White paper: How Chief Information Officers can transform their organization through ERP modernization

Note: The following excerpt is from a Harvard Business Review Analytic Services white paper.
 

As organizations confront SAP's deadline to transition from legacy ERP Central Component (ECC) systems to SAP S/4HANA cloud platforms, forward-thinking executives recognize this isn't merely a technical upgrade—it's a strategic inflection point that sets the stage for long-term enterprise growth and innovation. Chief information officers (ClOs) must play a pivotal role in aligning executive leadership, anchoring technical decisions in business strategy, and mitigating risks to reputation and compliance throughout the multiyear journey.

"Most organizations view the migration to SAP S/4HANA as an IT responsibility simply because SAP mandates it," says Marcus Frantz, chief digital transformation officer and executive board member at Zumtobel Group AG, an international lighting manufacturer headquartered in Dornbirn, Austria. "Instead, we reframed the migration as the cornerstone of our overall digital transformation strategy—a catalyst for business evolution rather than a technical requirement."

Companies in the top 20% of performance across key metrics not only achieve a high percentage of cloud ERP adoption but have also implemented strategic actions to further modernize their technology infrastructure and applications, according to a 2023 study by Aberdeen Group pIc, a consultancy based in Edinburgh. This modernization results in a host of benefits, including better visibility of inventory (68%), the ability to access and tailor reports in self-service capability (66%), and the expanding use of business intelligence (60%).  

Success demands a strategic, organization-wide approach to modernization that balances technical requirements and business objectives. "If you can operate your core as a standard and predictable platform, then you can focus on more innovation," says Kiran Varanasi, director, technology transformation, for Motiva Enterprises ILC, a major oil refiner headquartered in Houston. "And that's one of the fundamental guiding principles of our SAPS/AHANA migration -prioritize standardization in areas that don't provide a competitive advantage, which allows us to invest more in innovation that does create business value."

Effective change management is crucial for successful transformations, whether implementing SAP S/HANA directly or through RISE with SAP's business transformation-as-a-service model, particularly when addressing resistance to new ways of working. "In finance, the mindset is often 'Never change a running system," says Gerd Kohlgruber, CEO of Tycom Digital Services GmbH, an IT services and consulting firm based in Schwaz, Austria. Rather than forcing adoption, Kohlgruber's team cultivated internal champions and developed specific rationales for each department to demonstrate how the new capabilities in SAP S/HANA addressed their unique pain points.

This report examines how organizations are successfully navigating from ECC to SAP S/HANA as a strategic business initiative rather than a technical migration. It reveals how high-performing organizations are reframing this transition, selecting optimal migration approaches, building cross-functional alignment, mitigating business risks, managing organizational change, and leveraging the transformation as a foundation for long-term innovation and competitive advantage. The experiences of these organizations provide a valuable roadmap for executives facing this critical business transformation.