SAP S/4HANA – Historical Overview
Under the traditional application of SAP, entire data is stored under database level and based on that computations are carried out. Results are shown at the layer of application. Generally the processing for queries involves aggregations and calculations. Therefore, it is suggested that the application logic shall be pushed under database level for improving performance of the query execution. Applications based on SAP HANA offer best performance through pushing execution in database in possible manner. all data is stored under the in-memory data base which in turn, assist in reading the data in faster possible way as compared to the conventional database (Baumgartl et al. 2016). SAP HANA supports the replication of real-time data and therefore, eliminates the unnecessary complexity and latency for the data load.
This report will looks into the historical overview for SAP S/4 HANA finance. Under this section the report will highlight the evolution of the application as well as the advantages and limitations associated with the application while using it for business purposes. In the next section the report will point out the difference of SAP ERP FICO as against SAP S/4 HANA finance. SAP ERP FICO. The term FICO stands for FI (Financial accounting) and CO (controlling). It is considered as important module under ERP and FI as well as CO both stores financial data. FI is regarded as an important module for all the SAP implementations and is used for the purpose of external reporting including income statement and balance sheet (Discuss.asug.com 2018). FICO model can be integrated with other different modules like distribution, sales, production planning, project systems and material management.
The next section of the report will highlight the benefits of SAP S/4HANA if used by the business houses. Benefits will be listed down with regard to ease of use, performance, cost effectiveness and innovation. In the 4th section the report will highlight the case studies of those entities that have migrated to SAP S/4HANA and will discuss the issues faced by them while migrating (Sun, Gregor and Keating 2016). Finally, the report will be concluded based on the findings and discussion.
SAP re-imagined the finance for digital age with release of SAP S/4HANA that was known as simple finance previously. It includes the set for interconnected function for financial management and provides data on real-time basis from ERP (Enterprise resources planning). SAP S/4HANA is the part of S/4HANA and built on the database platform of SAP HANA in-memory. For over 40 years SAP application is providing the services to wide customers for solving different issues related to IT challenges and business issues (Maheshwari 2017). Major advantage of the app is processing the speed in combination with the integrated features for different functions of finance like management accounting and financial accounting. Interest for SAP HANA developed during mid-2011 and more than 500 entities opted to the application for satisfying their business requirements. Majorly the app was launched to focus on insights based on real-time. In 2013 January, SAP launched the business suite to help in running the business on real-time basis. SAP got outstanding response from the business houses as 2000 or more than that consumers accomplished the app in the period of 2 years that eventually help to app to become fastest growing app. In response to its huge success SAP introduced the financial insights, single data source and no aggregates for the purpose of reporting (May, Bo?hm and Lehner 2017). Ultimately, SAP released its business suite application for next generation business houses with the name SAP S/4HANA. This app is considered as the most appropriate for the business finances as it was based on on-memory platform that was most advanced. Further, it was the biggest improvement since the release of SAP R/3 and was designed with the award winning concept of Red Dot Award.
Difference in SAP S/4HANA Finance and SAP ERP FICO
The major difference among conventional database and the in-memory database is new HANA database applies latest technology for innovations for boosting the performance. It is ‘in-memory column database’ in addition to calculation engine and functions for immense parallel procedures. SAP positioned the database for central location for the data which in turn will help for using only one copy for data analysis and transaction (Missbach et al. 2016). The traditional databases include 3 copies of the data or representing the event that is different copies for acceleration, analysis and transaction. However, it leads to the risk of inconsistency in data and latency in inherent data in case of poor development. On the other hand, HANA database is composed of 1 single and common approach for database for OLTP (Online transaction procedure) and OLAP (Online analytical procedure). This approach requires optimised setup for hardware, removes unnecessary complication and allows data acceleration processing through entire data flow (Burns 2018). Till November 2016, new version of HANA released that is named as HANA2. HANA2 leveraged the additional functions regarding analytical intelligence, data management and comparison with applications of 3rd party.
