Does SAP S/4HANA Actually Have a Simplified Data Model?
What this Article Covers
- Importance of Verifying the Simplified Data Model for SAP Run Simple
- Different Accounting Silos?
- S/4HANA’s Data Model for SAP Run Simple
- Simplified Data Model = Faster Reconciliation?
- Understanding the Performance of the Columnar Database
- Why Faster Hardware is Actually What Will Lead to Faster Reconciliation
SAP has been very consistent in pointing to the benefits of S/4HANA’s simplified data model and as part of its SAP Run Simple marketing program.
However, after listening to this sometimes, and reading on quite a bit of SAP marketing literature, I began to question this assertion. When watching a presentation by SAP, or reading through documents related to S/4HANA and HANA generally, the proposed benefits “come at you” very fast. It takes some time to sit down and look at each of the proposals individually to determine if they are either true or likely to be true.
Importance of Verifying the Simplified Data Model for SAP Run Simple
Understanding the concept of SAP’s proposal regarding a simplified data model is important as it is used as a foundation on which to build an argument for other benefits, one of the most important beings that overall S/4HANA is more simple to use. However, the one I will use in this article is the proposed benefits to financial reconciliation.
The SAP slide below shows this statement very clearly regarding S/4HANA having a simplified data model for SAP Run Simple.
Jens Kruger from SAP has a video on S/4HANA, and he states that.
“S/4HANA offers a simplified data model.”
“All data is available without reconciliation, leaving financial departments to strategic tasks instead of just doing administrative functions. How can this be done? This is based upon a simplified data model. The simplified data model enables insights into financials data. “
He then goes on to show this slide:
He says that the silos, which are Financial Accounting Documents, Controlling Documents and Profitability Documents.
He then goes on to say:
“All of those silos required a reconciliation in order to get a consistent view on the data. And therefore getting instant insight into data across all silos is not possible. Therefore, the power of SAP HANA underneath the universal journal entry creates a single source of truth, and there is no reconciliation needed.”
“Under a traditional close, it is consists of a lot of steps. They must be performed in a batch fashion since they are just running too long. With the SAP HANA platform we are now able to reduce this.”
And Jen also provides specific speed improvements in the next slide.
Here is where the proposed speed improvements are declared by SAP. This is interesting because I had never heard that reconciliation was negatively impacting so many global FI/CO implementations, which is what Jens Kruger is proposing.
Different Accounting Silos?
Jens identification of Financial Accounting Documents, Controlling Documents and Profitability Documents as separate silos are strange. These are all integrated transactions within the FI/CO module currently in ECC. However, his point seems to be that reconciliation times in ECC presently make them break into different silos.
S/4HANA’s Data Model
Let us clarify what a data model is before we go through to validate the claim regarding its simplification.
A data model is the set of tables and the relationship between tables that is used — in this case — for the application to call upon. I have included just a small part of the data model in SAP ECC related to Work Centers, the Bill of Materials and the Production Version.
A simplified data model would mean that the tables and the relationships, as well as the primary versus secondary or supporting tables, are simplified. However, it can only partially say to be true of HANA. Here is why:
- Columnar Tables: HANA uses columnar tables, which means that every table is a single column. This of course significantly increases the number of tables that are necessary, and because the previous tables need to be emulated for people that need to see and work with the data, the data model is not simplified.
- Relationships Between the Tables: SAP’s point is probably that they cleaned up the relationships, and having reviewed many previous SAP tables and modeled the tables in ERD diagrams, I can say that many of the tables and the relationships between the tables were indeed convoluted in their design. When software development happens, the idea is that all the tables are laid out ahead of time, but the reality is that often the tables are added in a way that is more holistic, and much of ECC was written before more advanced data modeling tools were available.
- Fewer Indices and Aggregation Tables: There are fewer database speeding mechanisms needed like aggregates and indices, but this is not the actual data model. SAP may be using a shorthand here that when they refer to the term “data model” they mean all of the tables used in the database. I think that could be a fair point. It is true that columnar databases tend to need fewer supporting tables. However, HANA still uses aggregates, although they call it something else. In fact, it is right on the SAP HANA website. Aggregates are beneficial because they are precomputed combinations that are always reused.
What should be apparent from the bullet points above is that the “data model” simplification that is so breezily referred to by SAP is not definitive in any shape or form. With a columnar database, some areas become more simple, other areas more involved. Overall, there are also complexities involved with a new database, so I would predict that HANA will be more complicated than a company’s previous database installation. That is the issue with new products, and the more new, the more unpredictable outcomes. I cover these type of risk interpretation topics in the book Rethinking Enterprise Software Risk: Controlling the Main Risk Factors on IT Projects. One of the issues I bring up in the book is if the software vendor has too much influence over the consulting company, the outcome can be highly risky projects being proposed.
