"Subclassing and Composition – A Pythonic Tour of Trade-Offs", Hynek Schlawack
CFO Guide to SAP S/4HANA and S/4HANA Finance
1. IBM Global Business Services SAP
CFO perspectives on SAP S/4HANA
and S/4HANA Finance
What, Why and How?
2. 2 SAP S/4HANA and S/4HANA Finance
Introduction
The digital economy is now a reality, and it’s transforming
business processes, business decisions and business outcomes.
• Over 75 percent of business leaders believe that achieving
digital transformation will become critical to their
organization’s success within two years.
• Almost all employees believe digital transformation is right
for the organization. They see the effects of the digital
economy in their personal lives. It only makes sense to bring
the same ease of use, the same connectivity and the same
digital-driving opportunities to the workplace.
Today’s C-level executives face the imminent challenge of
digital transformation influenced by multiple market and
technological trends (Figure 1). If we look at the relevance to
the chief financial officer (CFO) and the finance function, the
role of the finance function continues to deliver sustainable
and superior shareholder value. The CFO, however, has to
deal with a wider range of levers to make this happen. As a
result, the role of the CFO today is more broad and complex
than ever.
It is generally recognized that creating and maintaining efficiencies
in operations is table stakes for today’s finance leadership. IBM
interviewed 576 CFOs globally as part of our annual program of
C-suite studies (See https://ibm.biz/IBMCSuite). The year-on-
year results clearly demonstrate how expectations have changed.
Providing strategic input, managing enterprise risk and integrating
different sources of information have soared to the top of the CFO
agenda, which have helped organizations to generate meaningful
business insights.
Figure 1: CxO Challenges
Digitally
enables
supply chain
Customer
centricity and
individualization
Retention
of talents
Devices
Market
factors
Business
model
innovation
Organizational
openness
Integration
of different
cross
channel
touchpoints
Technology
as enabler
for new
business
models
Internet of
Things
People
Big data
Social
networks
Business
networks SAP
S/4HANA
HEC
Industry solutions
LoBsolutions
HanaCloudplatf
orm
3. IBM Global Business Services
In this new era of digital transformation and new business
models based around Cloud, Analytics, Mobile and Social,
ERP core and systems of record is still essential, but needs to
be transformed into a digital core. Old SAP ERP can be
viewed as an inhibitor. SAP’s response is S/4HANA, and this
new generation ERP can be deployed in a rapid but phased
method starting with S/4HANA Finance. Over time, as more
S/4 functions beyond S/4HANA Finance are released,
S/4HANA will take over the functions of the SAP ECC core.
Although covering key functionalities such as universal journal,
appendix ledger, new asset accounting and an accelerated close,
SAP’s S/4HANA Finance solution is primarily about creating
a simplified user experience and access to real-time data,
addressing many of the pain points raised by CFOs in the
IBM CFO Study (please refer to page 6).
Since the S/4HANA announcement in February 2015, a
number of questions have been raised by SAP’s existing and
prospective customers:
• What are the business benefits of the new offerings?
• When should one adopt the new offerings?
• Would an implementation of S/4HANA Finance solution
result in the loss of any functionality or customization
available in the legacy applications?
• How much time and effort will be required to migrate to
S/4HANA Finance solution?
• What are the prerequisites?
This document provides an overview of IBM’s approach to
SAP S/4HANA and S/4HANA Finance solution. It also
addresses some of the key questions raised by many of our
customers.
What is SAP S/4 HANA?
SAP S/4HANA, SAP’s in-memory data base and application
platform, is now an established platform for SAP (Figure 2),
especially within the analytics space. It is used even more
increasingly in the ERP area as we see the shift to the digital
economy and the need to transform business processes,
business decisions and business outcomes.