With release of each S/4HANA, additional functionalities are implemented to the newer version with simplified structure of table. Since the release of 1511 in 2015 November, logistics module is set up in similar manner with the S/4HANA finance. Further, with release of 1610 additional functionalities became available egarding the logistics and finance logistics, for instance, IQM (integrated quality management) and aATP (advanced to Promise). As mentioned above, S/4HANA was the 1st application launced by SAP for the purpose of business suite and it includes the functions that enable the entities to optimize, simplify and accelerate the function of fiancé (Okungbowa 2015). Further it operates on the basis of full integrity in addition to other solutions of SAP like supply chain and sales. This further provides the digital core – ‘SAP S/4HANA Enterprise management’. Major functionalities included in SAP s/$HANA are as follows –
- Refinements of the existing processes
- Leveraging of the technical performance under HANA D3
- Implemented the new function from the S/4HANA
- Implemented the mobility and flexible and user friendly interface
- Leveraged the embedded BI on the S/4HANA
- Integrated with the networks of business partner
- Implemented new components and solutions (Ritter 2015)
In addition to the potentials provided by S/4HANA for faster insights, improved experience of the users, improvements of functionalities and reduction of complexities involved in database becomes major challenge for the CFOs (Chief financial officer) to make this real. It is not sufficient to just install the SAP S/4HANA, they are also required to adapt the procedures, capabilities and skills of all finance functions for improving the potential of SAP S/4HANA. As role of the finance functions have been redefined, it is biggest challenge for the the CFOs to change the process of traditional finance drastically and the models for operational support for delivering more accurate, more insightful and faster evaluation and reporting (Umar et al. 2016). Further, at same time it must consider for reducing costs and managing risk. On the other hand, SAP FICO that stands for finance (FI) and controlling (CO) is best module design for external as well as internal procedures of accounting. It is important and core module under the process of SAP ERP. Further, the financial transactions are incorporated with various parallel modules of SAP for getting best results. External reports those are generated from the SAP FICO are increasing used by administrators, banks, tax authorities, managers and stock holders for their particular requirements. The SAP FI is accountable for incorporating the diverse modules and creating single system for entire company. Major difference among SAP S/4HANA finance and SAP ERP FICO are as follows –
- Asset accounting – SAP S/4HANA controls various accounting principles for asset through setting up different depreciation areas. This app optimized the asset accounting area to run it with the additional functions and make it compatible for new data structure with ACDOCA table and full integration. On the other hand, FICO controls the transactions associated with asset accounting that includes land, property, building and equipments. Transaction generally includes depreciation, sales, purchase, acquisition, revaluations and transfer (Al-Sabri, Al-Mashari and Chikh 2018).
- Accounts receivable – SAP S/4HANA enhances the visibility of cash flows and payments methods, assist in improving the relations with suppliers, reduce the costs and enhance the pricing and payment method through applying tight control on the management of invoice processing. Apart from that, it helps to reply in faster manner even if in the fluctuate market and recognizes the risk associated with accounting system which in turn, improves the health of finance. On the other hand, FICO considers the transactions associated with account receivable and handles customer accounts. Transaction included under FICO are invoice posting, dunning, credit memo posting, down payments, invoice payments and accomplishing of customer reports (Okungbowa 2015).
- Accounts payable – SAP S/4HANA helps to enhance the speed and the accuracy to evaluate credit risk associated with the customers in faster way. Moreover, the billing system has become easier, visibility has been maximised and invoice management has been improved through SAP S/4HANA. On the other hand, under FICO transaction related to accounts payable are managed for all vendor accounts. Different transactions considered by FICO include invoice posting, dunning, credit memo posting, down payments, invoice payments and accomplishing of vendor reports (Junnarkar and Verma 2017).
- General ledger – SAP S/4HANA segregates the ledger accounts into 4 categories – (i) day ledger (ii) non leading ledger recognized under ACDOCA table – non leading ledger (iii) extension ledger (iv) leading ledger recognized under ACDOCA table. On the other hand, under FICO entity’s transactions are included under account charts and it lists all the transactions. The transactions are further recorded under different sub-modules those are reconciled with the general ledger data on real-time basis.
Benefits of SAP S/4HANA Finance
As role of the finance functions is redefined drastically, the CFOs are challenged for altering the traditional financial processes. As stated above, moving towards SAP S/4HANA will drive the business first and most importantly all the shareholders will have the clear vision of value that will be brought through enhancing the operational and financial drivers for the entity. Benefits involved with the implementation of SAP S/4HANA that is considered as key component and s considered for value creation will vary from company to company as compared to the present status (Pattanayak 2017). New SAP S/4HANA finance has an positive impact on all finance related activities of the entity. It reduces the complications in data model, enhances the functionality of transaction processing, improves the functionality of end-user and enables the company to enhance other areas, data storage and consistency, ease of operations and reporting capacities. However, the major benefits of SAP S/4HANA finance are as follows –
- Enhance the functionality of reporting – reporting is made on the basis of transactional data stored in high performing database. It indicates that continuous overnight ETL is not required anymore for the purpose of reporting. As the processes of business are based on particular available insights, this will speed up the process (Plattner and Leukert 2015). ETL is not required anymore as the real time profitability derivation has been introduced. Further, it indicates that the root cause for analysis has been speeded up with ease of drilling down process for line items. This is due to design of data model where primary reporting source, universal journal contains details for all line items.
- Experience of Fiori users – it contains the apps those are designed specifically taking into account the user’s perspective. This is considered as the major improvement as compared to the old SAP GUI. Number of fields, screens and mouse clicks are required for the mass task volumes including overdue receivables, processing have been reduced significantly. Fiori further provides unified experience and single point for entry across the devices (SAP 2018). This in turn enhances the productivity of users with less training while appointing new employees and results into little number of errors. More than 800 apps are available there in Fiori till 2016 March. Choosing the best fitting app is crucial for reaping the benefits from improved user’s experience. Further, the best set may include selection of the available currency for the app and apps those are developed additionally as part of SAP S/4HANA implementation.
