S/4HANA New Asset Accounting (Part 6): Should you Migrate in ECC?

We’re getting ready to finish up this blog series on New Asset Accounting and we need a closing topic. When I look back on the feedback that we’ve received on these blogs and from talking to customers about S/4HANA in general, there is quite a bit of concern or hesitancy from customers regarding their plans to move off of ECC.  That makes the migration to New Asset Accounting within ECC a strong option for that segment of the SAP customer base…  and seems like an appropriate closing blog as well!

Blog Series:
S/4HANA New Asset Accounting (Part 1): Introduction
S/4HANA New Asset Accounting (Part 2): History of Parallel Valuation
S/4HANA New Asset Accounting (Part 3): SAP’s Asset Parallel Valuation Solution FIN_AA_PARALLEL_VAL
S/4HANA New Asset Accounting (Part 4): Functional Improvements
S/4HANA New Asset Accounting (Part 5): Technical Changes
S/4HANA New Asset Accounting (Part 6): Should you Migrate in ECC?

S/4HANA Adoption Rates

As mentioned in the previous blogs (3 and 5 in particular), it is possible to get the benefits of New Asset Accounting without first transitioning from ECC to S/4HANA. There are other benefits in S/4HANA particularly now that Simple Finance and the Universal Journal et al. are the standard solution (as of S4HANA 1503) which makes it important for customers to consider waiting on New Asset Accounting until they are ready for a full S/4HANA implementation.  Other items to consider are that there are some functional differences between the ECC and S/4HANA versions.  For instance, the new depreciation posting program (Blog: S/4HANA New Asset Accounting: New Depreciation Posting Program) is only available on the S/4HANA version.  For the most part, anything related to ACDOCA is only available on S/4HANA.  But, keep in mind that the purpose and origin of New Asset Accounting was all about parallel valuation and is the fundamental reason why someone should consider migrating to it even if they’re on ECC.

Here we are midway through 2019 and the pace of S/4HANA projects has been rather tepid.  From our experience at Serio Consulting, the initial adoption of S/4HANA was quite high and we were able to work on several projects within the first 3 years of its release.  Normally, after an opening period like that, the adoption rates would pick up significantly but that has not been the case with S/4HANA.  Why?  I won’t go too far down that rabbit hole because it’s something that the analysts at Diginomica and others have covered extensively, but it’s clear that customers are going to wait.  SAP has announced that 2025 is the end of maintenance for ECC but they’ve previously extended support for older releases with a corresponding increase in the maintenance fees.  If that history repeats, we could see customers still using ECC into 2027 or later.

With so many customers pushing their S/4HANA adoption plans further out, it’s reasonable to assess the case for activating New Asset Accounting while on ECC.  First, there’s a key question that has to be answered:  “Why should I spend time and money to implement this now when it could easily be folded into a larger project that we’re going to do in X years?”.  There are a few reasons that jump out at me.

A Better Solution

First, I can not overstate how much more technically solid New Asset Accounting is compared to the parallel valuation solution in Classic FI-AA.  New Asset Accounting is far more stable, reliable, and consistent in it’s processing.  This makes it far easier to support because we have less errors to deal with… errors that have a real time+money impact as well as business interruptions for those still using Classic FI-AA.

The first example involves the periodic posting run (ASKBN).  You would not believe how many times we’ve had to help customers fix failed periodic posting runs that were holding up month-end close.  Some are what I would consider relatively easy fixes but they’re still undocumented solutions that some customers can’t work out on their own.  There are other situations that are much more intricate.  These are usually caused when the customer’s support resources start to directly update some tables just to get the job to finish.  The programs is complete… all good!  What they don’t realize is that they have messed up the underlying tables that the program works off of.  Another month passes by and when the program is run again for the next month end close, it errors out with even more difficult errors.  Personally, I’m a bit tired of working with these issues.  New Asset Accounting no longer needs the periodic posting program in order to properly report the asset values into the GL so that’s less research, bug resolution, ticket processing, etc. that customer’s have to spin their wheels on.