SAP HANA
SAP Business
Warehouse
powered by SAP HANA
Figure 2: SAP ERP and HANA Roadmap
• In-memory platform
• Real-time analysis
• Real-time reporting
• OLAP and OLTP
co-existance
• SAP HEC for SAP
• Business suite on HANA
• Instant financial insight
• No aggregates
• Single source of truth (via
views)
2015
• Rewrite of ECC code and move
of code to data base layer
• Simplified data model
• New User Experience
• Advanced and optimized processes
• True single source of truth
• Integration to the Internet of Things
• HCP as DevOps platform for
extensions
SAP S/4HANA
S/4HANA Finance
powered by SAP HANA
SAP Business Suite
powered by SAP HANA
2014
2013
2012
2011
4. 4 SAP S/4HANA and S/4HANA Finance
HANA is more than an in-memory data base. It is a platform
and foundation that all SAP offerings are being developed on
(Figure 2), and is an enabler for business innovation and
transformation. While it is established in the traditional
analytics space in the Systems of Differentiation (based on
Gartner Pace Layered Model), it is now core to SAP’s solutions
in the Systems of Record (that is S/4HANA) and Systems of
Innovation (for example, Integration to Internet of Things and
the new SAP HANA Vora solution).
In IBM we see the shift to the digital economy and the need to
transform business processes, business decisions and business
outcomes. In many cases, traditional ERP can be an inhibitor to
this digital transformational journey. From what we have seen of
early S/4HANA adoption, S/4HANA can be a key enabler to
transforming the ERP core into a Digital Enterprise Core.
The solution announcement of S/4HANA reinforces the
potential for improvements in speed, efficiency, agility and
simplification of SAP-enabled business and IT processes to
address many of today’s challenges.
S/4HANA Finance solution 2.0, released in Q2 2015, is the
first functionality that is fully S/4HANA optimized. Contrary
to what the name suggests, the S/4HANA Finance solution
should not be interpreted as merely a simplified version of
SAP FICO.
As announced by SAP at the launch of S/4HANA in February
2015, “Hanatization” of the remaining ECC code will be on a
gradual basis over the next few years. Look for the separate
point of view from IBM on additional areas such as S/4HANA
Logistics in the near future.
Figure 2 shows some of the technology aspects of S/4HANA,
which enable you to:
• Converge OLAP back into ERP for real-time reporting and
single version of the truth via Fiori Apps and HANA Live
• Bring in many data sources from inside and outside the
business into the HANA platform for real insight
• Use speed of in-memory to match and cleanse data on
the fly
• Build business rules in the platform, including embedded
analytics, to create new optimized and innovative business
processes
• Optimize business processes including removal of
unnecessary steps and some batch processing
• Simplify the business model by optimization of processes
and move of functionality back to S/4 or via SaaS
• Deliver actionable insight and innovation fast from big data
• Simplified User Interface via SAP Fiori
Understanding the S/4 HANA Finance
S/4HANA Finance solution is a robust solution powered by
SAP HANA for the CFO office. It provides instant insights
with on-the-fly analysis across practically all dimensions of
financial data. In addition, the new HANA data model removes
system limitations linked to data aggregation. It offers an
intuitive user experience and the migration to S/4HANA
Finance solution is non-disruptive.
From a technical perspective, the S/4HANA Finance solution
implementation redefines data aggregation and indexing using
the in-memory capabilities of SAP HANA. This allows
calculations to be performed ad hoc for financial transactions.
The new capabilities introduced with S/4HANA Finance
solution redefine the finance and controlling modules within
SAP:
Universal journal
This is SAP’s new definition of “single source of truth” with a
new simplified data model (Figure 3) that combines financial
accounting and managerial accounting into one universal
journal entry, all represented in a one-line item table with full
detail for all components. Since all the data is provided in near
real-time from the universal journal, the effort around period-
end reconciliation is expected to be reduced.
5. IBM Global Business Services
Ad hoc capabilities
The new universal journal allows ad hoc and on-the-fly
computations for converting periodic transactions. This means
that month-end activities move from batch to real time,
without needing data to be replicated first to other systems like
business intelligence. Reporting is simplified, fast and multi-
dimensional, making the “drill-down” reports almost
redundant.
Accelerated financial close
The ability to move away from batch- to event-based
processing helps enable a soft close so that period end
processes can run on a daily or weekly basis. This process will
allow organizations to get a real-time view of their P&L,
providing the business with early visibility of emerging trends.
