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As util­i­ties weigh the risks of over­haul­ing their core sys­tems, the stakes couldn’t be high­er. Reg­u­lat­ed oper­a­tions leave no mar­gin for error, yet the shift to SAP S/4HANA and the cloud is reshap­ing expec­ta­tions across the industry.

Few voic­es bring both hard-won prag­ma­tism and tech­ni­cal depth to this chal­lenge like Lorenz Prae­fcke, CEO of cbs Cor­po­rate Busi­ness Solu­tions Amer­i­ca, Inc. After near­ly three decades nav­i­gat­ing SAP trans­for­ma­tions on both sides of the Atlantic — first as a con­sul­tant in Ger­many, lat­er in senior roles at IBM and IDS Scheer — he today guides util­i­ties and man­u­fac­tur­ers in the U.S., from his base out­side Philadelphia.

In con­ver­sa­tion with ASUG, Prae­fcke reflect­ed on three forces that weigh heav­i­ly on util­i­ties today: com­pli­ance con­straints, accu­mu­lat­ed decades of lega­cy sys­tem debt, and a work­force that is under­stand­ably cau­tious about dis­rup­tion. His mes­sage to util­i­ties on the verge of mov­ing to SAP S/4HANA Cloud is that selec­tive data tran­si­tion (SDT) offers a mid­dle path, enabling mod­ern­iza­tion with­out the upheaval of a full reset. Below, Prae­fcke unpacks what’s at stake for util­i­ties, the grow­ing role of SDT, and the bal­ance between inno­va­tion and stability.

Q: In your posi­tion at cbs Cor­po­rate Busi­ness Solu­tions Amer­i­ca, how would you assess the cur­rent ​“state of the race” as it per­tains to SAP users migrat­ing to the cloud and adopt­ing SAP S/4HANA? What are the most press­ing oppor­tu­ni­ties for SAP users, and what are the biggest chal­lenges that pre­vent them from seiz­ing those opportunities?

The biggest oppor­tu­ni­ties would be to get rid of the sins of the past, or at least to start that way. Projects to move to SAP S/4HANA are not just tech­ni­cal upgrades. They’re, in fact, trans­for­ma­tion projects with a busi­ness per­spec­tive. This is, on one side, the chal­lenge, but on the oth­er side, the opportunity.

Chal­lenge means it has to do with change. You have to look into what you can do bet­ter. You have to be able to mar­ry the change man­age­ment and the trans­for­ma­tion into these projects to make them beneficial.

The oppor­tu­ni­ty is that you can solve the pain points you have today. You can solve issues in your busi­ness. You can change process­es, at least to an extent that doesn’t make it a huge, com­plex project. It’s also a chal­lenge to find the right bal­ance between mak­ing it a busi­ness-focused project with fast val­ue, while still going along with the tech­ni­cal upgrade. Don’t over­do it, don’t make it too large or too com­plex (one, cost­wise, but also for the orga­ni­za­tion). Because what­ev­er you change comes back to change man­age­ment in your organization.

Q: Migra­tion to S/4HANA isn’t just tech­ni­cal; it’s peo­ple-cen­tric. Can you expand on that com­po­nent of busi­ness transformation?

As a gen­er­al state­ment, not just in the util­i­ty space, trans­for­ma­tion has to do with changes on the busi­ness side — going along with new fea­tures, new options, and new pos­si­bil­i­ties that the tech­nol­o­gy gives you. That means you can prob­a­bly do things with a new sys­tem that weren’t sup­port­ed in the past, and you may not even be aware of it.

Times have changed. There are new busi­ness mod­els, and some of those process changes haven’t been imple­ment­ed yet in the SAP sys­tem, which is the sup­port­ing back­bone system.

But suc­cess in this regard has a lot to do with user expe­ri­ence. We see cus­tomers doing a tech­ni­cal upgrade but not lever­ag­ing the new pos­si­bil­i­ties that SAP S/4HANA deliv­ers out of the box. Just to name one: Fiori. It’s a user inter­face, but it also changes the way you work.

If you look at the old inter­faces and screens, they were full of tabs and infor­ma­tion. That was great back in the day. But now it’s a more guid­ed process. With Fiori apps, it’s much more focused on what you want to know. The fea­tures are eas­i­er to under­stand for first-timers or peo­ple who aren’t SAP experts.

To bring this into the orga­ni­za­tion, that’s real­ly the change man­age­ment piece you need.

Q: In the util­i­ty space, specif­i­cal­ly, what chal­lenges com­pli­cate cloud ERP adop­tion and migra­tion? Why, for exam­ple, does the SAP green­field mod­el work less often for util­i­ties than it might for cus­tomers in oth­er industries?

