SAP’s new platform is coming — at a price

Insurance firms ahead of the curve in implementing S/4 HANA, the new SAP enterprise platform. Banks need to wake up to the challenge of data right-sizing and testing.


Tim Bower tests SAP's S/4 HANA

Tim Bower, Original Software

From 2025 SAP will no longer support any other enterprise resource management platform than its latest, 2015, release: S/4 HANA. Migration from legacy SAP platforms may be costly and time-consuming, but financial firms that are SAP customers should start planning now, especially because S/4 HANA — while it will be faster — will be more expensive in terms of data usage.

So far, major insurance company SAP customers are well ahead of the leading banks in terms of implementing S/4 Hana, said Jane Tweddle, industry principal, financial services, at SAP, based in the UK. These have included New York Life Insurance Company, the largest mutual life insurance firm in the United States and Swiss Re which, is currently in S/4 HANA implementation, Tweddle said.

A number of tier two and tier three banks have made the transition to S/4 HANA, while some tier one banks are planning implementation, Tweddle added.

The transition to the new platform will be costly, says Nick Parkin, director of Proceed Group, a UK-based SAP consultancy firm, possibly $100 million for a large bank over a two to three period. And while it might seem sensible for firms to avoid that cost and stick with legacy platforms, SAP’s support cut-off date means that they don’t actually have a choice. “A few customers might decide to switch to Oracle, but I think the vast majority of banks using SAP tools will go to HANA,” said Parkin. “After all, those who decide to leave will still have to migrate and that’s going to be expensive.”

Thorough testing is one way keep costs down by avoiding expensive bugs, says Tim Bower, partner at Original Software, a UK-based test automation service provider that works with S/4 HANA. “You should automate as early as possible, building test cases from your business process capture that can be used as you complete the transition, or when a patch or changing legal requirement requires modifications,” said Bower.

Previous SAP products could run on a variety of databases, including Oracle or IBM platforms running on disk storage. S/4 HANA only runs on SAP’s own in-memory database system. This offers improved performance because in-memory is faster than disk storage. It is also more expensive, and a large database of, say, 40TB in size that previously sat on disks has to be pared down to, in this case, around 25TB of memory. That 25TB can then be stored on a 5TB in-memory database, which is made possible by the compression ratios that S/4 HANA can achieve.

This process requires a balancing act: keep too much data during the migration, says Proceed Group’s Parkin, and in-memory costs become prohibitive, while if there is not enough memory useful data is lost and that can impact day-to-day operations. Right-sizing data requirements is essential to keeping hardware costs down.

One remaining challenge is there is a skills shortage in S/4 HANA transition management. “SAP is training its customers, and third party integrators are playing their part as well.  So the gap is  closing,” said Parkin. “But right now the  job boards are full of SAP advertisements.”

Additional Information: read about SAP’s S/4 HANA, the latest generation of SAP business suites here. Read about Proceed Group, a UK-based SAP consultancy firm that specialises in the right-sizing and data migration process here, and read about Original Software, a UK-based test automation services vendor that offers S/4 HANA testing services here.


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