Prompt remedial action will be accessible where necessary,
rather than the need to wait until after month end.
Integrated business planning in ECC
New, more user-friendly processes are added to facilitate
planning in Excel with near real-time data and the loading of
plans back to ECC for reporting (with templates for cost
center, internal order, project, profit center, cost of sales, and
P&L planning).
New asset accounting
The new asset accounting module makes it possible to manage
parallel valuation of assets using the ledger and accounts
approach. Depreciation areas are no longer required to record
the leading valuation in the depreciation areas, making this
functionality more flexible. Posting are also now real-time
across all valuations.
Smart cash management
This is an optional replacement for cash and liquidity
management. It adds bank account management, short-term
cash position and liquidity forecast reports, and real-time
liquidity planning, allowing for tighter cash management, for
optimizing working capital.
Figure 3: Simplified HANA data model
S/4HANA Finance
• Header tables no longer required
• Change logs no longer required
K CUR K D Q CURQQD2DK
D1
D
D
Insert new field Columnar storage for every field
• Index tables no longer required
• Aggregates no longer required
Real-time data
replication
SAP
HANA
SAP in-memory
data base
Modeling
studio
SAP ERP
Header tables
K CUR S SQD
Extractors ETL layer Modeling layer
K CUR S SQD
D CURQQK DK DK DK
D CURQQK DK DK DK
D CURQQK DK CURK QD
Change logs
Line item table
DD
DD
SS
D CURQQK DK CURK QD
D CURQQK DK CURK QD
S S
S S
Aggregates
Index tables
D CURQQK DK CURK QD S SInd IndIndIndInd IndInd IndInd IndInd Ind Ind
D CURQQK DK CURK QD S SAgg AggAggAggAgg AggAgg AggAgg AggAgg Agg Agg
Business warehouse
Presentation layer
Document concept
• Header table
• Line item table
SD
MM
FI
PM
6. 6 SAP S/4HANA and S/4HANA Finance
Smart financials reporting
There are further optional replacements for many of SAP’s
traditional “drill-down reports.” Unfortunately, the code
framework used by the previous ECC reports isn’t necessarily
faster even with the new HANA database.
IBM Global CFO Study findings
The CFO’s role is a pivotal one, as all top executives recognize.
C-level executives say they work more closely with the CFO
than with any other C-suite colleague except the chief
executive officer (CEO). The CFOs we interviewed told us
almost all of their responsibilities have become more valuable
to their organization’s success over the past three years.
The CFOs’ expectations of the finance organization have
evolved quite markedly over the past few years, as have their
views on technology. That said, many CFOs don’t yet exploit
the power of existing technologies as fully as they could.
Figure 4: Value Integrators outperformed the other Finance Organizations
Finance efficiency
Enterprise-wide information standards
Standard financial chart of accounts
Common finance data definitions and data governance
Standard/common finance processes
Value
Integrator
High
Low
Disciplined
Operator
Constrained
AdvisorScorekeeper
High
Business insight
Operational planning and forecasting capability
Finance talent development
Common planning platform
Value Integrator
Performance optimization
Predictive insights
Enterprise risk management
Business decision making
Disciplined Operator
Finance operations focused
Information provision
Performance interpretation
Constrained Advisor
Analytics focused
Sub-optimal execution
Fragmented data
Scorekeeper
Data recording
Controllership
Multiple versions of the “truth”
They use ERP systems and analytical tools for about one third
of their work. The rest of the time they rely on spreadsheets or
outdated intuition. Thus, the finance organization’s
responsibilities are expanding, but most finance departments
haven’t been able to keep up. One of the key findings from the
IBM Global CFO Study was that CFOs consider two themes
to be particularly important: being finance efficient and
providing business insights. Based on these criteria, we scored
them and identified the four profiles, with one group, Value
Integrators, outperforming the rest (Figure 4).
A key finding of the CFO survey was that Value Integrators
perform better at almost every finance activity and show better
financial results; therefore, it is interesting to understand what
activities are required to become a Value Integrator.
