In today’s volatile world CFOs need to make better educated decisions in much shorter time frames. Technology innovations like in memory computing will allow them to do so by finally enabling real, Real Time Finance. For this purpose, SAP plans to release a significantly renewed solution portfolio on the basis of the SAP HANA platform.
While the impact of Real Time Finance will be revolutionary for the business, customers will be able to migrate to this new paradigm in a non-disruptive, evolutionary manner. This presentation will provide you with an outlook on SAP’s development roadmap in the area of Finance.
43. Thank You
Contact details:
Dr. Martin Naraschewski
Vice President, Finance Solutions
Dietmar-Hopp-Allee 16, D-69190 Walldorf
+49-6227-7-49602
Editor's Notes
Ever since the Financial Crisis, the world has become a very volatile world. Challenges that Finance departments are facing include:Unprecedented volatility in economic conditions in both financial and real marketsIncreased focus on risk including operational and legal risksOn-going changes to regulatory requirements like the planned IFRS/US-GAAP convergence or EMIR/Dodd Frank actsIncreasing globalization that requires Finance to rapidly extend their services to new geographies but also offers new opportunities to move towards global business servicesContinued pressure on margins that forces Finance departments to do more with lessInnovative business models like the trend from product to solution businesses that pose new challenges for both accounting and performance managementCompanies are looking more than ever to their CFOs to guide them through these troubled waters. In this context, the role of the CFO is further evolving.While in the past there has been a long debate about how CFOs are moving up from being a steward towards becoming a strategist, the discussion has further developed in recent years.
These leading CFOs drive change by systematically transforming their own Finance organization. In the course of this transformation the scope and role of their organization is significantly changing. When in the past it was sufficient to provide required information to regulatory authorities and requested paper reports to management, it was acceptable to do so with manual local processes.This is no longer the case.The circle of stakeholders who need proper information is widening and Finance organizations need to be much more pre-emptive in managing risks and controls.The most important change is happening with regards to report generation. The big change is from preconceiving the reporting needs of the business and producing a continuously growing “flood” of static reports towards providing a self service information platform that allows business users to generate these reports themselves whenever and wherever they need them. This requires Finance to put much more attention on data governance to ensure consistent data quality in the central system rather than post-processing data manually in local Excel spreadsheets. Once such data quality has been established the freed up time can be utilized for better strategic advisory.All of this is only possible, if today’s manual processes are being replaced by global business processes with consistently high service quality and an equally high degree of collaboration.
Technology is a critical enabler of the described Finance transformation.The keyword in this context is “Real Time”. In a highly volatile world, businesses need to be able to respond to changes in their economic environment much more dynamically than it was necessary in the past. Coincidentally, we are witnessing the emergence of a number of disruptive technologies like in-memory, mobile, and cloud computing that all aim to support the same goal: Making enterprises real, Real Time Enterprises.
What do we mean with real time? The same level of “real time-ness” that is already a reality in our private lives.Let’s take the example of a family day trip with our car.The dashboard in the car shows speed, fuel level and other critical information in real time.The navigation system proposes a new route with predicted time of arrival based on a new traffic situation in real time.When we arrive at our destination, our smartphone provides us with all relevant information on the history of the site, nearby restaurants and many other things in real time.Do you have the same level of “real time-ness” in your company? In most customers we are seeing, this is not the case.[Remark: This slide has turned out to be one of the most powerful slides of the entire presentation. Without a lot ado, the audience understands intuitively what level of aspiration is meant with “real time” and how much room for improvement they still have in their professional live.]
Today’s system landscapes have grown over many years to become a heterogeneous mix of “silo-ed” applications that don’t provide full data transparency to each other.The applications themselves are often not high performing enough in order to process information in real time.But a significant number of customers simply don’t leverage what is already possible today. Either because they are not aware of the possibilities that state-of-the-art Finance solutions are offering or because they are shooting too high in what they believe is necessary in order to substantially improve their current situation.
SAP is offering already today a rich and comprehensive portfolio of Finance solutions that all make significant steps in the direction of real time. We are providing integrated end-to-end solutions for five major Finance processes.Further information on SAP’s current Finances solutions are available in other places, for example in our Finance overview presentation.
