What is the cost of change?

With the maintenance deadline for SAP ECC 6.0 fast approaching, organisations are deciding how they will use SAP going forward. For many, their ERP system is the heartbeat of the business, so they are currently evaluating the role it will play and what needs to change for it to be fit for purpose in today’s digital world. With change comes cost, but with proper preparation you can maximise return on investment. Whether you are considering SAP S/4HANA, SuccessFactors or moving away from SAP altogether, there are a number of factors to consider when it comes to the cost of change.

  1. Procurement process costs

Without due diligence and attention to detail at the start of an IT project, organisations risk making expensive mistakes. Keep procurement process costs under control by investing time and resources in documenting requirements and evaluating potential solutions. Involve stakeholders from IT and the business to ensure buy-in and that everyone understands the impact of change. However, defining the scope and specifications of a project can be complicated and time-consuming. Early in the process, organisations should question whether they have all the necessary internal expertise or whether external expertise is required to help them validate proposed solutions.

  1. Licensing costs

As IT estates have become more complex, so too has software licensing. Changing the structure of your IT environment, such as moving from an on-premise data centre to a cloud environment, could simplify your licensing position and even deliver savings. In fact, many organisations now see the option of moving to SAP S/4HANA and SuccessFactors 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-premise data centre to a public or private cloud environment will have, and whether moving to the likes of RISE with SAP will deliver savings. For instance, will RISE reduce hyperscaler costs and complexity, or will it impact existing commercial agreements with hyperscalers which include non SAP usage?

  1. Implementation costs

Software projects always incur labour costs, whether in-house or external consultancy. According to SAP, it takes on average 11 months to implement SAP S/4HANA. However, every implementation is different, and costs will depend on the project size and 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. Offerings such as SAP Value Assurance services can provide guidance through the implementation process, which might help keep costs down and minimise risk.

  1. Maintenance and support costs

Ongoing support and maintenance cost is another important consideration. Indeed, such commercial concerns are pushing many organisations towards S/4HANA as the maintenance deadline for SAP ECC 6.0 approaches. If you keep your SAP S/4HANA implementation on-premise, you will be able to choose between Standard or Enterprise Support. If you’re planning to move to SAP S/4HANA Cloud or SuccessFactors, SAP Enterprise Support Cloud Edition comes with support costs included. Alternatively, if you choose not to move to SAP S/4HANA, you could opt for third-party maintenance and support. However, while this may provide some cost savings, it could also restrict you from making changes and innovating your SAP systems in the future.

  1. Training costs

User adoption is key to any IT project. When embarking on change, remember to factor in costs of onboarding staff. Without engaging training, you risk delaying launch and the project’s overall success. Bringing in an external training partner is often a wise investment if you don’t have training expertise in-house. They can also help train super users—employees who can support colleagues after the consultant leaves. In-person training might not be suitable for all workers, so assign budget for developing quality online materials, including interactive demonstrations and videos. On average, organisations should consider allocating at least 30% of their project budget for training and change.

  1. Recruitment costs

Implementing a major software project requires specific knowledge that organisations might not have in-house. However, SAP S/4HANA skills are in high demand, and related roles tend to come at a 10 percent premium compared to other ERP positions. According to our most recent member report, 71 percent 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 inevitable

Many SAP user organisations are currently at a tipping point when it comes to change. While change might be costly, so too is doing nothing at all. An organisation needs 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 meets business objectives and delivers long-term benefits.

To read more on this topic the ‘Cost of Change’ whitepaper is available for all UKISUG members to download here.

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