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Welcome to the second part of the post about deployment of modular public ERP with Two-Tier. If you missed the previous blog post, I encourage you to read it first here. Furthermore, we have prepared a whitepaper that outlines the Two-Tier Deployment in detail, in case you want to dive deeper into this topic.

In the previous part we have covered the value proposition, reasons for considering this journey and select Two-tier scenarios with customer examples. In today’s post we will expand on planning the transition journey, detail out what it takes in adopting the cloud mindset and lastly discuss the potential four step path to cloud for your organization.

Planning your transition journey

Operating a true cloud solution requires organizations to adopt a different mindset for designing their IT environment that is based on the standardization and fit-to-standard principles. This enables the organization to adopt standard business practices, avoid customizations and accelerate time to value. This mindset doesn’t restrict your ability to extend the solution when needed to preserve differentiation and business value where standardization is not desired. But it changes the mindset from leading with customization to leading with standard.

SAP embodied these principles in the Golden Rules for Implementation of SAP S/4HANA that are outlined below:

  1. Foster cloud mindset by adhering to Fit-to-Standard and Agile Deployment detailed in SAP Activate

  2. Use pre-configured solutions with predefined processes and utilize SAP Fiori UX – use SAP Best Practices, SAP Enterprise Management Layer* or Partner templates*

  3. Use modern integration technologies - SAP Business Technology Platform (SAP BTP) for Cloud integration and SAP API Business Hub

  4. Use modern extensions technologies - SAP BTP for side-by-side extensibility following the SAP S/4HANA Cloud Extensibility Guide, leverage business logic extensibility in-app extensibility

  5. Ensure transparency on deviations - use SAP Application Lifecycle Management tools to document the solution

* Not included in the subscription package for SAP S/4HANA Cloud

Organizations that follow these golden rules in their deployment of SAP S/4HANA have realized the following benefits:

  • Faster time to value

  • Lower cost of initial deployment and on-going cost of running the solution

  • Ability to absorb innovation delivered by SAP at a faster rate

  • Lower risk during the deployment of the solution

  • Higher flexibility and lower reliance on one system integrator

  • Deployment of future-proof solution utilizing modern technologies

SAP provides customers with detailed and prescriptive guidance for implementation of SAP S/4HANA Cloud in SAP Activate methodology. One of the key deliverables is the methodology is to set-up governance to ensure compliance with the golden rules. SAP recommends to setup dedicated Solution Standardization Board that serves as a body to govern the extensibility decisions. You can learn more about the SSB in this blog from Jan Musil. Organization implementing SAP S/4HANA Cloud has seen over 80% reduction in number of modifications and customizations in their environment when they set up Solution Standardization Board in their project. You can read about this customer in blog by Andre Malan here.

Additional considerations for your transition journey are listed below. This article doesn’t allow for detailed discussion of each, but we will share additional resources in the community that provide you with access to information and sources at the end of this post.

Transition journey considerations:

  • Location strategy and solution architecture - The driver in deciding the location strategy and solution architecture will be the business scenarios where you will be implementing decentralized federated model using Two-tier deployment. You will need to first identify the business architecture, the required business processes, flow of data and information between the various parts of your organization. During this process, consider which functions need to be run centrally and which functions and processes can be executed locally in the nodes of your federated solution architecture.

  • Master data governance - Master Data governance needs to be set up early in the planning process to ensure that it is understood where master data originate, ensure their quality & consistency across the entire solution and proper handling in cases master data needs to be updated or changed.

  • Localization considerations - During transition journey planning, consider localization requirements and availability of localization for your target countries. RISE with SAP S/4HANA Cloud currently supports 43 local versions and 27 languages. SAP intends to deliver 16 new standard local versions planned with Finance-led ERP scope for service-centric industries. SAP also intends that the customers would have the ability to create project-based local versions using Configuration Localization Tool (CLT) in SAP Central Business Configuration for the countries/regions that are not on SAP’s roadmap except for certain Baltic countries, embargo countries and hyper-inflation countries.

  • Data residency considerations - When considering new solution deployment, each organization needs to assess the local and regional laws governing data protection and data residency. Many countries and regions have established laws governing storage and protection of data. Majority of these laws focus on protection of data requiring the data storage to be in a specific location (for example within a country). For example, storage of personally identifiable data, medical records and other data entities in the country where were collected or persons reside.

  • Data center location - SAP runs data centers in multiple geographical locations to remain near to the customer locations. Customer has choice of data center location when they start deployment of their SAP S/4HANA Cloud solution. SAP customers can find location of all SAP data centers on SAP Trust Center site at https://www.sap.com/about/trust-center.html and should select the data center that has the closest proximity to most of the business users of their ERP system.

  • Security, data protection and compliance - SAP runs data centers and operates customer solutions in cloud in safe and secure manner to protect customer data. SAP is committed to maintaining the highest levels of security for our customers, their data, and their processes. The SAP Global Security team protects data, mitigates risks, and helps customers achieve global regulatory compliance by aligning people, processes, and technology. At regular intervals, SAP’s data center technology and infrastructure are tested and certified. You can learn more about this topic on SAP Trust Center.

