ASUG Research and smartShift: Balancing Custom Code Essentials with the Clean Core Pursuit

I’m Marissa Gilbert, Research Director here at ASUG. Welcome to today’s webcast, balancing custom code essentials with the clean core pursuit. Before we jump in, I have a few webcast reminders for you. As always, today’s webcast is being recorded and all of you will receive an email with a link to the recording after we’re done today. If you have any questions during this webcast, please type them into the Q&A box and Arndt and I will get to them towards the end of the session. And as time permits, we’ll get to as many of those as we can, of course. And of course, as the Research Director, I must ask you if you will take our post-event survey when we are all finished here. We’d love to hear your feedback on today’s session.

All right. Without further ado, I’m thrilled to be joined here with Arndt Hoffman, Chief Customer Officer at smartShift. Welcome, Arndt. Would you share a little bit about yourself here with our audience today?

Meet Our Expert: Arndt Hoffmann from smartShift

I’m Chief Customer Officer of smartShift, part of the smartShift team since we started in 2002 and since then have been in multiple roles and at the company and overall in the SAP space now since I just was counting close to 29 years. So the SAP Mothership doesn’t let you go once you’re in. 

Since 2002, we have been helping customers to actually transform and modernize their SAP systems. We have a strong focus on SAP custom applications and custom code and in comparison to others, we also when we talk about modernizing and optimizing code, we are not talking about manual labor, but we are utilizing our own intelligent automation platform, patented, which we have built over the past 20 years. 

So we have been helping customers mostly in the last couple of years with HANA and S/4HANA transformations, helping them to get to this new digital core, but also get it going a step further, optimizing their systems, making them more performant, more secure and also bringing them closer to the so-called SAP clean core.

Utilizing automation actually benefits our customers in speed. Usually, we transform SAP systems in a very fast time frame, three to five weeks. We take a lot of risk off these SAP transformation programs. We also give our customers the option to utilize their investments, what they made in customizations and leverage them out in their future SAP. 

We are now in the second year of this research which we conduct together. Our interest at smartShift is definitely to understand what customers are thinking about custom code, how they think about transforming this custom code to a more modern platform, and especially also what are the obstacles and challenges they have moving their customizations. That is why we are doing this research and I think we have some interesting results to share today and in the next webinars.

Key Findings from the Research Study

We conducted this research in January and February of this year among 174 ASUG members whose organizations are building and running custom ABAP code or are involved in custom code processes or planning their move to SAP S/4HANA. So everyone’s in that mindset and in this space that we dug into on custom code and migration, but really exciting too because now we have some of that trending data and as Arndt alluded, we are actually going to be diving into three separate webcasts.

Striking the Balance: Custom Code vs. Clean Core

Custom code is a business necessity for almost all SAP customers with reliance and challenges increasing when migrating custom code to SAP S/4HANA, balancing clean core ideals with business realities is a top priority. Future movers to SAP S/4HANA plan to use automation but underestimate code migration challenges. And our final key takeaway from the research is that the key to optimizing custom code migrations is taking the time to bridge knowledge gaps, focus on change management and working with the right people. 

But let’s dig into our conversation today. I am going to be sharing the research and Arndt is really going to be sharing his key insights and expert POVs. OK. So I think we wanted to set the stage a little bit here. We’ve been talking a lot about this in general, the ASUG, where everyone is on their S/4HANA status and we’ve sort of dubbed this year 20 S/4, right. 

Everyone sort of has S/4 on their minds. 42% of our survey respondents are fully or partially migrated, though 57% will be moving in the next seven months to more than two years from now. So we know from past research that ASUG has done that SAP customers are making this move to S/4HANA, mostly due to the end of mainstream maintenance, that’s our 2027 deadline. But also due to the enhanced functionality, the performance of S/4HANA, which leads to increased productivity and process standardization, which can improve consistency, quality and predictability. Arndt, what do you think about these numbers? Do these seem on pace for you or do they cause concern? What’s your take?

Arndt Hoffmann’s Insights on Migration

You can read them one way or the other because if I do the math, 73 to 77% have not yet moved to S/4, right. If you take that number and it is, we are in 2024, right. The S/4HANA has been available since 2015. So we are nine years into the market and for that, it is pretty astonishing. I still remember our first S/4HANA project in 2015 with the first release that was for a German customer called Doehler. They produce juice ingredients and stuff like that. And they wanted to implement S/4HANA in 2015. I remember that for a company which also has logistics functionalities, it was a pretty hard challenge, right, because S/4HANA was not yet very mature at this point in time. 

Since then, a lot has changed. We are now with the 2023 release of S/4. A lot of functionality has been added, a lot of stability has been added to the system and also from our topic, custom code, a lot of things have changed. 

