If you have acquired or purchased a business running SAP ECC 6.0 or S/4 HANA ERP and intend to carve out or divest the ...
If you have acquired or purchased a business running SAP ECC 6.0 or S/4 HANA ERP and intend to carve out or divest the company from it's parent group, then you'll need to understand how to split the current SAP ERP system from the mothership.
The process of performing a SAP divestment or SAP carve out project is multifaceted and you'll need to make various considerations of SAP divestiture before undertaking the project which we'll explore in this independent guide.
When you're starting an SAP divestment process, it's important to evaluate where you're starting from.
The first thing to understand is which SAP ERP product are you currently running?
SAP has several ERP products, some of which are approaching the end of support such as SAP ECC 6.0 and others which are considered to be their next generation products like S/4 HANA.
You can read our guides to various SAP ERP products below to find out more about these specific solutions to prepare for your SAP divestiture:
You'll also need to understand the architecture of the SAP system you are acquiring.
Is the SAP ERP a group wide system used by all business units and subsidiaries in the umbrella? Is the company you are acquiring the only business unit or entity on the platform?
If your instance of S/4 HANA or ECC 6.0 is shared by various other entities which will stay put, then you'll need to go through the process of exporting only the relevant data and possibly configuration, whilst leaving the other business units data intact for your SAP divestiture.
On the other hand, if your SAP ERP is running only the company you're acquiring then the task of migrating can be very simple, faster and cheaper.
When carving out or divesting a company running SAP ERP, you may want to, or need to use the time and money to make various optimisations and increase your return on investment and optimise costs in the long run.
If your acquisition is running an older SAP enterprise resource planning system such as ECC 6.0, then it may be more cost efficient to take the oppurtunity to upgrade it to S/4 HANA since ECC is approaching end of life - and otherwise you'll need to pay twice the consulting fees by 2030.
Also, if your target company is considerably smaller than the company you acquired it from, or if you're combining and merging several companies with a different business model or trajectory, then your current SAP ERP configuration may not be setup to cope with the target business activities and operations.
You may want to take this time to refresh and reset your SAP ERP and trim it to size, or possibly expand it or tailor it to the new business environment of your carve out.
Taking a lift and shift approach to your SAP carve out and divestiture is the cheapest and fastest approach to the process. In this scenario, you are simply taking the SAP ERP that your company was running and moving it to the new target entity with as little change as possible, save for that which is neccesary to complete a compliant carve-out such as data migration.
For example, if you are running SAP ECC 6.0 in the current parent company, you would simply extract the relevant data for the target company and establish a new ECC 6.0 system and import the data and relevant configuration.
Whilst this is the fastest and cheapest method, you may inherit a lot of bad data, bad processes and inefficiencies. If you intend to stay with SAP for the long term, you'll also need to reinvest in an upgrade to SAP S/4 HANA by 2030, when ECC 6.0 becomes end of life.
But sometimes, needs must.
SAP S/4 HANA is the next generation ERP platform from SAP and is the product where SAP is putting it's investment and time. If you are acquiring a company running ECC 6.0 then providing you have sufficient time and that SAP is your chosen ERP platform going forwards, then you should probably make this your destination.
Read our guide to S/4 HANA:
When it comes to migrating to S/4 HANA from ECC 6.0 there are a few approaches:
A greenfield implementation of S/4 HANA is probably the best and most frequently selected route for carve outs in the SAP world. This approach is where you essentially implement SAP S/4 HANA from scratch for your divested business entity.
This gives you the oppurtunity to tailor and configure S/4 HANA to the specific needs of your SAP divestment, which is perfect if it was running a group wide template or instance of S/4 or ECC6.
The greenfield approach enables you to remove a lot of the bloat and inefficiency from your system, improving business productivity, end user adoption and optimising ROI and total cost of ownership.
A brownfield implementation of S/4 HANA is perfect if you want to migrate the existing processes and configuration from the S/4 HANA or ECC 6.0 system that your parent company was running.
'Bluefield' is a relatively new approach to migrating from ECC 6.0 or S/4 HANA in your acquired entity to a new S/4 HANA platform. This is the process of selectively migrating processes, data and configuration, as well as implementing some fresh processes and optimisations along the way. This is perfect if you want the best of both worlds when implementing your new SAP ERP divestment platform.
Performing an SAP carve out isn't a task you should undertake alone.
Its highly recommended that you enlist the help of an SAP partner that has the right skills and tools available for an SAP carve-out and ideally one that is fit to support your company as its SAP or IT partner in the future.
The right SAP partner can help you to understand the pros and cons of each implementation approach, target state, costs and help you to negotiate new licensing contracts for your SAP carve-out.
When performing an SAP divestment or carve out, you'll need to consider the implications and cost of your SAP software agreements.
Your acquired entity will probably have its own SAP licensing agreement which may not be suitable for the new legal structure of your target company and setup.
You'll need to understand the specific terms of the licensing agreement with SAP for the acquired company and in most cases, you will need to negotiate a new agreement so that your divested company can continue to use SAP moving forwards.
If you're looking to take the oppurtunity to move to a next generation platform such as SAP S/4 HANA, then you'll also need to understand how the cost of your SAP licenses will cost in the future.
Finally, you'll need to ensure that you have the rights to continue to use and run the existing SAP implementation whilst you replicate or reconfigure your new system and you may need to purchase the ability to do so, also referred to as a SAP TSA or transitional software agreement which is a timebound permission to do this.
In our independent guide to SAP S/4 HANA Private Cloud (PCE), we explore the service offering, pros and cons, costs and more.
In this article we discuss the options that current SAP ECC 6.0 & R/3 customers as the product will go end of life officially in 2030.
Read our independent guide to SAP vs Workday, the pros, cons and functionality. Understand the difference between S/4, SuccessFactors and Workday.
In our independent guide to SAP for manufacturing, we discuss the various ERP systems available in the SAP portfolio, the costs, benefits and risks.
How to prepare for and execute SAP ERP implementation properly, including best practices, frequently asked questions and case studies.
We explore SAP S/4 HANA Public Cloud in our independent guide, covering the costs, functionality and suitability of the solution in various different...
