LSMW) is ECC’s primary data load tool, whereas SAP S/4HANA uses Legacy Transfer Migration Cockpit (LTMC)
In a nutshell, the intelligent ERP system SAP S/4HANA has much faster reaction times due to the in-memory database, and OLAP and OLTP functions are no longer separated in S/4HANA, allowing complex analyses. SAP S/4HANA uses machine learning and artificial intelligence, and because of the unambiguous data model and simplification of the entire system landscape, it can eliminate redundant data and interfaces. Thus, SAP S/4HANA enables intuitive operation and helps companies react swiftly to the changes and automate the necessary processes.
Difference between SAP S/4HANA and SAP HANA
It is pretty common for new ERP users to get perplexed by similar-sounding terms like SAP HANA and SAP S/4HANA. The basic difference between SAP S/4HANA and SAP HANA is relatively simple, where SAP HANA is a database type, and SAP S/4HANA is an ERP suite explicitly developed for SAP HANA.
SAP S/4HANA uses the infrastructure of the in-memory platform to enable rapid access to and analysis of data. SAP HANA serves as a platform for user-defined applications in software development as well.
Business Benefits of SAP S/4HANA
SAP S/4HANA can provide speed, simplicity, flexibility, faster analytics, lower costs, and the strength of HANA’s in-memory database for today’s highly agile business models. The top business benefits of SAP S/4HANA are as follows:
- Performance: SAP S/4HANA runs only on SAP HANA. The simplified in-memory database allows exponentially faster processing and simplified transactions with better aggregate table structures. S/4HANA improves performance and enables your business to plan, execute and generate reporting and analytics on live data.
- Agility: SAP S/4HANA end-user interface is entirely SAP Fiori driven. The user-friendly rendition of real-time business insights and intelligence on any mobile device becomes an added business advantage anytime and anywhere.
- Simplicity: SAP S/4HANA has a simplified infrastructure with a digital core that includes multiple applications like IBP, BI, etc. It brings unparalleled simplicity to the management and administration of the complete IT landscape coupled with the cloud adoption potential that it brings to the fore; hardware and network resources have never been so centralized.
- Reduced Total Cost of Ownership– S/4HANA brings functions like Global Available-to-Promise and master data governance into the core. The fewer the boxes to manage implies lower ownership and maintenance costs from an infrastructure point of view. Companies can visualize up to a 17% reduction in IT costs by moving from the old physical infrastructure into a more cloud-native environment supported by S/4HANA.
- More accurate forecasting- Embedded AI and machine learning applications continue evolving slowly but steadily in S/4HANA to enhance modeling, predictive outcomes, and forecasting.
- Tedious tasks automated– S/4HANA provides light process automation so organizations can automate routine tasks such as running reports that were previously done manually, freeing workers to focus on more productive actions.
- Innovation: Innovation is made simple with an open platform (SAP HANA Cloud Platform) to drive advanced applications – for example, predicting, recommending, and simulating – while protecting existing investments.
SAP S/4HANA Lines of Business
SAP S/4HANA has re-organized core modules in SAP ERP known as its lines of business (LoBs). The S/4HANA LoBs are listed below:
1. SAP S/4HANA Finance
The S/4HANA Finance LoB focuses on all the monetary activities associated with a business. This module includes financial accounting, treasury and risk management, controlling, financial planning, financial close, and consolidation.
2. SAP S/4HANA’s SRM and SCM Offerings
The SRM and SCM Offerings comprise the S/4HANA logistics LoBs consisting of supplier relationship management and supply chain management solutions.
3. SAP S/4HANA Sourcing and Procurement
Sourcing and Procurement LoB deals with the activities associated with the acquisition of raw materials required to fulfill orders. It includes extended procurement, supplier and contract management, and operational purchasing.
4. SAP S/4HANA Manufacturing
The S/4HANA Manufacturing LoB focuses on the product manufacturing process. It includes responsive manufacturing, scheduling and delivery planning, production operations, and quality management.
5. SAP S/4HANA Supply Chain
This LoB encompasses overall business planning activities, from pre-planning production runs to dispatching products to purchasers. It includes production planning, warehousing, and inventory management.
6. SAP S/4HANA Asset Management
The S/4HANA Asset Management LoB focuses on maintaining a business’s fixed assets, from machinery and tools to buildings. It includes EHS monitoring and plant maintenance.
7. SAP S/4HANA Sales
The S/4HANA Sales LoB focuses on the activities associated with completing sales orders. This LoB includes pricing, quotes, sales inquiries, contracts and agreements, free-of-charge orders, repair orders, individual requirements, credit, and debit memo requests, packing and picking, and revenue recognition.
8. SAP S/4HANA R&D/Engineering
The R&D LoB manages a product’s lifecycle, including defining the product structure and bill of materials, managing portfolios and projects, product lifecycle costing, driving innovation, and other sensitive materials used in the development.
9. SAP S/4HANA Human Resources
The S/4HANA Human Resources LoB is currently being developed by SAP, with an on-premise solution planned for 2022.
SAP S/4HANA Deployment Options:
There are multiple approaches through which SAP S/4HANA can be deployed. It can be deployed either on-premise or to the cloud.
On-premise
SAP S/4HANA on-premise deployment involves traditional in-house IT infrastructure models. This deployment model includes an instance of SAP S/4HANA that is physically hosted on customer property.
Cloud
There are several cloud options for SAP S/4HANA deployment, all of which encompasses the use of external cloud integration. SAP S/4HANA Cloud is the (Software-as-a-Service) SaaS edition of the S/4HANA ERP system designed for the SAP HANA in-memory database. It is shared with other customers and is available on a subscription basis (available as RISE with SAP). SAP S/4HANA Cloud is the “standard” cloud deployment option. S/4HANA Cloud (public) is a restricted version of the whole S/4HANA Cloud software, while S/4HANA Cloud (private) has a more significant scope and flexibility.