BTP is there, they have introduced the ABAP cloud platforms, Steampunk, embedded Steampunk, things like that. This whole extensibility concept for clean core. So SAP has done their job and laid a good foundation for a technology architecture. Also when it comes to how to do customizations in the system in a modern and, they call it clean core manner. So therefore, yeah, a way to go, right. Still not many there. So from a platform perspective, I would say the system is absolutely ready to move.

Challenges in S/4HANA Migration

Digging in or sticking a little bit on this topic of S/4, no major technology upgrade is without its challenges. Of course, as you’ve said Arndt, you know it’s definitely improved and gotten better over time as we’re all learning in the process. But the top migration challenges experienced as part of the move to S/4 are customizations within old instances. This is the number one risk respondents’ organizations experience when they’re migrating, followed by a lack of clear process documentation, the amount of time it will take to complete the project, and the support needed when diverting the team from their primary responsibilities. 

Arndt, are you surprised here that too many customizations is the top challenge that is experienced by organizations? Well, we have actually seen, I think we have done more than 3300 SAP transformation projects. So we have seen thousands of SAP systems worldwide and help customers in many, many projects. And so it is definitely not surprising here because if you look at how a standard or normal SAP system looks, right, all these systems have been built over many years. So we have seen systems even from the 1990s. I think the average system age is around 15 years old. 

For an ECC system they also have done all these projects, we have nice benchmarks. The average SAP system holds 23,000 custom customer objects, 3+ million lines of code of customizations. The change impact of moving to HANA and S/4HANA is massive. You have to correct thousands of issues to make your code work and be compliant for HANA and S/4HANA, and also over the years, all customers have accumulated a lot of technical debt in the system. 

There’s security problems, performance problems, lack of standardizations, naming conventions, etc., in the code. All that adds to this challenge of custom code and on top what comes on top. SAP has always been super generous to the developer community. So there’s no other standard software solution where you can pretty much utilize all core tables and core code in the way you want. 

That leads to these monolithic SAP systems with custom code which is intermingled with standard code so that these systems are hard to operate right. And we all know that a lot of SAP systems are way behind release cycles. They are still on ECC, not moved to S/4. And that is for good reason, because of customizations written in the way they were written at the point of time. And yeah, so custom code is on the critical path of all transformations and you better really think of and plan how to address that when you are moving to S/4. It’s critical. Yeah, absolutely. And I think too though you know it’s clear that there’s lots of challenges. But the fact I think that the custom code is really standing out shows how important it is to organizations. Like it is, it’s such a big challenge because it’s so important to them.

Custom Code: A Business Necessity

So while custom code has lots of challenges, we’ve kind of already said that 95% of organizations surveyed build and run ABAP code to extend their SAP software application. So you’ve already said it through your customers, you’ve seen it, it’s true. Here’s the data that supports it and in our research it really demonstrates that SAP customers cannot walk away from their custom code. It’s central to supporting their business. You know it’s really not nice to have here. It’s an essential part of making systems work for their organization. To you Arndt, you know how you see the responses here on why custom code is required at their organization. I think these are pretty interesting results even when you look at the trends here right. It looks like the importance even grows here. You have to look at each category and question yourself. Do I really need custom code and customizations for that right? So I would for example question, here’s a lot, 48% say they need it for reporting and analytics and how to connect systems. 

You could question whether there are better technologies for doing that. There is a lot of stuff coming with BTP which you could use, but then there’s the other important categories. It is still SAP is a standard software and SAP is not covering all industry-specific requirements, right. So therefore 64% here, industry specifics also up by 8% from 2023. That’s an important factor why you need custom code, other stuff which sticks out here even if it isn’t the highest number, but you see here still 28% to be able to innovate by 22% to have a competitive advantage also rising, right. So there’s important stuff in this custom code and I think that’s the magic. Custom code gives you a lot of challenges, but the magic is also there’s good stuff I have invested in that I’ve paid millions of dollars to build these applications. So better care about them and modernize them. Yeah, absolutely. And I think you’re spot on. You have to, you know, it’s just like with challenges. Where do you need it? You really have to identify it. And are there better tools at this point to really be able to mitigate some of these other challenges that organizations can face?

