Maximising Value in IT Transformation: An Overview of SAP S/4HANA Carve-Outs

    Divestment transactions have long been considered a strategic move among dynamic businesses looking to maximise their portfolio. Carving out business units is a part of these strategic manoeuvers that include complex processes of separating different aspects within a company. Among these, the efficient and targeted split of IT components is a highly complex process. These include the processes, systems, services, data, infrastructures, or projects. The task becomes even more complicated if it involves the SAP S/4HANA platform. 

    To understand why it’s so complex, let’s first explore what SAP carve-out means. We shall also look at the challenges businesses face while executing carve-out transactions, and the best practices to overcome them.

    Understanding SAP S/4HANA Carve-out

    Unlike a standard SAP project, a carve-out doesn’t involve system installation only. At the basic level, an SAP carve-out is a partial divestiture. When a company sells one of its business units, it needs to separate or “carve out” the unit from its SAP landscape. These are then handed over to the buyer. 

    At the technical level, an SAP carve-out includes two key components—cloning the SAP application (along with the repository, customisations, and system configurations) and migrating the targeted SAP data. The involved parties have two options while executing this process. They can go for a complete clone of the original SAP system followed by deleting all data irrelevant to the sale. Or, they can create an empty clone into which the relevant data is fed. 

    Regardless of the approach adopted, carving out a SAP infrastructure requires the involved parties to deploy landscape transformation software. 

    Maximising the Value of an IT Carve-Out Transaction

    Divestiture is a convoluted process posing unique challenges for the involved parties. The complexity amplifies when it involves sophisticated enterprise resource planning (ERP) systems like SAP S/4HANA, which underpin critical business functions. Companies need to develop a clear strategy and coordinate to successfully mitigate challenges like system split-off, data disentanglement, and ensuring regulatory compliance.

    Let’s go through how businesses can get the most out of their IT transformation projects, such as a SAP carve-out.

    Setting Goals for Both Companies

    Establishing goals is critical to ensure the separating companies don’t lose any greenfield advantage. In addition to setting short-term goals, it is important to work together and focus on mutual transformation and transaction success during the first three years.

    Maintaining Internal and External Communication

    Successful divestitures hinge on effective and transparent communication among all stakeholders and employees involved. Businesses need to create a governance structure involving representatives from different departments. It’s also essential to ensure coordination between these departments. These steps help in clarifying the potential gains and the future trajectory of both businesses.

    On the other hand, keeping all stakeholders informed of the milestones and progress helps pinpoint unforeseen challenges.

    Conducting a Comprehensive Impact Assessment

    One of the key steps to ensure a streamlined SAP carve-out is to conduct a thorough impact assessment before initiating the transaction. Taking a deep dive into the SAP S/4HANA landscape helps define the scope of the transaction. It also helps pinpoint and classify sale-relevant data, and understand data and system dependencies.

    Understanding the existing system architecture ensures a targeted approach. And, it helps with testing scenarios while also minimising the risk of unintended consequences during the carve-out.

    Enabling Efficient Data Migration

    Migrating business data is a crucial step in an SAP carve-out transaction that requires expert expertise and thorough analysis. You need to migrate important data and functionality selectively to speed up critical business operations and achieve faster results.

    To ensure only accurate data is fed into the carved-out system, implementing a rigorous data cleansing strategy is paramount. Organisations should also conduct robust testing and data validation checks before and after the carve-out. Advanced software and methodologies can help organisations that wish to efficiently prioritise, identify, and extract relevant data whilst also maintaining data integrity.

    Cashing in on tools also limits the chances of data discrepancies leading to operational disruptions post-carve-outs. 

    Custom Code Adaptation and Harmonisation

    Business units within a company may share configurations or custom codes in SAP S/4HANA. When carving out a business unit from an existing SAP S/4HANA system, these custom software codes may require adaptation and harmonisation to fit in with the new parent company. A comprehensive review of customisations and a strategic approach to code adaptation are essential to maintain operational continuity while ensuring these codes align with the specific requirements of the separated business.

    Leveraging Carve-Out Consultancy Services

    When it comes to divestment, decision-makers often fail to comprehend the expenses and efforts required to ensure a successful transaction. In addition, many roadblocks may only become apparent during the transaction process. These could be data inconsistencies, regulatory issues, or other similar problems. Anticipating these in the initial stages could help save substantial costs down the road.

    That’s why large-scale organisations looking for a smooth carve-out of their SAP landscape leverage expert carve-out consulting services such as Fission Consulting. High-end services specialising in supporting IT transformations for mergers, acquisitions, and divestitures can guide clients through each step of the project. With top-notch accuracy and efficiency, such services ensure minimal business disruption during and after the carve-out.

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