On top of what we see gen­er­al­ly, util­i­ties, for the most part, are reg­u­lat­ed indus­tries. This cre­ates a cer­tain mind­set. Change takes longer. Some­times, change isn’t even allowed because reg­u­la­tions pro­hib­it it. That’s a very spe­cif­ic chal­lenge in the util­i­ty space. Imple­ment­ing new process­es can be a big­ger exer­cise than with a pri­vate­ly owned cus­tomer, which has more free­dom in deci­sions and speed.

There’s also a rea­son why util­i­ties are reg­u­lat­ed. If some­thing goes wrong in these projects, it impacts cus­tomers’ dai­ly expe­ri­ence with water, net­works, and billing: things that sim­ply can­not fail. It is super key that all of these projects are 100% successful.

When you look at the broad SAP S/4HANA race out­side of util­i­ties, you have the two book­ends of the spec­trum. Brown­field is just a pure tech­ni­cal move, which should not be the right way of look­ing at these S/4 tran­si­tions. Green­field is essen­tial­ly the full change man­age­ment, inno­v­a­tive, start-from-scratch approach.

This ties into change man­age­ment. SAP cus­tomers need to fig­ure out the abil­i­ty of their busi­ness to adopt change: across Fiori, adopt­ing new busi­ness mod­els, chang­ing process­es, reduc­ing tech­ni­cal debt, and going back to stan­dard. That means cus­tomers need to look at this spec­trum — Brown­field on one end and Green­field on the oth­er — and pin­point exact­ly where their busi­ness fits from a change man­age­ment point of view. Because ulti­mate­ly, these projects are as much about peo­ple as they are about tech­nol­o­gy. You have to under­stand, as an orga­ni­za­tion, what the abil­i­ty of the busi­ness is to adopt change. That deter­mines where on the spec­trum you fall.

When you talk about util­i­ties, specif­i­cal­ly, being reg­u­lat­ed indus­tries, they tend to be more on the Brown­field side because of the con­ser­v­a­tive nature of the busi­ness. A lot of times, you have reg­u­la­tions around data reten­tion, which means you need to bring over the full his­to­ry. There may also be reg­u­la­tions that pre­vent cer­tain parts of the busi­ness from being host­ed on the cloud. For exam­ple, SAP has rolled out prod­ucts like NS2 for nation­al secu­ri­ty cus­tomers. Many util­i­ty com­pa­nies with nuclear pow­er gen­er­a­tion plants are con­sid­ered of strate­gic nation­al inter­est and there­fore sub­ject to addi­tion­al scruti­ny, reg­u­la­tions, rules, and requirements.

Q: It seems there’s also a gen­er­a­tional piece in util­i­ties — employ­ees who’ve been in the same roles for decades may not have the appetite for full trans­for­ma­tion. Can you talk about how that affects S/4HANA projects?

We tend to see this across indus­tries, and espe­cial­ly in util­i­ties. A lot of the peo­ple who work at util­i­ty com­pa­nies are lif­ers. You have mature orga­ni­za­tions with aging work­forces who’ve been through com­plex imple­men­ta­tions, have the scars to prove it, and say, ​“I’m close to retire­ment. I don’t want anoth­er one of these SAP projects. Let me ride this out.”

Con­nect with Lorenz Prae­fcke on LinkedIn. 

That ties into projects led by senior exec­u­tives who some­times hold old­er ways of think­ing about SAP sys­tems. That can block things like Fiori adop­tion. Don’t change what’s not bro­ken: I like my old GUI, I don’t want to change this. But it also affects the organization’s abil­i­ty to attract new talent.

Peo­ple who grew up with iPads don’t want to mem­o­rize four-dig­it trans­ac­tion codes. They want an iPad with a but­ton to open the two fields they need, or a cam­era to scan some­thing and move on. Com­pa­nies are stuck in this gen­er­a­tional shift, but it can open the door to push­ing the bound­aries of inno­va­tion and mod­ern­iz­ing user experience.

Q: How does mod­ern UX — like Fiori dash­boards and real-time report­ing — help bridge that gen­er­a­tional gap?

In the old ECC space, you had to run mul­ti­ple reports, export them, and work in Excel to make a decent, visu­al­ized report. Now it comes out of the box with SAP S/4HANA.

Even exec­u­tives who’ve worked the same way for years can ben­e­fit. Today, I have tools I nev­er had in ECC, and they help me every day. I can design my own dash­board, see infor­ma­tion I nev­er had access to before, and extract data with one click. I don’t have to run through loops to get what I need.