  • Integration with other enterprise systems - end-to-end integration among applications, processes, and people, as well as physical assets such as sensors or machines, is critical for the success of any business. SAP S/4HANA Cloud will also have to be integrated with many other solutions within customer system landscape. Integration Approach for Two-Tier ERP Scenario with Head Office and Subsidiary on SAP S/4HANA Cloud supports Cloud-to-Cloud integration for products like SAP Ariba, SAP Concur, SAP Fieldglass. Additionally, other enterprise systems can be integrated using SAP Cloud Integration capabilities on SAP BTP.


Possible Transition Journey

Based on the complexity of the current monolithic implementation and the deviations from standard SAP processes, the journey to a full SAP S/4HANA Cloud federated deployment is a process that for some companies can take several years. However, opportunity exists right now to begin the journey and reduce the overall time to the value of the cloud. The process can be broken into four steps: Optimize, Start Simple, Expand, Complete.

  1. Optimize – focus on non-standard processes and custom code cleanup in the current SAP ERP using the boundaries of the S/4HANA Cloud system as guardrails. A Solution Standardization Board, discussed earlier, should be created, and all new developments should follow the golden rules.

  2. Start Simple - Identify areas within the company that have natural boundaries and processes that are a fit for the SAP S/4HANA Cloud. Examples include subsidiaries, minimally integrated lines of business, newly acquired businesses, or geographical regions. These represent starting points to the first cloud implementation and build expertise in running the cloud. This approach minimizes impact to the rest of the organization.

  3. Expand - The initial SAP S/4HANA Cloud system can be expanded, or new SAP S/4HANA Cloud systems can be added to the federated system based on the same criteria used to determine the first system. In addition, central services such as finance and central procurement can be brought into scope to consolidate cross company business processes and thus increase the horizontal usage of the cloud. In parallel to the subsequent rollouts, retrofitting of current SAP ERP processes should continue.

  4. Complete - The completion of the journey to the SAP S/4HANA Cloud federated approach is not without challenges. The areas that are left on the SAP ERP system, are the areas with non-standard processes that could not be converted to cloud-based approach due to the criticality to the business and technology limitations related to the non-standard extensions. Future innovations within the cloud software and continuous feature delivery will naturally increase the fit over time. Once the remaining processes can be re-engineered to be executed in the cloud, the migration to a full federated deployment can be completed.

The journey outlined above shows the immediate steps large enterprises should consider in their transition to cloud. They are designed to allow for gradual transition while focusing on realization of benefits of such transition gradually to minimize the disruption to existing systems and processes.


Lessons learned from federated two-tier deployments

SAP customers have been deploying SAP S/4HANA Cloud to gain advantages provided by cloud software we have outlined through this paper. The project teams that deployed their ERP systems in this manner pointed out following key criteria for success:

  • Define clear criteria for selection of candidates for two-tier deployment driven by benefits

  • Embrace the SAP Activate with agile principles and live the fit-to-standard mindset

  • Define master data governance, start with data cleansing and migration early

  • Focus on organizational change management to help users adopt the new way of working

  • Leverage SAP Cloud ALM powered by SAP Best Practices and SAP Activate

  • Use the right knowledgeable resources with experience in the cloud

  • Understand the integration requirements end-to-end to drive holistic implementation

  • Identify analytics and reporting requirements early in the process and manage them


The following list is a summary of the key references and links listed throughout this blog post:


Thank you for reading this far. You can explore more SAP S/4HANA Cloud and SAP Activate resources in SAP Community using tags SAP S/4HANA Cloud and SAP Activate. We encourage you to consider following the communities to stay up to date on recent innovations. Let us know your thoughts in the comments to this blog post or via questions in the SAP Community.


Inside SAP S/4HANA Podcast

As always, I would like to encourage you to subscribe to our new podcast “Inside SAP S/4HANA”. This podcast leverages the unique knowledge and expertise of SAP S/4HANA product experts, partners and customers to address your needs by sharing product insights and project best practice. There is no customer success without product success and project success; we help you get to the next level and make your SAP S/4HANA projects a success. Subscribe now and benefit from the shared knowledge.


openSAP microlearning’s for SAP S/4HANA

Just a couple of months ago, we launched openSAP microlearning’s for SAP S/4HANA as an exciting new learning opportunity. What began with a small batch of 20 videos, has now become a channel with more than 50 microlearning’s that have generated over 20,000 views since then. Today we cover multiple lines of business, like Finance and Manufacturing & Supply Chain, and key technology topics like Master Data Management, Extensibility, User Experience, and Upgrade Management. We are continuously adding new microlearning’s to the SAP S/4HANA channel, so make sure you check them out.


Your voice matters!

If you want to learn more and actively engage with SAP subject matter experts on SAP S/4HANA Cloud, join our SAP S/4HANA Cloud Customer Community. This platform which is available to SAP S/4HANA Cloud customers and partners has a clear mission: deliver an interactive community to engage with one another about best practices and product solutions.


For more information on SAP S/4HANA Cloud, check out the following links:


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