Another example is the failed V2 updates.  These are a significant pain to deal with.  The first time you work with V1, V2, and V3 updates… it’s pretty neat and certainly an informative experience regarding the underlying posting process in SAP Financials.  Fixing failed updates has it’s own series of solutions, all of which are very advanced.  But it is an annoyance when it starts to become a monthly issue.  From the business side, the update failures start to erode the customer’s trust in the system.  After all, if you say the document is posted and issue a document number… but then find out that it actually failed…  well, that’s not very comforting.

Fixing either of these problems just adds to the month end process in terms of both time and headache/stress.  This puts added stress on the accounting group but mostly on the SAP Support Group.  If they aren’t experienced in these matters… and considering that most customers just use a FICO Generalist to handle fixed assets… then the time to fix them is far longer than it should be, and the fixes don’t work consistently.  The business users start to not trust the system, not like it, and can even start to not rely on it.  Don’t believe me?  How many financial departments get fed up with their IT solution, extract the base data that they need and develop their own datamart?  Tons.

Parallel Valuation

Another reason to consider migrating to New Asset Accounting now in ECC… and it’s the most fundamental reason to consider… is based on your overall requirements for parallel valuation.  We’ve worked with customers where their requirements for parallel valuation in general, and for fixed assets in particular, just weren’t that stringent.  However, there are other customers where it’s a much bigger deal.  The importance that they place on parallel valuation, the complexity of their asset processes (particularly around the initial capitalization and certain inter-company transfers), and their reporting requirements end up driving a much stricter level of tolerances around the resulting values.  Of course, this is most likely a spectrum where there are other customers that are somewhere in between these two extremes.  Either way, now that the reporting and accounting requirements regarding parallel valuation have to be followed, it doesn’t make sense to use the solution that was designed with the limitations in Classic FI-AA.  Derived depreciation areas were never intended to be burdened with tracking real values and then posting them to the GL.  The solution worked given what SAP had to work with, but it was kinda thrown together and then enhanced as quickly as possible.  That’s fine for a short term solution but not one that you want to live with while you wait for your company to upgrade to S/4HANA.

How Long Can You Hold Out?

And just in case you might be (over)-buying SAP’s claims about the simplicity of it’s software, implementing S/4HANA still takes about the same amount of time as ECC.  Ex: If it took a customer 1 year to implement ECC back in 2009 for their North American companies and then another 2 years to roll it out globally, it will most likely take the same amount of time to newly implement S/4HANA.  Can a 12 month ECC implementation be done in 9 for S/4HANA?  I don’t think so.  Yes, SAP’s Activate methodology is an improvement over previous attempts to deliver working solutions in the Business Suite.  But ERP implementations are about people first, process second, and the IT solution a distant third.  It is going to take just as much time for the logistics and finance groups to review, tweak, and communicate their policies on — for example — invoice verification.  There are so many ‘collisions’ between finance and HR, finance and sales, production and sales, etc. that an enterprise IT project such as S/4HANA invariably has to review and optimize every process.  News flash: that’s a hard thing to do!  A vendor can deliver a pre-configured solution but not every department or line of business will agree with it.  There is still so much negotiation that goes on between different groups in an SAP project so the implementation times aren’t that much faster.  Given all that, the key question then becomes, how long can you hold out on a solution with so many technical flaws and functional work-arounds?  SAP has moved on… so should its customer base.

Greenfield or Brownfield S/4HANA Transition

Lastly, if you are going to upgrade to S/4HANA… and by this I mean a true technical upgrade (i.e., brownfield) of your existing SAP landscape… then you have to migrate from Classic FI-AA to New Asset Accounting in ECC first.  It’s a prerequisite that has to be done in the system prior to converting the entire system to S/4HANA (On-Premise).  This mirrors the requirement in the GL as well.  If your S/4HANA adoption plans are based around an upgrade and not a new implementation (i.e., greenfield) then you might as well migrate to New Asset Accounting sooner rather than later.

The Conversion Process

What does it take to convert to New Asset Accounting in ECC?

SAP does a good job of delivering a conversion guide for converting a system for S/4HANA.  Below is an overview of the basic phases and tools that SAP recommends for the S/4HANA system conversion.