Explaining the Clean Core Approach

To thrive in the digital era, organizations must adapt to changing business environments and embrace new capabilities.

Organizations depend on IT to deliver the capabilities that drive their strategic initiatives. Flexibility and speed in supporting strategic changes or fostering innovation are crucial. However, legacy systems burdened with significant technical debt can hinder organizational agility. Modern enterprise resource planning (ERP) software now serves as a dynamic, evolving platform, offering extended capabilities such as built-in insights, automation, workflows, standard integrations, and easy extensibility. These features provide distinctive advantages without the encumbrance of technical debt. To apply these new technologies and enable business evolution, organizations must address the complexities of their legacy systems.

IT must deliver essential capabilities while maintaining organizational agility. The primary goal of IT is to enhance an organization’s competitive edge by equipping the business with the right technological capabilities. Historically, this has led to variations within ERP systems—such as modifications in data, processes, integrations, extensions, and code. In some instances, these changes were crucial for providing business-critical capabilities or integrating disparate systems. However, some changes did not yield valuable outcomes. Regardless of their necessity, the methods used to extend standard functionality often introduced technical debt, demanding significant maintenance efforts.

Changes in both the business and technology landscapes are compelling organizations to address legacy complexities. Disruptions in global supply chains, evolving customer preferences, and shifting employee dynamics require businesses to adapt rapidly to new demands. Technological advancements are delivering new capabilities at an accelerated rate. However, significant technical debt hinders the adoption of these new technologies, with 10 to 20 percent of the technology budget for new products being diverted to resolving issues related to tech debt. This diversion limits the ability to respond effectively to emerging business requirements.

It pertains to the dimensions used to deliver capabilities through an ERP system. We consider six dimensions when discussing an organization's core. These technical and procedural aspects work together to equip your business with the capabilities needed to achieve desired outcomes.

The clean core approach aims to create modern, flexible, and cloud-compliant ERPs. Achieving a clean core involves integrating and extending a system to ensure it aligns with cloud compliance standards, while maintaining effective governance of master data and business processes.

A common misconception is that a clean core means a system free of core customization. In reality, a truly "clean" core adheres to standardized guidelines for all its elements. This adherence ensures that when system upgrades are necessary, changes can be implemented with minimal manual effort for testing and adapting existing structures.

Organizations can find it challenging to achieve a perfectly clean core. However, the more they can integrate these elements into their landscape, the greater the benefits they experience in business performance and cloud delivery.

Adhering to standard guidelines for innovation enables the creation of a competitive edge while sidestepping technical debt. Introducing new capabilities into the organization often yields benefits for both its top and bottom lines. Organizations operating within standard environments can quickly and affordably adopt new capabilities compared to those deviating from standard practices. The benefits projected from the new capabilities are realized more rapidly and extensively when the core is clean. Establishing a clean core, whether in readiness for transitioning to the cloud or already within it, optimizes the advantages of cloud delivery.

Organizations must start by comprehending the extent of necessary changes and the urgency with which they must be implemented.

Amount of Change: Organizations with a significant demand for new capabilities to meet business requirements can contemplate a project to transition to a modern ERP system. Conversely, those already equipped with adequate capabilities prioritize optimization or innovation within the existing environment.

Required Speed of Change: Organizations requiring rapid innovation to adapt to market dynamics need to transition to modern platforms for enhanced capabilities. Conversely, those facing a less urgent need for change seeks to enhance access to existing capabilities. These considerations dictate whether the focus can be on optimizing the current core, migrating to a less complex landscape, embarking on a complete transformation with a new greenfield system, or innovating differentiating capabilities beyond the core. Grasping this overarching strategic direction will guide the precise actions needed to enhance agility in the near future and ready the organization for forthcoming initiatives like transitioning to the cloud. Given that each organization varies in its level of standardization, we advise collaborating with SAP to identify the most suitable transformation approach for your specific needs.

Certain organizations achieve cleanliness through migration transformation, while others do so through new implementations. Regardless of the approach, maintaining cleanliness needs establishing robust governance. Transitioning to and sustaining a clean core demands dedication from both the business and IT sectors.

Through collaboration among business, IT, and partners, achieving a clean core becomes achievable. SAP provides a proven methodology to assist organizations in comprehending both business and technology imperatives, along with the complete spectrum of transformation benefits. Our process involves benchmarking business Key Performance Indicators (KPIs) against industry peers and evaluating digital maturity compared to industry standards to offer recommendations on areas to prioritize, along with the necessary enabling capabilities. We work together with you to articulate the qualitative and quantitative benefits of addressing identified gaps.

Conclusion: 'CLEAN CORE' is a method aimed at achieving and preserving the cleanliness of an organization's core enterprise management systems to enhance 'maintainability' and reduce the total cost of ownership (TCO). This encompasses activities across software, data, interfaces, processes, and operations.