In my last post I discussed implementing divestiture scenarios in SAP landscapes using SLO (System Landscape Optimization) methods and tools. SLO is a tool based approach to implementing business transformation projects with unique features, including flexible go-live dates, preservation of the integrity of SAP data, and minimized impact from a transformation effort on ongoing business.
Company integrations, mergers and acquisitions – how to handle data harmonization?
In this post, it’s time to look at the opposite of divestitures: company integrations. The pace and size of M&A deals has been increasing for years with no end in sight, which in turn increases the relevance of data harmonization across previously independent companies and business units. When integrating a previously independent business, data and processes should be harmonized and streamlined to improve the efficiency of the business, reduce overall costs, and allow management of the company in a unified way. Data harmonization can enable joint reporting across several systems and help simplify business processes.
However, we usually recommend decoupling business transformation (i.e. harmonization of data) from actual process changes to reduce the complexity of the overall transformation.
Examples for data harmonization which can easily be implemented using landscape transformation tools include the Chart of Accounts, Master Data (such as customers, vendors and materials), organizational units, or the fiscal year setup. By aligning one or several of these business objects across your SAP systems you can gain some quick wins, including:
- Fiscal year conversions to align your overall fiscal year and accommodate any fiscal year customizations across different SAP systems and other parts of your enterprise to simplify financial reporting. Even if some parts of the business have a shortened fiscal year, for example, you can still align the fiscal year and its setup across the complete enterprise.
- Master Data harmonization will help you to have, for example, one customer number across the complete company for the same business partner. This way, you can set up reporting such as sales statistics, you can improve your sourcing and purchasing, and avoid all kinds of confusion with non-transparent numbering.
- By harmonizing the technical names of organizational units such as company codes, plants, or on the more granular level of cost centers, you ensure clarity and central reporting in a Business Warehouse or EDW.
When performing any kind of data harmonization with SLO tools such as SAP LT, the procedure is similar. SAP LT includes several business scenarios out of the box for SAP’s ERP solution. For other systems such as SRM, CRM, SCM, and SAP BW you may need additional help from experts, such as Datavard’s consulting team, who can supply add-ons and extensions.
Business transformations based on SAP LT follow a predefined project methodology where the tool identifies all database tables and fields that contain relevant information for a given scenario. This “table pool” is built based on predefined business content, and on the ABAP dictionary. In the case of a Chart of Accounts conversion, this would be a list of all places in the database where accounts, cost elements, and the name of the Chart of Accounts itself are stored. This is a crucial step, and predefined conversion rules and content in SAP LT make it possible to include non-transparent fields such as change documents or CO object numbers in SAP which are often stored in concatenated fields where it is not always clear what data certain tables and fields contain.
Several test conversions in sandbox or test systems should be executed to ensure that the business transformation is sound and solid. This means everything is correct from a business perspective, but also sufficiently fast from a cutover perspective to allow for the available business downtime.
Using complex mapping tables and cross-checks, SAP LT ensures that only accounts which are compatible with each other are converted. For other conversion scenarios, other checks and security measures are available (e.g. to check the account groups of customers and vendors to be converted to new numbers). SAP LT then generates ABAP programs which can be executed in a controlled way during a rather short system lock time when no users are allowed to work in the system. The toolset includes central monitoring and logging to implement changes in the database tables based on the mapping tables. This approach can be implemented for both SAP standard tables and custom tables such as Z-developments.
This approach has some major advantages over other approaches (such as simply starting to use new account numbers). Since all data in the database is converted using this approach, all data is included: customizing tables, master data, and transactional data. As a result, after the conversion is finished the SAP system will appear as if it has always been in the converted state. This avoids breaks in business processes since no new documents have to be posted. You can flexibly choose the cutover date and are not forced to use the first day of a period or even calendar year, for instance. Year-on-year reporting is still possible, and in some cases even enabled by this transformation.
Typical harmonization scenarios that can be implemented using SLO tools such as SAP LT and Datavard extensions include these scenarios and business objects:
- Chart of Accounts conversion with changes to G/L accounts, cost elements, and the Chart of Accounts itself. Accounts can be renumbered, and it is even possible to merge accounts with the same function.
- Profit Center conversions and Cost Center conversions with renames and/or merges of Profit and Cost Centers
- Master Data harmonization, such as rename and merge of customer numbers, vendor numbers, material numbers, and business partner numbers. Of course, such harmonization may be connected to the implementation of MDM (Master Data Management) tools or processes.
- Fiscal Year changes with the implementation of a shortened fiscal year, and changes to the numbers of fiscal years to align several SAP systems.
- Renaming of organizational units such as Controlling Areas, Company Codes, Plants, or lower level organizational units such as Sales Organizations and Purchasing Organizations. (Mergers of such organizational units are also possible, but usually not part of a Data Harmonization transformation project)
Data transformation and audits
When transforming data with such an automated approach I’m often asked whether such changes are legal – after all, direct updates that bypass the SAP standard applications are a big no-go in SAP systems and databases. The answer to this question is yes, indeed this is legal since no values of transactions are changed. No tax codes or amounts are changed.
What happens is that business objects in SAP ( such as FI document numbers or account numbers) receive a new number. However, the logic of how this new number is generated is fully transparent and documented. This means that no critical data changes. It is possible to access the mapping table, include the mapping or transformation logic in the project documentation, and even store the original number of any object in an existing or new field Of course, custom fields can be used for this. For some scenarios SAP standard fields exist already which can be used for such purposes. One example is the field “old material number” in table MARA in case of a material number conversion.
My usual recommendation is to ensure that auditors are informed and even embedded in the transformation project to ensure that all changes are done in the most transparent way possible, and that all requirements for testing and auditing are well known and understood right from the start of the project. This way, project documentation can be manually produced and in some scenarios automatically generated during the transformation to support required legal documentation and auditing processes.