This includes integrating information from numerous internal
sources, including planning, budgeting and forecasting, and
continuously fine-tuning everyday financial processes (Figure 5).
7. IBM Global Business Services
The case for the SAP S/4 HANA Finance
solution
IBM and SAP collaborated on a study IBM CFO Study meets
S/4HANA Finance (Figure 6).
From this study, it was concluded that S/4HANA Finance
solution is more than a HANA technology play. It is expected
to offer a wide range of business benefits that address some of
the key activities that are required to become a Value
Integrator identified in the IBM Global CFO Study (Figure 7).
Figure 5: Value Integrators are better at performing almost every finance activity
-20% 20% 60% 100% 140% 180% 220% 260%
Drive integration of information across the enterprise
Optimize planning, budgeting and forecasting
Execute continuous finance process improvements
Develop talent in the finance organization
Measure/monitor business performance
Drive enterprise cost reduction
Provide inputs into enterprise strategy
Support/manage/mitigate enterprise risk
Process transactions
Strengthen compliance programs/internal controls
Manage investor/stakeholder relations
Constrained Advisor
Scorekeepers baseline
Disciplined Operator
Value Integrator
Level of effectiveness
Figure 6: IBM Global CFO Study meets solution
Relevant IBM
CxO studies
IBM Institute for
Business Value
New innovative
solution
S/4HANA
Finance
Key study findings most
feature the need for
A single version of truth
in real-time
Key solution benefit
enables this capability by
Universal Journal &
Central Finance
8. 8 SAP S/4HANA and S/4HANA Finance
SAP S/4HANA solution benefits include:
• A single source of truth: Seamless integration between
transactions and analytics will attempt to streamline and
eliminate cycle times and data reconciliation
• New on-the-fly capabilities capabilities for moving period-end
finance processing, such as Goods Receipt/Invoice Receipt
(GR/IR) clearing, cost allocations and FICO reconciliations,
from batch to real time. The speed and online availability is
achieved using the in-memory functionality within SAP
S/4HANA and the reduction of the aggregation tables
• Innovative rapid planning and forecasting combined with
predictive analytics to explore new business models and
immediately assess potential effects on the bottom line. This
functionality particularly caters to the new role of the
finance function – value generation through data insight and
data intelligence
• New reporting and analytics capabilities for finance users with
self-service access to virtually all information, allowing
instant insight-to-action—historical data can now be used
for predictive analysis—with reports and dashboards
available on mobile devices
• Global regulatory compliance capabilities across currencies,
languages and industries with built-in legal compliance
management capabilities and continuous risk assessment.
• Cost efficiency for reduction in data base size linked to the
table aggregation, helps reduce storage costs.
Figure 7: SAP S/4HANA Finance meets IBM CFO Engagement
S/4HANA Finance key functional
benefits. IBM CFO Study key activities
by performance accelerators in the
Value Integrators quadrant
Boosts Finance
Efficiency (FE)
and/or Business
Insights (BI)
Specific S/4HANA Finance functions/modules/benchmark data which enable the
capability beyond classic SAP FICO
1. Drive integration of information
across the Enterprise effectively
(single source of truth)
FE+BI Universal Journal to achieve a virtual single operating model, integrated business planning,
cash management and fraud management
2. Drive enterprise cost reductions FE Improved automation capabilities in nearly all areas, e.g. lease administration
3. Measure/monitor business
performance
BI Consistent business insights and prediction capabilities across all finance value map
elements
4. Optimize planning, budgeting and
forecasting
FE+BI Integrated business planning including cloud technology
5. Execute continuous finance
process improvements
FE Financial close, planning, forecasting and budgeting, managing money, finance operations,
fraud and audit management
6. Provide inputs to enterprise strategy BI Extended simulation flexibility and speed through on-the-fly calculation capabilities
7. Develop talent in the finance
organization
BI Modern user experience, improved automation capabilities to get rid of transactional
activities
9. IBM Global Business Services
How to migrate
Dependent on “as is” landscape, there are a number of HANA
adoption scenarios to get to end state of S/4HANA Finance.
