Transformation and the Digital Core Imperative

  • February 19, 2019
NTT DATA Services SAP Advisor Digital Core Blog

Disruption — the calling card for transformation

Digital transformation has been all the rage for some time now, and for good reasons. Advances in cloud, mobile, IoT, AI, ML, blockchain and big-data analytics have forever altered the playing field. Companies across industries are under constant threat from faster, smarter, more nimble competitors who are leveraging technological advances to streamline processes, reinvent business models, win customers, and grow market share. Disruption is rampant. No one is safe. This is the reality of business today.

As reported in HBR, an historical study from Constellation Research quantified the quickening pace of disruption by measuring the entry and exit of U.S. corporations in the S&P 500 index:

In 1958, corporations listed in the S&P 500 had an average stay of 61 years. By 1980, numbers from research firm reveal that the average stay had declined sharply to 25 years. In 2011, the average tenure dropped to 18 years. At the present rate of churn, the research firm estimates three-quarters of today’s S&P 500 will be replaced by 2027.

It cannot be overstated -- in today’s digital universe the stakes are high. Leading digital companies generate better gross margins, better earnings and better net income than organizations in the bottom quarter of digital adopters. According to a Harvard Business School study, as reported in CIO, digital leaders post a three-year average gross margin of 55%, compared to just 37% for digital laggards.

Putting it plainly, digital transformation is NOT optional. It is the commitment every business enterprise and public sector organization must make to ensure its relevancy, its survival.

Complexity — the transformation killer

As reported in Forbes, by 2018, 67% of the CEOs of Global 2000 enterprises will have digital transformation at the center of their corporate strategy. However, according to a recent survey, only 50% of companies are successfully executing on their digital transformation strategies despite demonstrated efforts and investments.

Complexity, in it’s many guises, is the foremost reason for this yawning gap between effort and success.

It starts with big data. Data that should be creating business insights and opportunities is disorganized, disjointed and overwhelming. What should be the lifeblood of transformation is often its killer. Many, perhaps most, businesses today are incapable of harnessing and utilizing today’s dizzying volume, variety and velocity of big data. Forrester reports that a whopping 60% - 73% of all data within an enterprise goes unused for analytics (as reported in Inc). Gartner estimates that 85% of all big data strategies are failing (as reported in Digital Journal).

Moving forward, big data will only get bigger. As reported in NetworkWorld, IDC predicts that the collective sum of the world’s data will grow from 33 zettabytes in 2018 to a 175ZB by 2025, for a CAGR of 61%.

Data is quickly becoming the most important asset in the enterprise. The data required for effective decision making resides in numerous places throughout the enterprise — databases, data warehouses, operational applications, transactional systems, the Internet/Intranet, etc.

Realizing the promise of transformation necessitates pulling all of this disparate data together in real time without disrupting business, and without adding additional complexity.

As we see at clients every day, complexity is the dark force that inevitably ratchets up costs in SAP landscapes, leading to bloated cost structures and operational instability.

The legacy, on-premise ERP systems in abundance today are too costly, too complex and rightly perceived as static and incompatible with the transformational goals of present-day companies.

More specifically, complexity born of workarounds needed to deal with exponential data growth and constrained resources — processing power, memory, speed — has led to database sprawl and reliance on inefficient disc-based database management systems.

In addition, management layers, accrued over the years through mergers and acquisitions, new product and services divisions increase complexity, prohibit accountability and create barriers between business units, divisions, employees and, ultimately, between a business and its customers.

The digital core imperative

Digital transformation began a decade or so ago as isolated, one-off, departmental projects typically classified as “shadow IT” initiatives. Today, digital transformation is an enterprise-wide, mainstream endeavor — mandated by Boards, supported by C-level execs, and executed continuously by IT and business users working hand in hand.

It has become abundantly clear that piecemeal edge innovations of the past no longer pass muster. In fact, it is too often the case that these well-meaning one-off projects ultimately add to the complexity problem.

The ultimate end goal of digital transformation is to become an intelligent, nimble organization capable of adapting to constant change and continually enhancing your customer’s experience. This means having in place a secure and scalable digital core capable of harnessing the power of all current and future disruptive technologies, a re-envisioned IT architecture that streamlines end-to-end processes, provides analytical capabilities, empowers teams with individualized customer insight, supports new business modes, connects to business networks, and most importantly, gives you a single source of truth.

S/4HANA is your digital core

Many core enterprise systems today — think of the ERP boom in the ’90 — are flirting with overdue replacement cycles and/or upgrades, extensive and expensive customizations, rising maintenance costs and, most critically, a lack of flexibility needed to meet today’s changing business demands.

Available on-premise, in the cloud or as a hybrid deployment, S/4 HANA is SAP Business Suite reinvented for the digital age and purpose-built to provide the digital core your business needs to rapidly and smoothly advance your transformation journey.

In a nutshell, S/4 HANA is a collection of integrated, modernized ERP (and other) apps with a simplified code and data model (no material aggregates to be maintained) capable of running OLTP and OLAP on the same system.

In addition to ease of implementation without disruption, S/4 HANA benefits include compression, real time analytics, landscape simplification, and ease of configuration, delivered through a simplified and enhanced end-user interface based on SAP Fiori. S/4 HANA, not incidentally, is also optimized for cloud deployment.

S/4HANA is mature and proven. Since its launch in 2015, S/4HANA adoption has grow to approximately 9,500 customers, according to SAP.

As transformation efforts gather steam in the years ahead, S/4 HANA will play a pivotal role, simplifying and reducing hardware costs, driving deeper cost savings; increasing analytic and BI capabilities by orders of magnitude; wringing latency from cloud-based services; and infusing your business with unprecedented efficiency and flexibility.

While the very real and measurable monetary drivers for S/4HANA adoption are compelling, at NTT DATA, we believe that infusing our clients’ business with the core transformational power that only S/4HANA can deliver yields the greatest value by far and should rank first in green-lighting migration initiatives.

For net-new SAP customers, S/4HANA is a no brainer. For existing SAP customers, S/4HANA is your future. Mainstream maintenance for SAP Business Suite ends in 2025, so it’s high time existing SAP customers get serious about their S/4HANA migration plans.

At NTT DATA, we invest in SAP to ensure that our clients always get the most from their SAP investment. There is no cookie-cutter tool for S/4 HANA migration. Each company has it’s unique ERP environment, market forces, corporate objectives, industry imperatives, customer expectations, and enterprise IT priorities — which is why NTT DATA provides a broad set of offerings that support your entire S/4HANA journey, from building the business case to defining the roadmap to full execution.

Contact NTT DATA today to learn how are S/4HANA experts can help you build the digital core your business needs for its transformation journey.

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Sebastian Gueler

Sebastian Gueler is a Vice President and leads the SAP practice for NTT DATA Services. Sebastian has more than 25 years of SAP experience; having worked in Germany, South Africa, Australia, China, Mexico, and the U.S., helping customers globally across various industries with their digital transformation journeys.

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