Business Transformation and the Cost of Change

The last few years have brought accelerated digital change as organisations have transitioned to a post-pandemic world. This has seen long-term technology roadmaps being rewritten and a considerable shift towards the use of cloud services. At the same time, business expectations of technology have also been heightened, as it becomes strategically important for growth, innovation, and employee satisfaction.

As a result, many organisations are currently evaluating the role their ERP systems will play both now and in the future. ERP systems by their very nature are a long-term investment that most organisations will try to sweat for as long as possible. However, with the maintenance deadline for SAP ECC 6.0 fast approaching, organisations can no longer ignore that change is coming. With change comes cost, but with proper preparation, you can maximise return on investment.

Here are some of the main factors to consider when it comes to the cost of change:

1. Procurement
   Keep procurement process costs under control by investing time and resources in documenting requirements and evaluating potential solutions. Stakeholders from IT and the business should be involved from the start to ensure buy-in and that everyone understands the impact of change. From the outset organisations should question whether they have all the necessary internal expertise or whether external expertise is required to help them validate proposed solutions.
2. Licensing
   Moving from an on-premises to a cloud environment, could simplify your licensing position and even deliver savings. In fact, many organisations now see the option of moving to S/4HANA as an opportunity to simplify their licensing positions and ensure they are correctly licensed.
   From a total cost of ownership perspective, organisations should also consider what impact moving from an on-premises to a public or private cloud environment will have, and whether moving to the likes of RISE with SAP will deliver savings?
3. Implementation
   Software projects always incur in-house and/or external consultancy labour costs. However, every implementation is different, and costs will depend on the project scope. To estimate costs, consider whether you will work with a partner, the complexity of your cloud environment, the volume of data involved, and how many customisations and integrations your implementation will require.
4. Maintenance and support
   Understandably, commercial considerations are pushing many organisations towards S/4HANA as the ECC 6.0 maintenance deadline approaches. If you keep your S/4HANA implementation on premises, you will be able to choose between Standard or Enterprise Support. If you’re planning to move to S/4HANA Cloud or SuccessFactors, SAP Enterprise Support Cloud Edition comes with support costs included. Alternatively, if you choose not to move to S/4HANA, third-party maintenance and support is an option. However, while this may provide some cost savings, it could also restrict you from making changes and innovating your SAP systems in the future.
5. Training
   User adoption is key to any IT project. Without engaging training, you risk the project’s overall success. On average, organisations should consider allocating at least 30% of their project budget for training and change management. Bringing in an external training partner can be a wise investment. They can also help train super users—employees who can support colleagues after the consultant leaves. In addition, in-person training might not be suitable for all workers, so assign budget for developing quality online materials, including interactive demonstrations and videos.
6. Recruitment
   S/4HANA skills continue to be in high demand, and related roles often come at a 10% premium compared to other ERP positions. According to our most recent member research, 90% of organisations are concerned that a lack of available skills will impede their move to SAP S/4HANA. Bringing in short-term consultants or partners can help to educate internal teams so that the organisation is self-supporting by the end of the project, saving costs in the future.

Change is coming

While change might be costly, so too is doing nothing at all. Organisations need clear and open stakeholder engagement, high-quality training, and change management to implement change successfully. With solid planning and budgeting, you can ensure your change strategy delivers long-term benefits.

To read more on this topic check out our 'Cost of Change' research paper.