Simplified Data Model = Faster Reconciliation as Part of SAP Run Simple
Is it the simplified data model that speeds reconciliation and therefore creates a single version of the truth? As I just discussed, using a columnar database uses fewer assisting or secondary tables, But it also creates a lot more tables, with many more relationships, in addition to having to generate the views of the previous tables of ECC. As it is illogical to work with just a bunch of columnar tables. If you go into ECC on HANA, you will see all the same tables that you have seen before, because they are emulated by HANA — so how much this is simpler depends upon your point of view.
Understanding the Performance of the Columnar Database
Secondly, a columnar database like HANA will underperform a standard row based (aka relational database) in transaction processing — and this includes year end close (all other things being equal).
When HANA is proposed to be universally virtuous in performance in all situations, remember that a columnar database only outperforms relational databases for analytical applications. However S/4HANA is intended to sit only on HANA (although I see this exclusivity changing in the future), but HANA uses much more expensive and higher speed hardware, so the increase in speed, in this apparent non-analytical application, will come from more costly and higher speed hardware only.
Therefore, the statement that HANA’s “simplified data model” will lead to faster reconciliation is not true.
Why Faster Hardware is Actually What Will Lead to Faster Reconciliation
However, if we give it some consideration, this faster settlement will be equally available a company that would simply port its current ECC system to faster hardware.
Multiple Versions of the Truth?
It seems that SAP is changing the previous story on ECC to make points for S/4HANA. I don’t think that SAP would be talking about how terribly slow its reconciliation and period closing is in ECC if they were not trying to sell S/4HANA (call me cynical). If this is all true about reconciliation latency, then the question is do other software vendors face this issue.
To find out I reached out to two financials vendors, Intacct and FinancialForce, two accomplished vendors in the area of financial applications, to determine if they have similar reconciliation problems. Neither of them uses an in-memory database. Neither of them seemed to have heard of the problems with reconciliation and period closing that is described by SAP. When I spoke to FinancialForce they had the following to say about reconciliation and period closing in their system:
“You need to do all the things to setup the year end, and we have an automated button that performs all of the reconciliation. The a button is hit and the journals are created for you. This is not even a batch job process — in that it may take 30 minutes to 2 hours, with 2 hours being on the very long side.”
Therefore, what amounts to a quarterly or yearly process takes in most cases roughly 45 minutes. So if we take SAP’s proposal, S/4HANA will cause save 420 hours on the quarterly close. If that is the number of hours saved, how many total hours are present ECC systems taking exactly? That just sounds terrible.
Something which is not being adequately explained by SAP is that there are things to check before a reconciliation is performed.
Reconciliation Speed Issues?
ECC’s hardware, not the data model of ECC versus S/4HANA is what is attributed to reconciliation speed changes. But secondly, two financial vendors are unaware of the batch problems in their systems that SAP has attributed to ECC.
Here are some important things to consider when interpreting the message of reconciliation and period closing as described by SAP:
- It should be remembered quarterly closing is only a small portion of the activities performed within FI/CO.
- Finance is not an area which requires a lot of computing power, and SAP is stretching here to find something that can help sell S/4 Simple Finance.
The information provided by SAP on this topic is convoluted, and once broken down into its constituent pieces it does not add up. Jens Kruger of SAP is commingling several different topics to make a case for S/4HANA Simple Finance, but the items that he attributes to HANA are not related to what he calls out. All of this is part of the attempt to fit into the SAP Run Simple marketing program. However, SAP Run Simple has little to do with reality. SAP Run Simple is nothing more than a marketing construct.
There is also appears to be the exaggeration on the part of SAP as to the impact of quarterly closes. This is not the first time I have seen this type of proposal from SAP. SAP also uses the example of long run times for MRP used to justify Simple Logistics. Why these issues have not been brought up more on articles on S/4HANA is a concern. However, I suppose that gives me the opportunity to provide some very good value to my readers and my clients. But it brings up a lot of issues regarding either the knowledge level or the independence of many of the media outlets that carry stories and are supposed to do analysis on SAP. For software buyers, if you have a consulting company that is proposing to you that the SAP S/4HANA data model is simplified, that would bear explanation on their part as to why that is. If they are just blindly agreeing with SAP on everything, then they will be limited in how much they can help you.
My recommendation is that the time required for reconciliation and quarterly closes be benchmarked in the client’s current ECC system to determine whether or not this is an issue. Statements about the reconciliation and quarterly close time should not be looked at in a separate matter but checked against what other software vendors in the area have to say on the topic.
Marketing constucts like SAP Run Simple and simplified data models that have nothing do do with reality detract from implementing beneficial programs. I cover how to interpret risk for IT projects in the following book.
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