Let’s now direct our view to the future.The envisioned paradigm of the future will be the Real Time Finance organization.We see three major characteristics of a Real Time Finance organization. Real Time Finance organizations need to be Aligned, Agile, and Predictive.Aligned means that they need to work from a transparent single source of truth, at least for reporting purposes, to make sure everyone is working with the same information and no time is lost with reconciling information manually.Agile requires real time finance processes that support instant reactions to changing external conditions.Predictive means gaining unmatched insight and foresight in order to preempt potential future changes of the conditions before such changes become a reality.
The main breakthrough innovation that will enable Real Time Finance is in-memory computing, in particular SAP’s new SAP HANA platform.With SAP HANA, it is now possible to store ALL transactional data of even the largest enterprises entirely in main memory and to abolish the need for physically rotating, and therefore slow, hard disks. This change, together with a different way of organizing data in main memory, is providing performance gains of several orders of magnitude.But SAP HANA is more than just an in-memory database. It is in addition:An entire application and integration platformA library of shared business functions that are optimized for use with SAP HANAAn innovation platform for SAP, partners, customers, and startups
Alignment is a key prerequisite forany real time organization. An organization can only act in real-time if everyone is “sitting in the same boat, rowing in the same direction”. In our context, this means that everyone is working from a common set of information, provided by a single source of truth. Such a single source of truthcomprises three major elements:First, it provides seamless access to all data, not only financial data, from a single access point. HANA Live, a virtual semantic data model on top of SAP HANA is providing this capabilitySecond, it is about ensuring data consistency across all solutions. This consistency is being provided by SAP HANA as the single repository of shared data and shared methods across all Finance solutionsLast not least, in order to ensure data consistency, Finance solutions have to support all personalized analytics within the system of record. Otherwise, users will continue to extract and maintain data in local spreadsheets. This change requires an unprecedented flexibility and adaptability in reporting as provided by SAP ERP when powered by SAP HANA.
Today there are several barriers that prevent realization of a single source of truth, e.g., Several copies of dataIn different data modelsInherent data latencySeparate cashes for performance optimizationIn recent years, computer systems have increased the number of processing cores with large integrated caches. Main memory space has become practically unlimited with the ability to hold all the business data of enterprises of any size. Falling prices have moved processing from Disk/SSD to In-Memory.Memory access is 1M – 10M times faster than disk. Disk-centric computing was also one of the major factors that forced separation of transactional and analytical workloads. Moving data to various locations was necessary for reporting to circumvent network issues. Pre-processing of data then became the necessity to optimize linear data transfers. We do not have to live with those limitations any more.Through advances in data sciences combined with relevant hardware trends, SAP is leading the real-time computing revolution… leveraging the power of in-memory computing to bringing analytics and transactional processingback in one database.This transforms how we construct business applications and our expectations in consuming them.
Realization of the single source of truth will occur in up to three stack layers:All accounting records from existing backend systems can be replicated in real time into a single SAP HANA database. Of course it is also possible to consolidate existing backend systems in one SAP ERP system on top of SAP HANA without any replication.Thereby, SAP HANA becomes the single place of storage for all accounting records, essentially a Central Journal. It provides shared data and shared methods to all Finance solutions in higher stack layers.SAP HANA provides seamless access all stored data through SAP HANA Live, a semantic virtual data model.All transactional processing (OLTP) and reporting (OLAP) is performed by SAP’s Finance solutions like SAP ERP, SAP BPC, SAP BW, and SBOP BI on the fly from this shared source of information without creating additional instances or pre-calculated aggregates.The benefits of this approach are not only higher data consistency and significantly reduced reconciliation effort. It also supports a much more flexible and adaptable personalized reporting. End users can configure their own data views on the fly anyway they want them. They can drill-down to line item level and can retain all existing data fields in transaction processing and reporting. They can even flexibly add their own customer-specific dimensions and preserve such additional information in transaction processing and reporting.
One of the most important planned innovations for 2014 is the introduction of SAP Smart Accounting. It is essentially an entirely new architecture for SAP ERP Financials. Its main characteristics are:Convergence of FI and CO. There will be one logical document that is the common basis for both regulatory and managerial accounting. Thereby a much higher degree of consistency between FI and CO has been created abolishing the need for time consuming and error prone manual reconciliation.Abolishment of pre-defined aggregates. All aggregation and transaction processing is now performed on the fly based on HANA Live views. The totals and indices in FI and CO will be a matter of the past. This fact is a further move to preserve data consistency throughout the entire technology stack.More flexible reporting. As a beneficial side effect, reports can now be configured by the end user in a very flexible way without requiring any assistance from IT.
