Post - Blog
The best of both worlds: Can a hybrid approach to SAP S/4 HANA beat greenfield or brownfield deployment?
- 10 months ago (2023-06-17)
- Junior Isles
Richard Evans , Head of Solutions and Innovation at Delaware UK
Solar PV and Energy Storage World Expo 2024
Renewable energy production is taking an increasingly prominent role in meeting overall consumption, already generating 44.4% of the UK’s power requirement in Q4 2022, according to the Office for National Statistics. This phenomenal growth, which is set to continue, is supported not only by the advanced technologies used in harvesting natural resources, but also by the enterprise resource planning (ERP) software used within the power sector to manage the projects, and enable informed, data-driven decisions in real-time that empower companies to adhere to their business strategy.
But nothing lasts forever, and ERP systems are no exception. Every system has a lifespan, when either vendor support is withdrawn, or when new technologies such as AI, machine learning and IoT make the decision to adopt a newer ERP that encompasses and derives more value from them, a much more attractive proposition than relying on legacy infrastructure. But with SAP’s decision to withdraw support in 2027 for SAP ECC (SAP ERP Central Component), power companies, elements of critical national infrastructure (CNI) face a number of choices in migrating to SAP S/4HANA (which is an abbreviation of SAP Business Suite 4 SAP HANA, an enterprise resource planning (ERP) software package. Organizations use SAP S/4HANA to integrate and manage business functions – such as finance, human resources, procurement, sales, manufacturing and service – in real time)
Changing from one system to another is a huge task. ERPs evolve over time, systems and processes with critical functionality are built over them that are not easy to move. Potentially, moving from one system to another is much more than a simple upgrade. Additionally, energy companies need to ask themselves whether a greenfield approach is better suited to their needs or a brownfield approach is better?
Should companies take a greenfield approach?
The choice is not clear-cut. Greenfield projects that start from scratch don’t have a mountain of technical debt to deal with, and businesses have total freedom to redesign their processes and select which direction they want to take. While companies typically settle within a specific technology ecosystem, alternatives exist and have many benefits.
By jettisoning legacy process which no longer serve any commercial value, Greenfield projects have the advantage of building a ‘clean core’ of standardised processes, which have a clear and unimpeded upgrade path, enabling the business to effectively live the dream of the cloud.
The downside, though, is that everything needs to be built from the ground up. Clearly, some processes were working effectively, so these need to be remapped into the new system from scratch. There are likely to be impacts on people and how they work, and new relationships to build. It’s not always the case that ‘the grass is greener’ on the other side. But even considering all this, a greenfield option may well be the best way forward for many organisations, even though it might be difficult to convince the CFO who has invested heavily over the years in the existing platform. The sentiment in the market today is increasingly about the clean core approach and greenfield delivers on this.
Brownfield as an alternative approach
The brownfield approach is less about a ‘big bang’ and more about ‘business as usual’.
By building on what it already has in creating a brownfield deployment, an energy company can reduce its spend on new technology reduce disturbance on the existing ERP system, and by implication, the rest of the business. However, this kind of approach needs to be executed in one go, and the final set-up can be rigid and unwieldy. Brownfield implementations carry all the baggage from previous implementations, in terms of data, code and processes, therefore missing additional opportunities to introduce agility and resilience in business operations. When the existing platform is configured to support particular business models that no longer represent the current market dynamics, and is full of customisation that no longer serves a purpose, then business as usual may be less desirable than big bang. Some have argued that simple upgrade and then simplification projects may take longer to achieve the desired functional parity than a greenfield, but again it depends on the actual starting point and the desired outcomes.
Is a hybrid approach the best of both worlds?
Each approach has its pros and cons, but there is a third way, the hybrid approach, which involves separating the system from its data, simplifying the migration process and unlocking the potential of structural changes. Typically, it involves migrating data from one or more ERP systems to a new S/4HANA solution. Typically, there are two variations on this hybrid theme.
The common approach is to create a shell system containing all the code and configuration, but without any master or transactional data. The actual system conversion from ECC to S/4 is simplified when there is no data in place and pre-upgrade mitigations are simpler too. Then when the upgrade has taken place configuration can be amended to match the latest operating best practices and then master data and certain transactional data can data can be selectively introduced to the upgraded system (hence the term Selective Data Transition or SDT for short). There are other ways of creating that target system which can start as a new S/4HANA systems that then has transports imported or configuration manually applied.
The hybrid approach supports flexibility by enabling organisations to selectively re-use parts of their existing ERP system while re-designing other elements. If, for example, the finance, sales and marketing elements are performing well, then the company may wish to keep these, and instead swap out the logistics and procurement modules. Each case will be unique and will depend on the circumstances of each company, and its priorities. It is a particularly appropriate approach for businesses to pursue when they are looking to go live in phases across different countries; bringing on new business units; or when they need to leave behind large volumes of old data.
Taking the next step
Whichever approach is ultimately taken, the number of smaller decisions involved in making the final choice is enormous, and time is ticking. Support for SAP ECC, which includes security updates, will expire in 2027 and the race is already on the move to SAP S/4 HANA. With power companies forming an increasingly important element of the country’s CNI, securing the enterprise is vital at a national level, as well as at a commercial level.
As large as the decision may be, not making it carries significant elements of risk. Ignoring the deadline will only increase the complexity of any migration as time pressures begin to mount, and resources required to map and audit existing processes before the migration run scarce. Allied to the investment funds that need to be rallied before the process can go ahead, the time is now to begin considering the next step.
But it’s important to remember that the functionality of any new ERP will offer enhanced features that better fit current business operations. Whether a greenfield, brownfield or hybrid approach is adopted, each will offer advantages over existing legacy systems. The journey for power companies to upgrade their ERP has already begun, so making sure that the business is aligned with the external constraints and ready to take the next big leap forward toward a successful future is underway.