Transcript 0:00 There's a sentence I hear in too many procurement technology roadmapping conversations these days. It goes something like, "Ah, we're gonna wait for our S/4 migration to be finished before we do anything else." 0:13 Does that sound familiar? It sounds like prudence. One transformation at a time. Get the foundation right, then build on top. 0:20 I wanna spend the next ten minutes trying to convince you otherwise, because waiting for the migration isn't the safe move. It might actually be the least safe thing you can do. Let's get into it. 0:31 [upbeat music] Welcome to ProcureTech Unpacked, the show for procurement professionals who want to cut through marketing to understand the technology shaping our function. 0:51 I'm Joé Cannes-Dumes. So here's where I'm taking you, three points. Number one, S/4HANA migrations take much longer than you think they're going to take, and that's a fact. 1:01 Number two, the scope where procurement actually depends on ERP is narrower than you might think. And number three, the real bottleneck isn't a dependency on the ERP, it's talent and capacity in your team. 1:15 Let's take them in order. All right, number one, let's start with the part that everybody treats as fixed, the migration date. Ask any organization when their S/4HANA migration will be done and you will get a date. 1:28 Ask again in twelve months and you will get a later one. That's not me being cynical. It's literally what's happened to me dozens of times over the past few years. 1:38 And based on Gartner's most recent study on the topic in twenty-twenty-four, nearly a decade after S/4HANA was shipped, only about thirty-nine percent of SAP's ECC customers had even licensed S/4 by the end of twenty-twenty-four. 1:52 Not migrated, licensed. That's just buying the thing, the first step, which means that roughly sixty-one percent of organizations on ECC haven't even started, at least at that point in time in twenty-twenty-four. 2:05 And the pace is the real story. Licensing crawled from thirty-four percent in the middle of twenty-twenty-three to thirty-f-seven percent a year later to thirty-nine percent by the end of twenty-twenty-four. 2:17 Two, maybe three percentage points a year against a twenty-twenty-seven migration deadline, uh, because the mainstream ECC support was coming to an end. 2:29 The other important data point is that according to America's SAP User Group or ASUG that surveyed all their members, a full migration can take anywhere from a year and a half to six years for the most complex SAP installs. 2:42 So by and large, the point h-here is that organizations are taking much longer to transition to S/4HANA than planned, and if SAP maintains its deadline dates, the market is facing a pretty intense SAP consultant crunch in the years to come. 2:58 Might be a good time to reorient our careers. Uh, so wait until it's done means that you're waiting on a target that's gonna recede as you approach it. 3:07 The two-year pods that you budgeted might become three or four or five, and at that point, it's no longer a pause. It's a demotion that you volunteered for. 3:17 If you make the SAP migration your entire procurement digitalization roadmap, you're essentially forfeiting the one thing that procurement never stops asking for, that infamous seat at the table. 3:29 Because you don't earn that seat by waiting your turn as a function behind the ERP program. You earn it by bringing the business something it can't get anywhere else, and I'll get to what that is in the next points here. 3:41 That leads me to point number two. The scope where procurement actually leans on the ERP is a lot narrower than you may think. Here's the assumption that's buried underneath the whole waiting argument. 3:53 You're assuming that the ERP sits underneath everything that procurement does, but for a big chunk of your process, it simply doesn't. Think about where your work actually lives. 4:03 A sourcing event, the ERP is not the system of record for that. A legal contract, not for that either. 4:10 Supplier management, spend analytics, category strategies, you may need master data or transactional data from the ERP, but the process by and large isn't run in ERP. 4:23 All of the source to contract activities that procurement touches get inspired from the ERP as a thin master data read and/or transactional data read and a downstream hand off when you start having to go into P2P processes. 4:37 Usually, it's nothing more. The only real coupling is in that P2P or procure-to-pay process where purchase orders, invoices, goods receipts are posted in the ERP, and even that is mostly thinner than it looks. 4:50 Most of what actually chains the P2P process to your enterprise resource planning system is a manufacturing or a maintenance concern. 4:58 Goods receipts against inventory, three-way match is tied to product costing, MRP related replenishment. 5:04 If you're not moving physical goods through production or maintenance, very little of this integration applies to you. 5:11 If you run the whole flow, intake, requisition, purchase order, receipt, invoice, approval in a dedicated P2P platform and you hand the ERP a clean okay to pay file at the end, the ERP isn't the foundation your procurement process runs on. 5:27 It's where you pull your financial data at the start, your GLs, your cost centers, your vendors, and the payment engine you feed at the finish. 5:35 So my point is that for most of the potential technology portfolio that you could have as procurement, wait for S/4 isn't caution, it's a category error. 