To summarize, SAP has invested or plans to invest in three major areas in order to implement the idea of a single source of truth:Central journal: Several customer live implementations or proof of concepts have validated the possibility of replicating all accounting records into a SAP HANA-based central journal. This central journal is the basis of all further transaction processing and reporting.Shared data and methods: The SAP HANA platform acts as a central repository of both shared data and shared methods that are being accessed by the various Finance solutions. The first Finance solutions that are fully leveraging this central repository are SAP ERP, SAP BW, and SAP BPC. In the near future, SAP plans to optimize further Finance solutions to make use of these capabilities.New accounting architecture: SAP Smart Accounting will be SAP’s next generation accounting solution, as part of SAP ERP and powered by SAP HANA, with unprecedented data consistency and reporting flexibility
Presumably the most important characteristic of acting in real time is agility. The skiing lady in the picture is a great example of what it takes to be agile. First, you need fast gear, in this case fast skiing equipmentHowever, without the ability to recognize bumps in the slope instantly and being able to change the course without delay it is not very likely that the skiing person will reach the finishing line within a competitive timeLast not least, in the case of an unavoidable crash it is necessary to wear protective gear like the helmet to prevent serious damageThe same applies to real time finance processes. Real time processes are about speed and you need to be able to execute transactional processes in real timeBut you also need to provide instant insight to action to the business to respond to changed economic conditions without delayFinally, you better have real time process oversight and risk management capabilities in place to make sure that the impact of potential process failures is limited as much as possible
The migration to real time Finance processes, based on SAP HANA, will constitute no less than a next process revolution. Sequential processes of today may be replaced by continuous processes where activities are happening simultaneously, driven only by events rather than being driven by an orchestrated sequence of process steps.This is only possible if any process execution, transactional or analytical, is happening in real-time and if the associated insight to action is made available to decision makers in real time as well. We also believe that novel mechanisms for real-time process oversight will be necessary to ensure compliance and mitigate risks in such novel real-time processes.As you can see from the diagram, acceleration of process bottleneck steps will be an important element and the starting point of the evolution towards real-time processes. But many more enhancements will be necessary and are in fact on SAP’s innovation agenda. These include further process automation as well as new analytical user interfaces in order to make sure that the processed information reaches the end user in real time, anytime, anywhere.
Just imagine what such real-time processes could mean for your Finance organization. Here are some examples of real-time innovation for the major Finance processes that SAP is supporting today.We will show in the next slides how planned or already available innovation from SAP will enable the described real-time Finance processes.
A major investment focus is the establishment of the (near) real-time period end close. We are referring here only to the preparation of the financial information that is typically being collected and calculated at the month end close. The additional activities that are needed to prepare a full blown quarterly or annual report will still require several days of additional work.Accelerating the month end close substantially will bring several business benefits. It can provideMore timely information for managerial reportingThe ability to forecast the period end close more often and with higher accuracyThe ability to simulate accounting decisions on the flyThe transition to a continuous (soft) close also helps the Finance organization to better balance their workload throughout the entire period avoiding today’s stressful and error prone month end crunch.
One important example of real-time acceleration within the period end close is intercompany reconciliation. Intercompany reconciliation is often one of the most labor intensive and time consuming activities at period end. SAP has released new enhancements for SAP ERP that turn intercompany reconciliation from a batch process at period end into a continuous process that can be executed on the fly intra-period.For this purpose SAP has not only accelerated the processing of information and eliminated several batch jobs, it is also providing new user interfaces. The new intercompany reconciliation capabilities require SAP HANA and can be run side-by-side to a current SAP ERP installation.
To further improve and accelerate the consumption of information by business users, SAP plans to release a number of Smart Business Cockpits. These new cockpits aim to provide key decision managers in the Finance organization with a 360 overview on their relevant financial data. It is planned to release initially five new cockpits that address the CFO, the Financial Close Manager (first version already available), the Cash Manager as well as Receivables (already available) and Payables Managers. These end user configurable cockpits provide real-time visualization of the most important KPIs for these roles. They also support drill down to several layers of additional information.The new cockpits will require SAP HANA and in most cases also SAP Smart Accounting.