IBM helps you determine which would be the correct HANA
adoption scenario based on a number of factors, including
compatibility of specific LoB and Industry solution to work
with the new S/4HANA S-Innovations.
Assuming a migration scenario is the logical progression, for
clients who are currently running on SAP ECC6, on any
non-HANA data base, would be to move to the Suite on
HANA (with or without S/4HANA Finance solution).
S/4HANA and the enablement of the S-Innovations such as
S/4HANA Finance solution (and SAP S/4HANA Logistics
available in Q4 2015) would be the next step. Dependent on
the landscape, there are different approaches to this migration
from the ECC6 system running on non-HANA data base to
the S/4HANA environment.
These are five possible upgrade and/or migration paths that
are available to move from an ECC6 system running on a
non-HANA data base to S/4HANA with S/4HANA Finance
(Figure 8).
For all of the following scenarios there is a further option of
on-premise (could be private cloud) or SAP’s public cloud
offering for S/4HANA.
New implementation to S/4HANA
• For a complex heterogeneous landscape with older versions
of SAP, a new, consolidated S/4HANA implementation may
be more efficient than a migration.
• SAP Activate Methodology and other accelerators can
support this S/4HANA adoption scenario.
• Default position would be to start with S/4 HANA unless
there is an industry or line of business solution limitation, in
which case an interim starting point of Business Suite on
HANA.
Figure 8: S/4HANA Migration Scenarios
Re-implement
Scenario 1: Greenfield/re-implementation
SAP ERP or SAP R/3
or non SAP
Upgrade,
migrate &
enable S/4HANA
Finance
Scenario 2: Upgrade and migrate
(all instances, or optionally consolidate)
SAP ERP or SAP R/3
(Pre Enhancement
Pack 7)
S/4HANA
Finance
(SAP ERP 6.0
EhP7 on HANA)
S/4HANA
Finance
(SAP ERP 6.0
EhP7 on HANA)
Migrate &
enable S/4HANA
Finance
Scenario 3: HANA migration
SAP ERP 6.0 EhP7 on
Non HANA DB
S/4HANA
Finance
(SAP ERP 6.0
EhP7 on HANA)
Enable
S/4HANA
Finance
Scenario 4: S/4HANA enablement
Suite on HANA
(SAP ERP 6.0 EhP7
on HANA)
S/4HANA
Finance
(SAP ERP 6.0
EhP7 on HANA)
SLT replication
Real-time
reconcile
Scenario 5: Replicate into a central finance
(and optionally reduce number of instances over time)
SAP ERP or SAP R/3
Source system(s)
- SAP (any release)
- non-SAP systems
S/4HANA
Finance
10. 10 SAP S/4HANA and S/4HANA Finance
Pre ECC6 Enhancement Pack 7, Non-HANA DB—
two-step approach
• EHP7 upgrade and technical data base migration to HANA
as combined upgrade, assuming downtime window is
achievable for cutover. Alternative is to separate these two
activities. “Hanatization” of relevant custom code (code
correction) required as part of this project.
• Separate enablement of S/4HANA Finance solution post
migration to HANA data base on stability of availability of
S-Innovations required to address business or IT
requirements—Consider change management requirements
and industry or line of business solution limitations.
ECC6 Enhancement Pack 7, Non-HANA DB—two-step
approach
• Technical data base migration to HANA and “Hanatization”
of relevant custom code (code correction) is required as part
of this project.
• Separate enablement of S/4HANA Finance solution post
migration to HANA data base on stability of availability of
S-Innovations is required to address business or IT
requirements—Consider change management requirements
and industry or line of business solution limitations.
ECC6 Enhancement Pack 7, HANA DB—one-step
approach
• Based on Business Case and validation that there are no
industry or line of business solution limitations, enablement
of S/4HANA Finance solution and other “S-Innovations”
based on availability.
Separate S/4HANA system with central finance
Install a new S/4HANA system, and use data replication to
move finance data from other SAP (and non-SAP) systems to
get some benefits of S/4HANA Finance solution. Not all
finance functionality will be available on the central finance
systems, and there needs to be process and data harmonization
across the source systems, but some finance benefits can be
achieved at reduced risk.