- SAP S/4HANA Cloud deployment provides S/4HANA functionality by placing a customer’s solution instance on a partitioned cloud server alongside other customers. However, the functional scope is limited due to its standardized setup.
- Private cloud deployment renders SAP S/4HANA functionality without needing the customer to maintain the technical backend. It is best for companies running SAP ERP with some cloud experience; with this, they can host the solution on their cloud without having the need to share space with other tenants, as the standard SAP S/4HANA Cloud deployment provides.
- RISE with SAP license gives access to either an SAP S/4HANA Cloud or SAP S/4HANA hosted on a private cloud.
Hybrid
A hybrid SAP S/4HANA instance is the combination of both the world, i.e., on-premise and cloud deployments. This arrangement may be adopted for several reasons, including hosting an on-premise deployment at headquarters while utilizing a cloud deployment in a satellite office or testing the feasibility of both instances.
Migration approach to SAP S/4HANA
Prior to migrating to SAP S/4HANA, it is crucial to make a few fundamental decisions influencing the entire migration strategy. For instance, migrating to SAP S/4HANA Cloud System requires a different approach than switching to SAP S/4HANA On-Premise System. The various migration approaches available to a company are as follows:
Greenfield approach
Greenfield strategy involves abandoning a company’s existing ERP system. The advantage of this approach is that a new, uniform system can be implemented that only contains the data and processes that are necessary. If a company completely overhauls its enterprise architecture, innovations can be integrated comfortably coupled with a high level of functionality. The Greenfield approach is unavoidable while switching to the SAP S/4HANA cloud version, as the systems require complete replacement.
Brownfield approach
The Brownfield approach follows a system conversion. It implies that existing business processes are taken and optimized if necessary. EA tools are utilized to divide the conversion into clear phases to ensure a smooth transition. These tools also ensure that the old processes are reevaluated so that redundancies and complexity are not adopted. However, the brownfield strategy is by far the most popular migration path.
Landscape Transformation
The landscape transformation is not an independent migration strategy. It is a method usually adopted by large companies with complex system landscapes to prepare for migration. In this approach, databases are cleaned up and consolidated to reduce the footprint before the change. Companies use this approach to combine several ERP systems from different vendors.
SAP S/4HANA Release Cycle
SAP S/4HANA receives multiple updates a year. The on-premise deployments are updated once a year, whereas the Cloud-deployed instances receive quarterly updates. The SAP S/4HANA naming conventions for releases follow a four-digit year/month format.
SAP S/4HANA ‘2021 Release Highlights
The latest release for SAP S/4HANA was October 2021, the 7th version of this intelligent ERP. The 2021 release is available for SAP S/4HANA on-premise, Cloud Private Edition, and on RISE with SAP, offering a simple and holistic approach to SAP S/4HANA transformation. The 2021 release brings innovation to all lines of business and industry sectors. A few release highlights are as follows:
- Seamless integration of MRP with supplier systems so change requests are automated and improve supplier collaboration in Manufacturing.
- The use of financial planning content in SAP Analytics Cloud through the integration with SAP Integrated Business Planning for sales and operations planning in Finance.
- Seamless handling of intercompany relationships in overhead cost management, supporting the needs of international businesses in Finance.
- The new Kanban control cycle analysis helps control Kanban cycles with a focus on checking the container statuses that help identify critical situations and solve them early and quickly in Supply Chain.
- It uses machine learning to give suggestions for object part code or damage code notifications to the technicians, which eventually decreases the time needed for analyzing incidents and will reduce downtime per asset in Asset Management.
- Continuous delivery of embedded phrases of regulatory content service such as dangerous goods management in R&D/ Engineering.
SAP S/4HANA Cloud 2202 Release Highlights:
With the new SAP S/4HANA 2202 release, SAP is actively expanding the range of functions and thus driving forward the promised integration with the involved departments in the end-to-end process. The key highlights of this release include:
- New planning strategies for products together with a selection guide in Manufacturing.
- In Finance, Advanced Valuation Processes offer a range of capabilities you need to gain proper insights and accelerate period-end closing activities, along with the ability to comply with the latest international accounting standards.
- The Greenhouse Gas Report template with formatting and additional functions allows the customers to specify the location and data classifiers that apply to a greenhouse gas report before generating the report file in Environment, Health, and Safety.
- SAP S/4HANA Cloud 2202 introduces a new end-to-end process as part of the Supply Chain. Using manual planning with freight booking documents in the transportation cockpit, businesses can perform manual transportation planning even for ocean freight.
- As part of the Two-Tier ERP with SAP S/4HANA Cloud 2202, the predictive maintenance with service integration in the subsidiary-headquarter model is made available to the customers. Predictive maintenance enables data analytics through the Internet of Things and ensures zero equipment downtime, enhancing customer satisfaction.
Conclusion
Buzzwords like “Intelligent Enterprise”, “digital transformation” and “experience management” are commonplace in today’s business world. These concepts highlight enhanced efficiency, more productive processes, innovation potential, and seamless adaptability to ever-changing market conditions. With SAP S/4HANA and all its features, your business will find an all-in-one solution for lifting your corporation to the next level: improving your financial planning, optimizing your supply chain management, enhancing your manufacturing or R&D processes, and a lot more. Leverage the powerful SAP ERP with built-in intelligent technologies, including AI, machine learning, and advanced analytics, to add agility and efficiency to your organization to instantly generate added value for your business and take the lead in your industry.
