The Long and Winding Road to ERP Modernization

Any system modernization journey can be a long and winding road. Army leaders took PDI as an opportunity to share lessons learned on their journey down the enterprise resource planning (ERP) modernization road. An esteemed group of panelists, Matt Macko, Josh Call, Michael Gormley, and moderator, Brian Plotnick, representing both the functionals and program office spoke in Phoenix with the hopes of helping others learn from the successes and challenges faced to date.

As all SAP customers near the end of life for the Enterprise Core Component in 2027, federal agencies are preparing to modernize their critical business systems running SAP to S4/HANA and other agility solutions. S/4HANA is a next-generation enterprise resource planning suite, offering significant advancements over legacy ERP systems, Including real-time data processing, simplified data models, and enhanced user experiences. The transition will enable federal agencies to process transactions and analyze business data with unprecedented speed and accuracy, fostering more informed decision-making processes that are critical in the public sector. Army leveraged this opportunity to improve auditability, increase efficiency, and decrease sustainment costs by re-engineering business processes and consolidating their five SAP ECC systems into one S/4 HANA system, the Enterprise Business System – Convergence.

Army leveraged this opportunity to improve auditability, increase efficiency, and decrease sustainment costs by re-engineering business processes…

The team reviewed seven key lessons:

• One Team, One Fight: Unity and collaboration across different teams and stakeholders is paramount for success.
• Have a Plan: Develop a clear and detailed plan to guide the modernization process and incorporate business process re-engineering to improve efficiency in the future state.
• Build Unity, Align through Value: Align Initiatives and processes with the organization’s core activities and
  use value chains to prioritize and streamline efforts.
• Business Process Re-engineering with Purpose: Focus on daily operational impacts and practical applications.
• Feed Ideation with Technology: Engage in continuous process improvement by leveraging technology and use a prototyping environment to model the proposed processes changes and new S/4 HANA functionality. Try out multiple scenarios to determine the best fit.
• Align to a Target: Define clear objectives and targets to guide the ERP modernization efforts and ensure organizations are moving toward a shared goal.
• Innovative Acquisition Approach: Implement agile methodologies and flexible acquisition strategies. Leverage other transaction authority for faster prototyping and production. Encourage collaboration between functional business and program office teams throughout the project lifecycle.

The discussion and presentation highlighted the Importance of planning, collaboration, and innovative approaches in successfully modernizing ERP systems. The need for ongoing evaluation and adaptation of business processes and policies to ensure the ERP system meets organizational needs while minimizing costly customization of commercial software was also echoed throughout the panel.

One key differentiator discussed was the Army’s use of SCoUT. SCoUT Is the System Convergence Unification Tool, a cloud-hosted sandbox environment where the Army evaluates new technologies against business requirements. The tool has been critical in informing decisions, allowing the configuration of multiple system designs for comparison and analysis of the best fit, and helping stakeholders understand the art of the possible in the future state. SCoUT has been a critical tool for facilitating the modernization effort.

Modernizing the government’s SAP system will have many upsides, but one notable positive will be the ability to handle the growing volume and complexity of data. Traditional ERP systems often struggle with data silos and latency issues, which can impede the ability to generate timely and actionable insights. S/4HANA’s in-memory computing capability allows for the consolidation of transactional and analytical workloads, providing real-time Insights that can enhance strategic planning, resource allocation, and execution.

The government’s transition to a composable ERP ecosystem is not just a technological upgrade but a strategic move toward greater efficiency, agility, and security. A composable ERP, like S/4 HANA, is made up of modular micro-services that function together to provide a full ERP platform. This allows organizations to exploit the capabilities needed and not invest In those that are not. By leveraging the advanced capabilities of S/4HANA and other best of breed software, federal agencies can enhance their operational effectiveness, deliver better public services, and ensure the safeguarding of sensitive data. This modernization effort is essential to keeping pace with the rapidly evolving technological landscape and meeting the high expectations of the public for transparency, accountability, and service excellence.

As multiple agencies work toward this goal it is imperative to learn from each other to help straighten and shorten the long and winding road to modernization.

The audience was engaged and asked great questions on some of the nuances of the acquisition process. More specifically, how does a large transformation effort that is geared toward agile methodology develop an estimate in support of component cost estimates which seek long term predictable costs? The panel highlighted the challenges associated with cost estimating for large programs. The Program Objective Memorandum process necessitates both Program Office Estimates and Independent Government Cost Estimates to secure future funding. This task becomes particularly challenging with Agile methodologies, as cost assumptions are not readily available years in advance. To address this, the Army’s Office of the Assistant Secretary for Acquisition, Logistics, and Technology is collaborating with the Deputy Assistant Secretary for Cost Estimating. Together, they are revising their approach and developing new estimating models and tools that align with Agile method­ologies and adapt to flexible and evolving requirements.

The Army’s approach to modernizing their ERP systems serves as a model for other federal agencies facing similar challenges. By leveraging innovative tools like SCoUT and embracing agile methodologies, they demonstrate that with strategic planning and collaboration, the complexities of ERP modernization can be effectively managed. As the public sector continues to navigate this long and winding road, sharing these insights and lessons learned will be crucial in ensuring a smooth and successful transition to next-generation systems.

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