For the Upgrade Migration scenarios above, Modernization/
Optimisation of remaining custom code (or move of some
custom code to HCP applications) would be a separate activity,
possibly driven by other business change or transformational
requirements. For new implementations, HANA enabled
Custom Code (or development of some application extensions
in HCP) would be default assumption.
For all scenarios above, build a roadmap on how you will align
with incremental availability of S/4 HANA functionality going
forward.
Note: While the functional enablement of SAP S/4HANA
Finance solution can be included in the same change window
as the technical upgrade and data base migration, it is
recommended to keep the activities separate due to complexity,
risk and the increased downtime requirements. If two
downtime widows are not acceptable, SAP provide a new Near
Zero Down Time (NZDT) service, available with S/4 HANA
Finance 1508, that will allow customers to perform all
activities (upgrade, DB migration and S/4HANA Finance
migration) in the same downtime window.
Under all approaches, post the upgrade, most code is expected
to work as normal. However, custom code that is data base
dependent may have to be remediated. As part of S/4HANA
Finance solution enablement, the new fixed assets and new
cash management functionalities need to be enabled and
configured.
11. IBM Global Business Services
How IBM can help
IBM and its industry and SAP specialists help you understand
if you are ready to make the move or identify which SAP
S/4HANA adoption scenarios would be the most suitable for
your business. IBM Global Business Services provides an entire
suite of assets, accelerators and services to help you with this
key business and IT transformation. Service offerings are cross
industry (grouped by Strategy, Implementation, Conversion
and Support Services) and industry specific assets (mainly
addressing industry use cases around analytics). These include:
IBM value pack services
• Initial HANA Adoption workshop
• HANA readiness assessment
• Analytics Jumpstart
• Value realization through a HANA POC on IBM Cloud
• HANA Business Case and Roadmap development
• System upgrades and preparation
• HANA sizing, technical requirement planning and
environment setup
IBM Lab for SAP solutions (LSS)
• LSS demos on HANA (Analytics, Fiori, etc.)
• LSS S/4HANA demo (with SAP S/4HANA Finance)
IBM HANA upgrade and migration assets
• SAP-certified HANA migration center
• IBM S/4HANA migration best practices guide
• IBM SAP upgrade and migration automatic accelerators
• SAP upgrade and migration services on IBM Cloud
IBM’s technical and SAP finance leadership lend their views on
industry direction for the future ERP and how cutting-edge
technologies (for example, analytics, SAP S4/HANA,
S/4HANA Finance solution, HANA Cloud Platform, etc.) can
facilitate business transformation and IT innovation within
your organization.
Summary
Technology is driving rapid, transformational change. Mobile,
cloud solutions with near-real-time transaction processing and
analytical capabilities are able to shift organizations towards
high-value creation at a reasonable cost. Not long ago, it was
commonly accepted that what happened last year, quarter or
month would dictate what is likely to happen tomorrow.
Decision making by the C-level executives was previously
based on past activity and data.
However, that can no longer be sustained. Most enterprise-
level CFOs will agree that the global business environment is
driving real-time decision making and requires a single source
of truth as a prerequisite. Technological innovations can
provide the necessary insight, in an accessible way, to support
this requirement.
SAP S/4HANA and SAP S/4HANA Finance solution are
presented as SAP’s new generation technologies, created to
support this new C-level executives’ agenda. It is clear that
adoption of ground breaking innovation requires an
organizational transformation and strong executive
sponsorship, both of which are only secured in an organization
when there is a significant business case to be realized by these
implementations.
For more information, contact the authors:
Mark Dudgeon
Chief Architect and Distinguished Engineer
SAP Global CTO
HANA Growth Engine Lead
mark.dudgeon@uk.ibm.com
Bert Meyerink
Senior Managing Consultant
S/4HANA Finance Solution Lead
MEYERIN@nl.ibm.com
Andrew Worsley-Tonks
Senior Managing Consultant
SAP Upgrade Lead and Finance SME
andrew.worsley-tonks@uk.ibm.com
To learn more about IBM visit: ibm.com/gbs/sap