As a user who isn’t an IT expert, this real­ly helps me. It can also open the minds of peo­ple who are used to old­er ways of work­ing. But, as I said before, it’s a change man­age­ment process. The chal­lenge is more about mind­set — get­ting peo­ple on board and open to change.

You don’t even need to copy it into Pow­er­Point. That’s anoth­er change with the cloud. You can do a live demo any­where, just with inter­net access. You can pull up real-time num­bers and show them instant­ly. You could nev­er do that with ECC. You always had to pre­pare, and it was nev­er the lat­est num­bers. Real­time capa­bil­i­ty is a huge ben­e­fit, and it comes with the cloud. That’s why cloud migra­tion is so important.

Q: Let’s shift back to SDT. Why is it par­tic­u­lar­ly effec­tive for util­i­ties com­pared to oth­er migra­tion approaches?

We need to put this in com­par­i­son to the oth­er approach­es. Cus­tomers can go Green­field, Brown­field, or SDT.

Brown­field basi­cal­ly means you take every­thing you have and move it up. Noth­ing changes, except those that are manda­to­ry with S/4HANA. It’s 100% tech­ni­cal. That can work if you have a roadmap to bring inno­va­tion lat­er, but typ­i­cal­ly, it pre­vents you from get­ting fast val­ue because you lose time upfront.

Green­field is the scari­est for util­i­ties. By def­i­n­i­tion, it means redo­ing every­thing from scratch. That’s the kind of com­plex­i­ty util­i­ties don’t want. You’d have to revis­it process­es that have been run­ning well for 20 years, and that’s not attrac­tive in such a con­ser­v­a­tive industry.

This is where SDT comes in. It lets you move data and process­es in a way where you only change what you want to change, but you have the abil­i­ty to do it. It’s like a Brown­field-plus, depend­ing on the will­ing­ness for change.

In util­i­ties, we see many cus­tomers not chang­ing much when they move to S/4. They’ll say, ​“Eighty to 90% of our process­es we don’t want to change right now.” There’s usu­al­ly a small­er por­tion where imme­di­ate val­ue comes from spe­cif­ic process changes. SDT allows that flexibility.

Q: Can you share some con­crete exam­ples of how SDT gives util­i­ties more flex­i­bil­i­ty than oth­er approaches?

SDT is typ­i­cal­ly tied to spe­cif­ic func­tion­al­i­ties that S/4 brings. For exam­ple, a cus­tomer might want to acti­vate the new prof­it cen­ter account­ing. We’ve had cas­es where cus­tomers start­ed down a Brown­field path and, mid­way through, real­ized they want­ed that func­tion­al­i­ty. At that point, it’s too late: you either stop and restart, or you fin­ish and add it lat­er. With SDT, you can add it into the scope with­out start­ing over. It may extend the time­line, but you have the option.

It also lets you pin­point ele­ments you want to opti­mize. Util­i­ties often have mas­sive data­bas­es because they’re deal­ing with mil­lions of cus­tomers and all the asso­ci­at­ed data. With SDT, you can reduce the data­base size by archiv­ing old­er doc­u­ments and keep­ing only what you need for a five-year time slice, for exam­ple. That low­ers your cloud con­sump­tion costs.

In util­i­ties, there’s also a lot of M&A activ­i­ty. SDT makes it eas­i­er to har­mo­nize sys­tems, redesign ERP struc­tures, inte­grate acqui­si­tions, or divest non­strate­gic parts of the busi­ness. That flex­i­bil­i­ty is key.

Or you can leave behind data you don’t need any­more. In util­i­ties, we’ve seen trac­tion in both spin­offs and acqui­si­tions. With Brown­field, you bring all the old data, includ­ing data from busi­ness­es you no longer own. With SDT, you can move only the rel­e­vant com­pa­ny codes, and you can apply a time­line filter.

That cleanup makes it eas­i­er to work with the data, and it has a big impact on cost. Cloud licens­ing is often based on data­base size. We’ve done cal­cu­la­tions show­ing that, even with the slight­ly high­er upfront cost of SDT, the project can pay for itself through long-term sav­ings in cloud consumption.

Q: You’re a found­ing mem­ber of the glob­al SDT engage­ment, and you offer the Enter­prise Trans­former soft­ware. What dis­tin­guish­es cbs’ approach?

The SDT engage­ment start­ed about five years ago, when com­pa­nies began dis­cussing how to deliv­er these projects in the future. Today, only four com­pa­nies glob­al­ly — SAP, SNP, Natu­vion, and us — have the tools and capa­bil­i­ties to deliv­er SDT.