Future of Custom Code in S/4HANA Migrations

So of course, limiting custom code might be the goal, but it might not be something that is achievable in some cases. But as organizations progress in their S/4HANA journeys, limiting custom code is recognized as a best practice. The reality is that customizations and unsupported business requirements are certainly going to persist and endure here. What’s your take on this Arndt, do you think that they’re going to get closer to their goals or is it becoming more and more challenging? Well, I think that is exactly the dilemma we were talking about. On the one hand, they impose a burden on you. They limit your flexibility in the system, your upgrade availability in systems. So you want to reduce this custom code footprint. On the other hand you want to retain them. The question here is we are not going to touch too much on that today. But it is also not always about less custom code. It is just having custom code and custom processes in a better way. And then we come to these new concepts which are part of this clean core idea of having a cloud-ready system with extensibilities and customizations in the system which are upgrade ready and upgrade stable, right. That is the biggest, biggest pain here. You can have customizations if they don’t impose all these challenges and that means you write them in a proper way. You follow certain cloud practices in cloud syntax, encoding them, utilizing just available APIs from SAP, Whitelisted APIs not making direct table calls and stuff like that. So therefore yes, limiting them, but also doing customizations in the right way. And yeah, that’s what we are focusing on, helping customers to take old customizations, modernize them towards these new principles utilizing automation and not manual. That’s our part.

Questions and Answers

Perfect. So here is our last slide of data and then we will have time for some questions. So if you do have any questions, make sure you’re putting those in the Q&A box on your screen. So this is sort of again sort of digging at home here as organizations move forward and their S/4HANA migrations, the bulk of respondents will continue to use custom code. It’s not going anywhere. We’ve been talking about that, but they’re going to be using it to a smaller extent and this outweighs moves to modern extensibility concepts as well. Does this feel aligned with what you’re seeing as well with a lot of your customers? Absolutely. As part of my role, I’ve been at many user group meetings lately. Last year, I think it was around 2020 or so. And I’m seeing a big change in the awareness around these modern principles, around clean core and extensibility concepts. And I am also especially getting closer to 2027, the clean core. This Greenfield idea has, from my perspective, gone away a little, right, because it’s now getting closer to 2027 times not there to do big science projects and so customers really think about it. Yes, I need the processes, how I have built and customized them before. But they also think about how I can modernize them so that they don’t impose these challenges on me and in the future. And so the awareness for clean cores is rising. Customers are looking into these new principles. As I said they are also thought through by SAP and so that pretty much reflects also my discussions I’m having in the market. Yep, absolutely.

Clean Core Concept

So we do have a few questions in here, but I just want to throw up this next slide here. This is a rapid code analysis from smartShift. So if you can type in that QR or the URL old school if you want or you can scan the QR code and that will take it to you as well. And this is a health check that’s offered by smartShift. So do check that out. Then let’s have a couple of questions that came in. When smartShift analyzes a customer’s custom code, does it just provide the customer a huge list that the customer must go through and analyze again?

smartShift is definitely not another analysis tool. smartShift is all about automated transformation. So we are really changing custom codes, utilizing our platform and utilizing transformation algorithms at a big scale. I’ll just give you an example. We are working for Procter and Gamble helping them to actually move their supply chain system to S/4 and for them what we did utilizing this, this platform we actually changed 1.3 million or we fixed 1.3 million issues in their coding automatically. So, it is real automation at the highest scale. We did that in three to five weeks at an error rate of having roundabout 20 tickets and testing for 1.3 million changes. And as part of these 1.3 million changes we corrected all HANA compliance, S/4 HANA compliance. We made the code more performant, more secure, brought them to the latest ABAP standards and stuff like that. So therefore, definitely smartShift is about transformation, automation and not giving you another huge set of Excel files which you have to take and yeah, fix yourself.

Difference in Analysis Approaches

Matt had another question. He said in ECC, we have already gone through the process of identifying our custom code analysts using SAP CCLM process and usage data. We have found that the process is not always finding everything deep in the code. How is smartShift different when it comes to analyzing custom code? 

Well, on the one hand, CCLM, the standard analysis tools from SAP are good. So there’s not a question of being better in the analysis or worse in analysis. smartShift analysis is always transformation-oriented. Therefore, our analysis is very deep. If we are going to change 1.3 million lines of code or issues in a Procter & Gamble supply chain system, we better know what we do. Our analysis is also super deep. We understand dependencies, data flow, CRUD operations, etc. Our analysis is always targeted towards what can I do with automation, how to build a transformation roadmap based on automation. CCLM is good. We also utilize a lot of the SAP input. We need to understand simplification items and the usage data from SAP system, but we always try to enhance that. If we use usage data to retire code, we also take into consideration all this knowledge about dependencies to ensure we don’t delete anything from the system which we shouldn’t. So nothing is good or bad, it’s just different and always transformation-oriented.

Conclusion

Thank you, Arndt, for the insightful discussion. We have two more webcasts coming up in this series on May 28th and June 18th, where we will delve deeper into success stories and strategic roles for SAP migration barriers. We look forward to seeing you all again.