We have seen in previous slides how important the right user interfaces are in providing real-time information to end users anytime anywhere.However, SAP is also investing significantly in renewing the entire usability of SAP ERP as part of the Fiori program. SAP plans to release a renewed user experience of SAP ERP Financials initially for the roles of theGeneral Ledger AccountantCost Center Manager (as successor to SAP RealSpend)Collection SpecialistCredit ManagerFurther renewed roles are planned to follow in the mid-term.
One of the most significant planned innovations is the release of SAP Smart Cash Management, a newly developed cash management solution.The new solution is not tied to a single SAP ERP system and is able to provide consolidated global cash positions in real time even in the presence of heterogeneous backend systems.It provides new functional capabilities, e.g., in the areas of liquidity forecasting and bank account management, as well as new data visualization capabilities through a dedicated smart business cockpit for cash managers.SAP Smart Cash Management is powered by SAP HANA and can be run side-by-side to an existing SAP ERP solution.
Another good example for the transition to continuous processes is the area of receivables management, in particular the collections process.Today, the collections process has a periodic character and consists of several consecutive process steps. First, collection relevant information is being extracted from the back end system. After a review of open cases, a collections work list is produced for a dedicated team of collection specialists. These specialists are working in the back office and contact their assigned customers in order to resolve open collection cases.The downside of this approach is that a separate team of collection specialists is required. These specialists are lacking customer proximity and may even work on the basis of outdated information.It would be much better to involve sales representatives directly in the collections process. However, this is only advisable if they can be equipped with always up-to-date information about the collection status of their customer. There is hardly anything more embarrassing for a sales rep than to complain wrongly about an unpaid invoice based on outdated information.With SAP’s latest innovation, such a direct involvement of sales reps in the collections process has now become a possibility. With real-time information in the hand of sales reps and receivables managers anytime anywhere, the collection process can be turned into a continuous process without the need for periodic data extraction and quality review steps.
SAP offers with SAP Receivables Manager and SAP Customer Financial Fact Sheet, both powered by SAP HANA, the necessary tools to support the transition of the collections process from a sequential into a continuous process with direct involvement of the sales agents.SAP Customer Financial Fact Sheet equips sales agents with a real-time, always up-to-date 360° overview of the payment status of their customers. This information is made available on multiple mobile devices ranging from smart phones to tablets. With this information at their fingertips, sales agents have the right tools in their hand to engage with their customers to resolve an open collections case.On the other hand, SAP Receivables Manager provides the receivables with an up-to-date overview on the overall status of open collection cases. This enables the receivables manager to continuously steer the overall collections process without the need for a periodic review of open collection cases.
In addition, SAP has released in 2013 an entirely new solution for real-time process oversight, SAP Fraud Management powered by SAP HANA. This new solution leverages predictive algorithms in order to detect potential fraud incidents. It supports the definition of customer-specific fraud identification strategies incl. a simulation of customer-defined strategies based on historic data.SAP Fraud Management also provides new visualization capabilities in order to display all relevant information that is needed in order to assess a potential fraud incident.
For the mid-term future, SAP plans to focus development predominantly on three areas in order to make real-time Finance processes a reality:Further process acceleration and automation to reach the goal of the real-time month end close.Additional analytical front-ends in order to facilitate the real-time access of information by business users.Generally, a user experience renewal of existing roles as part of the Fiori development program.
The ultimate characteristic of being a real-time Finance organization is the ability to predict the possibilities of the future better than the competition can do. This requires unmatched insight and foresight. Practically, it means that you need to Deeply understand the drivers of your business and develop a quantitative model of your organization based on these driversRecognize trends and anticipate future risks that may affect these drivers and lead to a better forecast of the near-term futureAlign around a joint plan and adapt dynamically to changing economic conditionsIn more technical terms, technology innovations will enable Finance organizations to be more predictive by providing advanced analytics as well as novel ways of planning, modeling, simulation, and forecasting.