- More rapid for processing monthly closing – owing to speed of HANA, the existing programme can be reprogrammed to perform on the basis of real time. Aprt fro that, the existing batch jobs can be performed faster, as impact of the correction posting will be done on real-time basis, next step in closing process will not wait. Further, with introduction of universal journal, further reconciliation will not be required among FI and CO sub-modules. Through design, posting under FI as well CO both is reconciled always as both are written on same table of ACDOCA (Wang, Syaiful and Nurul 2017).
- Central finance – based on the particular circumstances, the approach is known as central finance implementation that offers various benefits. The said approach enables gradual introduction of the SAP S/4HANA into complicated IT landscape. It further enables increasing the reporting speed without long project of implementation through data replication to central finance in real time basis. Further, the approach will be appropriate for the organizations those move towards service centre shared by finance where complicated landscape will hold back the situation (SAP 2018).
Through linking the above mentioned benefits to the organization operational and financial drivers, SAP S/4HANA will be more transparent and structured.
As the industries, societies and economies are moving forward to digital transformation rapidly it is expected the entities will undergo massive changes that will have impact on business procedure and processing. Further, as SAP keeps on enhancing and evolving the products, it is becoming challenges for the adopting the new technologies for the new customers. However, the common reasons behind reluctance in moving towards SAP S/4HANA are –
- Licence cost and deployment cost
- Lack of knowledge or skill
- Constraints of resource
- Fear from business disruption
- Complication involved in migration
- Lack of system readiness or install base
Wipro implemented the SAP S/4HANA on 2015, January 15th. Different areas of the app implemented by the entity includes –
- SAP treasury management and risk management
- S/4HANA Finance
- SAP Financial Cockpit
- SAP Fraud management
- SAP cash management
Wipro implemented the above mentioned to achieve various business objectives. There are different ways through which the app can be implemented and Wipro used the ways through central finance. It is usage approach and helps the users with various SAP and Non-SAP system to gain immediate advantage from the app (Wipro.com 2018). While migrating to SAP S/4HANA, Wipro faced various issues related to migration and implementation. The major challenges are as follows –
- Justifying migration cost – they faced the issues with justifying the cost required for SAP S/4HANA migration as it required preparing business plan that can again be tricky with the new system. Accurate estimation of the effort and time required for adopting may often seem like guesswork
- Incompatible to custom code – though it was important for Wipro to migrate to SAP S/4HANA, however, migration required the custom ABAP code ready with HANA. This was the biggest step in the journey towards HANA, however, clearing the code has value for long term it is required for migration (Sulit and Buenviaje 2016)
Fujitsu identified that most of the SAP customers are carrying with them huge baggage for complication. With this baggage they were not ready to journey for the digital world. Fujitsu had remarkable experience with regard to SAP services and they were recognized as the leader for SAP S/4HANA services. Target customer of the company who were agreed to move towards SAP S/4HANA from the existing system of ERP expected to gain great advantages through simplification, consolidation of the processes and channelling under the platform of process-spanning (Fujitsu.com 2018). However, various issues faced by the company while migrated to SAP S/4HANA are as follows –
- Increased planning and execution cost and deployment analysis – through any major software implementation require wide-ranging preparation, transition to the SAP S/4HANA from existing database requires considerable planning, analysis and execution procedure that involves higher amount of cost. Extra time required for analysing the systems and actual execution was much difficult as compared to estimation (Ghattamneni 2016).
- Data inconsistencies – while migrating to SAP S/4HANA migration of the financial data was crucial thing. For making the migration successful, data shall be clean and shall be consistent. However, even if the company took all kinds of safely measures for managing the data in appropriate manner, it faced the issues with data inconsistencies. Most common issues faced by the company are differentiating general ledgers and sub-ledgers (Menon 2016).
Case Studies
Conclusion
It can be concluded from above interpretation and research that SAP S/4HANA is important software for running the business operation and financial activities successfully. It enables the user to update the data on real-time basis which in turn enables to detect the error in early stages. Further, it has various advantages like it enhances the functionality of reporting, rapid for processing monthly closing, make the company ready for adopting digital core system and increase contextual awareness. It is found that it has various differences with SAP ERP FICO in context of marinating records for general ledger, asset management, accounts receivable and accounts payables. Further migration to SAP S/4HANA involved with various challenges like data inconsistencies, justification of the migration costs, incompetency to custom code and Increased planning and execution cost and deployment analysis. However, irrespective of various challenges involved while migrating to SAP S/4HANA, it is considered as useful as it enables the users to enhance the performance as against the relational database. Further, it is considered as advanced platform as it works on in-memory real time basis.
References
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