We see a lot of con­sult­ing com­pa­nies talk­ing about selec­tive data trans­fer or migra­tion. If you don’t have the tool and tech­ni­cal capa­bil­i­ties, you can’t deliv­er true SDT. You can always migrate some data selec­tive­ly, but that’s not the same thing.

For cus­tomers, it’s also key that SAP is part of this engage­ment. We all work with the same stan­dards and method­ol­o­gy. Even though we’re com­peti­tors, there’s a high lev­el of col­lab­o­ra­tion, which ensures qual­i­ty no mat­ter which of the four you work with.

Our Enter­prise Trans­former soft­ware is essen­tial. With­out soft­ware that can selec­tive­ly carve out, trans­form, map, and move data, you can’t do these projects. Ours has been on the mar­ket for more than 20 years. It start­ed as a frame­work for M&A trans­ac­tions and evolved to han­dle carve-outs and moves into SAP S/4HANA. It works for both cloud and on-prem environments.

For util­i­ties, one big advan­tage is com­pli­ance. Reg­u­lat­ed indus­tries face stricter audit require­ments. Our Enter­prise Trans­former soft­ware includes report­ing, log­ging, and track­ing of all activ­i­ties. That makes it eas­i­er for cus­tomers to prove com­pli­ance and pass re-audits (crit­i­cal for utilities).

A lot of com­pa­nies in the mar­ket claim to do SDT, but they’re real­ly using one of these four tools in the back­ground. If you’re doing a real SDT project, it’s with one of those tools. Many SIs work with mul­ti­ple SDT partners.

Q: What chal­lenges, in addi­tion to data migra­tion, does SDT for S/4HANA present that cbs can help tackle?

This is very spe­cial­ized exper­tise. If you don’t under­stand what SDT does and how it dif­fers from oth­er migra­tion approach­es, you shouldn’t attempt it. You also need to know the soft­ware itself. In most of our projects, our con­sul­tants use the tool because they have both the tech­ni­cal and project expertise.

I’d go even fur­ther. The tool itself won’t solve the prob­lem. SDT is about tools and ser­vices togeth­er. Every SDT tool is dif­fer­ent. They all deliv­er sim­i­lar results, but suc­cess depends on how you design the migra­tion and tie it into process and trans­for­ma­tion requirements.

That’s where cbs is unique­ly posi­tioned. All our migra­tion con­sul­tants are also func­tion­al busi­ness con­sul­tants. They under­stand the under­ly­ing busi­ness process­es and SAP appli­ca­tions, so they can design a migra­tion that sup­ports both the tech­ni­cal and func­tion­al requirements.

Some­times that involves the tool, some­times anoth­er approach. We can mix and blend meth­ods. A fool with a tool is still a fool. If you don’t know why or how to use it, you won’t get the right results. Unfor­tu­nate­ly, we’ve seen oth­er firms pro­mote the idea that buy­ing the soft­ware alone solves the prob­lem. That’s not true.

Q: Any part­ing thoughts for the ASUG com­mu­ni­ty as our mem­bers assess their S/4HANA migra­tion paths?

SDT is slow­ly gain­ing trac­tion; ASUG mem­bers should take a clos­er look.

I’m not say­ing SDT is the only solu­tion. There are cas­es where Green­field or Brown­field is bet­ter. If you don’t know about all the options, you risk mak­ing the wrong decision.

Vis­it the cbs web­site. 

Every S/4HANA trans­for­ma­tion is an indi­vid­ual jour­ney. In my career, I haven’t seen two projects alike. That’s why it’s so impor­tant to do a phase zero to look at the right approach from a busi­ness-dri­ven per­spec­tive, not just IT. If you want to resolve spe­cif­ic pain points or get quick wins, you need to frame the project from that angle, not as a pure tech­ni­cal evaluation.

Q: Do you have a final exam­ple that illus­trates how util­i­ties are approach­ing SDT?

We had a util­i­ties cus­tomer last year who put out an RFP for SDT. They chose it because of a few tech­ni­cal issues they couldn’t resolve oth­er­wise. In dis­cus­sions with us, they real­ized the broad­er val­ue of SDT and what else they could achieve with it.

They end­ed up revis­ing the RFP to fac­tor in all of that. It was a dif­fer­ent sto­ry­line than if they’d only spo­ken to a part­ner with a nar­row­er focus. That’s anoth­er key point: most part­ners are not unbi­ased. Their rec­om­men­da­tions often serve their own busi­ness models.

We’re one of the few com­pa­nies that’s tru­ly unbi­ased. We don’t care whether the cus­tomer choos­es Green­field, Brown­field, or SDT, as long as it’s the right choice. Because we can deliv­er all three, we can make rec­om­men­da­tions from a holis­tic perspective.