One particular challenge in this context is the ability for entire organizations to plan dynamically. As a consequence of the “new normal”, real world conditions are changing faster and more disruptively than ever before. Examples are the rapidly changing demand in consumer-oriented industries or rapidly changing commodity prices that are relevant for many producing industries.On the other hand, business models of companies are also getting more complex than ever before. This means that the impact of changing economic conditions on company plans will often be very complex too.Companies therefore need much more flexible ways to adapt their plans. This means to move away from the traditional, rigid annual planning and budgeting cycle towards an integrated rolling plan for the entire company that is adapted periodically within the fiscal year. In order to speed up the planning cycle it is necessary to link the independent plans of the individual business units into the rolling plan for the entire group in real-time.
There are a number of functional requirements for a planning solution to fully support integrated business planning (see list on the slide). These requirements are driven by the need to simultaneously provideStrong governance and integration mechanisms for the owner of the central plan andFar reaching planning autonomy for the owners of the individual plans withSeamless integration to SAP ERP in order to accelerate the development of planning models by re-using existing data and data structuresIt is a market reality that there is today no single planning solution in the market that is supporting all of these requirements simultaneously. That’s the main reason why many SAP customers are still utilizing hybrid planning landscapes consisting of SAP Business Planning and Consolidation, SAP BW-IP, and planning capabilities in SAP ERP. While there exist integration points between these planning solutions and with SAP ERP, the depth of integration still leaves significant room for improvement. Obviously, this situation is not getting any better when employing 3rd party planning solutions.
This situation will completely change with the release of SAP Business Planning and Consolidation 10.1 and the planned release of SAP Smart Accounting.SAP Business Planning and Consolidation 10.1 will provide all necessary capabilities for integrated business planning in one single solution which will give it a strong differentiation in the market. It will do so by providing a new unified planning model that combines the strengths of both current SAP Business Planning and Consolidation and SAP BW-IP in one single solution. By virtue of a tight embedding in SAP Smart Accounting it will also replace the current planning capabilities in SAP ERP.Functional HighlightsUnified models based on BW meta-data for enterprise wide planning scenariosRich set of pre-defined planning functions and reporting capabilities, e.g. disaggregation, repost, revaluation, currency translation, unit conversion, inverse formula calculationsHighly flexible session based simulations, including e.g. master data planning Unified user interface for planning and reportingKey DifferentiatorsBW data warehousing capabilities provide well established and proven data consolidation and harmonization services Best-of-breed data extraction for SAP Business Suite increases flexibility, reduces maintenance and lowers TCODeep integration with SAP ERP for closed loop scenarios, e.g. extraction of actuals and write-back of planning resultsHigh performance due to the use of dedicated EPM operators within HANAPlatform for various planning applications, e.g. SAP CRM-TPM and Planning for Retail
This particular example demonstrates how group level P&L planning (that used to be the domain of SAP BPC) and operational cost center planning (that used to be the domain of SAP ERP) will be supported by a single, very user-friendly planning environment, SAP Business Planning and Consolidation 10.1.The general ledger accounts are the structural dimension that ensure alignment between top-level P&L planning and bottom-level cost center planning. Updated plan data from departmental plans can roll up into group plans in real-time without the need for any batch updates.
To summarize, SAP has defined three next generation development areas for the near- to mid-term future in order to help customers to reach an unmatched level of insight and foresight.With SAP Business Planning and Consolidation 10.1 and the planned release of SAP Smart Accounting, SAP will support an unprecedented level of integrated business planning. It is also planned to connect existing special purpose planning solutions from SAP with this new generic planning environment.Another focus area will be to embed next generation capabilities for dynamic business planning in SAP BPC to better support, e.g., driver-based planning, easy-to-use simulation models and predictive forecasting.Finally, it is planned to evolve SAP Business Planning and Consolidation into a single analytical solution that seamlessly supports planning, real-time consolidation, profitability analysis and reporting.