5:44 And where the coupling is real, such as in manufacturing, two moves can take risk off the table. Neither is exotic, and both are SAP's own stated direction. Number one, move your integration out of ERP. 5:57 So in SAP speak, you want your procurement tools to talk to something like business technology platform or BTP, not a point-to-point integration into the ERP. When ECC transitions to S/4HANA, 6:11 you're just changing the system of record behind the integration layer. The cutover is changing a spoke in the wheel instead of changing the middle of the wheel or the hub. 6:21 Number two, lift your data objects above the ERP. A vendor master record that sits, uh, in ECC or in SAP ERP is a transactional golden record, but it is not the entirety of what you want or conceptualize as a vendor. 6:37 And so conceptualizing that golden vendor record in a governed data layer, letting the ERP hold the transactional details for posting rather than being the golden master record itself is the play here. 6:49 Besides, you already know you can't fit, as I just mentioned, all the information that you want for a vendor in the SAP vendor master record. It's just not built for that. 6:59 And when the ERP is- isn't the single source of truth anymore, that doesn't just decouple procurement from ERP, it de-risks the migration you were told to wait for. I'll say this again another way. 7:10 Done right, investing now in procure tech makes your S/4 migration shorter and safer for the entire organization because you're getting out of the way. 7:19 The thing you were waiting for gets easier precisely because you didn't wait. And then finally, point number three, the real bottleneck is not the ERP or your technical dependency on it, which I've been trying to prove. 7:33 It's your team's capacity, and capacity is a people problem, not a technology one. To me, this is exactly why waiting is the wrong value lever. 7:43 The migration definitely has the potential to be a huge capacity sink, don't get me wrong, not just for procurement, but for all the business functions in the entire business that are using ERP. 7:54 If you queue further procurement transformation behind that ERP migration, you're not freeing up capacity to address it. 8:01 You end up spending all of your capacity and then some on the migration, and then you hit a budget wall when it's finally time to get going on your priorities because the organization is hungover from the S/4 migration and the increased budgets over time. 8:16 Waiting also quietly costs you people. 8:19 Digital literacy in the era of AI, so being able to evaluate AI output, managing AI risk, designing automated workflows across your enterprise systems, none of that gets built while you wait on S/4. 8:31 It only gets built by doing the actual messy work of creating AI agents, troubleshooting them, figuring out how to get to value. And your best people are watching you, right? 8:41 The go-getters, the ones topping every year-end review, they didn't join your team to babysit a migration for two, three, four, five years. If you hand them a roadmap that reads "Wait," one of two things happens. 8:53 They leave your organization for one that gets it and they don't wait, or they stay and they go quietly stale. Either way, you're losing them. 9:02 The first way you notice, the second way you don't until your whole team is the equivalent of someone who doesn't know how to use the internet twenty years ago. So to me, the question is not do we wait or do we not? 9:13 It's how do we do both? And both is mostly a partner selection question in my mind. The partner you want can make joint data decisions alongside your S/4 program. 9:23 They can build their solutions so that the ECC to S/4 cutover stays clean, and they can deliver in increments that show you value before the migration does. 9:34 And finally, here's the reframe that should change your budget conversations internally if that's the biggest hurdle and everything I've been talking about you're already aware of. 9:43 Nearly every big transformation business case I've ever seen leans on procurement benefits to make the numbers work. Spend reduction, better sourcing, tighter compliance, healthier working cap. 9:53 Procurement value is often what makes the digital transformation pencil out in the first place for the entire company. 10:00 So investing in procure tech alongside your S/4 migration program isn't just a compelling line item for you as procurement. It's the line item that helps pay for everything else. 10:10 You're not asking for a slice of a transformation budget. You're offering to help fund the whole bill. 10:16 That's how you sell doing both at the same time as procurement, and that's how you earn that infamous seat at the table because you get it, right? Waiting feels safe, but it's the least safe thing to do. 10:29 The S/4 migration will take as long as it takes. That's IT's job. Your procurement capability, that is the part that you actually control and need to control. That's it for this one. 10:40 If you enjoyed the episode, please give us a follow and or a five-star review wherever you get your podcasts. It helps us out more than you can imagine. And it's free. This was ProcureTech Unpacked. 10:52 I'll see you next time. That's a wrap on this episode of ProcureTech Unpacked. 10:56 If this one resonated, subscribe wherever you get your podcasts and sign up for the Procure Procurement newsletter for weekly insights between episodes. 11:04 If something we covered sparked a question or an idea, we'd love to hear from you. All the links for the reports we discussed are in the show notes. We'll see you next time. [upbeat music] Resonate.
