Financial architecture

At many companies in the financial services sector, it is not unusual for the CFO to also share responsibility for IT. We, a medium-sized consulting company, have also opted for this allocation. Bundling IT responsibilities at the CFO Office has many advantages.

Proper processing of financial data is a core function, but the provision of control and decision-relevant information is becoming increasingly important. The requirements for availability, flexibility, and dynamics are continuously increasing, sometimes in contrast to the existing data quality and data integrity.

Complex, heterogeneous system architectures in which many different applications and diverse technologies and data models are used thus reach their limits. Especially since it is still very common for Microsoft Excel to be used as an “IDV tool” in many core processes as a calculation, data refinement or evaluation tool.

And above all, there is one goal: to significantly reduce administrative costs and thus also IT costs in order to remain competitive and profitable.

SAP S/4HANA Platform

With the new SAP S/4HANA platform SAP has been positioning itself as the solution provider for the aforementioned areas of tension for some time now. Yet the success story of SAP S/4HANA in the financial sector got off to a rather cautious start. In the banking environment in particular, many institutions were relieved to be able to relieve some of the pressure on their budgets after the in some cases considerable investments resulting from IFRS 9 and AnaCredit. Especially since, in addition to core financial functionalities (e.g., FI-CO, GL), significant innovations or cost benefits were missing to make the S/4 business case seem compelling enough.

Another stumbling block was the unwillingness of banks in particular to use S/4 in the cloud, which in itself offers an attractive cost advantage.

In recent months, however, there has been a change in thinking and the financial world has become more and more interested in the new SAP platform. A classic first step in approaching the topic of “S/4 Conversion” is to conduct a preliminary study. On the part ofADWEKO we have the privilege to accompany some of our customers exactly in this early phase. Because what everyone realizes very quickly: S/4 Conversion is not just an upgrade project or the change of a database, but the added value only unfolds when it is understood as a transformation and innovation into a new integrated financial architecture.

From my personal experience of working with insurance companies and banks in the context of an SAP Financial Architecture 2024, I can summarize the following four points as crucial drivers in the direction of SAP S/4HANA:

1. central finance function

The fact that both the sub-ledger for financial instruments and insurance contracts and the general ledger are available on one system as fully integrated components is a key advantage compared to other systems. the old SAP Bank Analyzer architecture.

In addition, complex calculations, scenarios and other functions that are necessary within the framework of the finance function can be used directly by the business department via the fully integrated solution without creating an additional data silo. SAP PaPM solution can be used directly by the business department without creating an additional data silo.

2. integration

The data models, the functions and the processes on the S/4 platform are aligned and fully integrated. In the past, it was quite common to think about the topic of data transformation and integration even in a pure SAP architecture. S/4 makes use of the capabilities of the SAP HANA platform, which includes extensive data management tools. This dramatically reduces the data management effort once the data is available in SAP.

Beyond the finance function, it is necessary to make the results data available to other functions in the company. This is where SAP, with the Financial Services Data Platform (SAP FSDP) In addition, SAP has established a further solution that enables the full use of data across all business processes. And here, too, an “out-of-the-box” integration with SAP’s Finance Suite is available, which considerably reduces the ETL efforts of earlier days in this environment.

3. reduced implementation costs

S/4 has already been on the market for some time. During this time, the “teething troubles” have been eliminated and a robust system has emerged. In recent months, not only has the quality of the software improved, but so has the expertise in the market on how to implement and operate it cost-effectively using “best practices.” Solution providers like ADWEKO have built up a great deal of knowledge and experience in this area, and have developed their own process models, tools and consulting approaches to enable customers to make a cost-effective as well as future-proof switch to S/4.

4. maintenance end 2024* 2027

This is also a key factor in evaluating the switch to S/4 and implementing it in a timely manner. Not so much because the end of maintenance is timely, but rather because investments in the old ERP system can only be transferred to the new S/4 platform at further expense. In addition, new SAP innovations are almost exclusively available on S/4.

* on Feb. 4, 2020, SAP published to extend the maintenance of SAP Business Suite 7 until 2027

Source: https://news.sap.com/germany/2020/02/wartung-s4hana-sap-business-suite-7/

Conclusion

Finally, a personal conclusion: With the SAP S/4HANA platform, SAP has impressively underlined its market leadership in the finance function. With new, innovative products such as FSDP, SAP is also taking into account the fact that it cannot fully offer all functions that are specific to the financial sector. Therefore, it is a smart move to open up to partners/competitors so that they also offer functions or applications on the platform. The extent to which this will be accepted by the market, partners and customers certainly remains to be seen.

In terms of data integration, the SAP S/4HANA platform offers many possibilities. Unlike the financial function, however, SAP is not the undisputed market leader here, but one software manufacturer among many. Especially from the “open source camp” there are promising competing products that are definitely worth evaluating before deciding on an SAP-only strategy.

Comments, remarks, or rebuttals welcome directly as comments to this post. You are also welcome to contact me directly by email: cord.boetger@adweko.com

For almost 20 years, Cord Boetger has been supporting various companies from the financial services sector in IT transformation projects. In the course of his professional career, he has already become familiar with the different interests from the perspective of a bank, from the perspective of a software manufacturer and from the perspective of a consulting company. This experience helps him to work out the ideal balance between the quite different solution approaches for ADWEKO’s customers.

Cord Boetger

ADWEKO Consulting GmbH

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