SAP offers multiple choices for adopting the presented new innovation that is powered by SAP HANA. You canRun many of the presented innovation scenarios side-by-side to an existing SAP ERP system. In this case, only the new or enhanced capabilities are run on a SAP HANA platform that replicates to the existing databaseYou can also establish a new virtual ERP system (central journal) that fully runs on SAP HANA and replicates in real time against the existing traditional ERP systemsMigrate your entire SAP Business Suite to run on SAP HANA. In this scenario you will likely want to consolidate existing ERP systems in one instance of SAP ERP
There are several good starting points for your journey towards a Real Time Finance organization. Most of them provide an acceleration of central reporting capabilities on the basis of a side-by-side deployment of SAP HANA. In these scenarios, SAP ERP will continue to run on a classic database. SAP offers a number of side-by-side deployable accelerators for SAP ERP, e.g., acceleration of profitability analysis (CO-PA) or intercompany reconciliation.In addition, you can run SAP HANA-optimized releases ofSAP NetWeaver Business WarehouseSAP Business Planning and ConsolidationSAP Governance Risk and Compliance
A next step would be to migrate your entire SAP ERP system to SAP HANA. SAP has launched SAP Business Suite powered by SAP HANA in January 2013. Since then, many customers have successfully migrated their SAP Business Suite systems to run on SAP HANA. Here are the names of a few customers with an implementation of SAP ERP powered by SPA HANA that can be referenced publicly. There are already many more customers live and there is a significant pipeline of ongoing or planned migration projects.Since August 2013, SAP is running its entire operational system landscape, both transactional and for reporting, successfully on SAP HANA, incl. SAP ERP and SAP CRM. We have seen already a number of very convincing benefits and expect many more as we are optimizing our Finance processes to make use of the new system capabilities.
SAP plans to release a number of very significant innovations in the near-term that aim to capture the full potential of SAP HANA in Finance.The most important release will be SAP Smart Accounting, the next generation accounting architecture of SAP ERP. It will also include a much tighter integration with SAP Business Planning and Consolidation.SAP Smart Cash Management is an entirely new cash management solution that also leverages the next gen architecture principles of SAP Smart Accounting.Last not least, SAP plans to provide a fully renewed user experience for SAP ERP. The first renewed roles in Finance are planned to be released in the near term.
You can adopt SAP’s next generation architecture for Finance in an evolutionary, non-disruptive way leveraging past investments like in the outlined five step approach. This sets SAP’s next gen approach apart from our competitors (like Workday or Oracle Fusion) that require an entirely new ERP implementation or that forces customers to sacrifice critical industry-specific capabilities of their current systems.The presented maturity steps are only an illustrative example. You can start with several side-by-side implementation steps to minimize the risk and migrate SAP ERP to SAP HANA at a later point in time. But you can also change the sequence of these adoption steps in many different ways. For example, you can start with migrating your entire SAP ERP system technically to SAP HANA to simplify the architecture and then optimize gradually on the basis of a common SAP HANA platform.
Last not least, we are also offering a broad choice of deployment options. All innovations that were shown in this presentation can be deployed On Premise. However, they can also be deployed in the new SAP HANA Enterprise Cloud. In fact, SAP is running its own ERP on HANA in the SAP HANA Enterprise Cloud. The main advantage of the SAP HANA Enterprise Cloud is that you don’t have to invest in new hardware or establish new platform management skills in your IT organization. But you will retain the possibility to manage your Finance solutions individually.There is also a growing number of public cloud solutions for Finance that are fully managed by SAP. Currently, these areSAP Cloud for Travel and ExpenseAriba NetworkSAP Financial Services NetworkWe also have a new public cloud Endorsed Business Solution from our partner Blackline that supports account reconciliation and other financial close activities.
Let’s come briefly back to our day trip example that has shown how real-time information is already a reality in our personal lives.This presentation has shown how Real Time will soon become a reality in Finance too. Like in the personal life example, it will provide A single source of truth, or at least a single source of information available anytime and anywhereReal time finance processes with real-time and often continuous process execution, instant insight to action and real time process oversightUnmatched insight and foresightAll of this will have a profound impact on the daily work of the employees in a Finance organization. It will make life easier but also profoundly shift the focus of work. We leave it to you to imagine what this transformation may mean for you and your colleagues personally.
In a nutshell, there are three key take aways from this presentation:Technology innovations like in memory computing will trigger a new process revolution, enabling Real Time FinanceFor this purpose, SAP is providing a renewed Finance solution portfolio on the basis of the SAP HANA platformSAP supports customers to flexibly choose their own non-disruptive evolutionary path towards real time