Microsoft has started migrating its internal SAP systems to S/4HANA under the RISE with SAP umbrella.
In choosing RISE, Microsoft is making SAP responsible for the licensing, technical management, hosting and support of its SAP applications under a single SLA — although ultimately Microsoft will host its S/4HANA instances in its own Azure cloud, and some of the migration work will be performed by third parties.
The migration to S/4HANA will serve a dual purpose for Microsoft: modernizing its legacy SAP systems before the end of mainstream support in 2027 and demonstrating to customers that it is capable of hosting and running one of the largest and most complex SAP installations in the world within the RISE framework.
All three major cloud providers host SAP applications for their customers, and all three run at least some of their internal financial systems on SAP. Microsoft has run SAP internally since at least 1995; Amazon.com is reported to have turned to SAP for its finances in 2008, while Google parent Alphabet replaced some of its Oracle financial systems with SAP in April 2021. Microsoft, though, is the first to adopt the RISE with SAP offering.
Microsoft’s engineering team is no stranger to complex SAP projects: Last year, it completed the migration of internal legacy SAP systems from dedicated servers to its Azure cloud, a stepwise process that now provides it with a model for managing the S/4HANA migration.
“It helped us to tune our Microsoft cloud to run SAP environments, highly complex, large-scale environments, the largest in the world,” said João Couto, vice-president of the SAP business unit at Microsoft.
Couto is more used to helping joint customers of SAP and Microsoft move their applications into the Azure cloud but has been heavily involved in discussions with his colleagues at Microsoft Digital, the company’s internal IT services organization, about the S/4HANA migration.
Although the companies are only now announcing the deal, work on the migration has already begun.
“We started a few months ago,” Couto said. “We are in the planning and assessment phase. In some elements we are already going into a deep dive and understanding how we can adjust our own internal operations and how the services will be provisioned, how the SLA will be delivered.”
Among the questions to be answered, he said, are who will deliver which services, and how will integrations be made to surrounding Microsoft systems that are not part of the RISE offering.
Understanding the lie of the land before moving anything is important, as Microsoft has one of the largest and most complex SAP installations in the world, serving multiple business units and also managing its core finances. The systems must cope with sales of products, services, and subscriptions to businesses and to consumers.
“We have a full portfolio of core finance and operations systems of record anchored on SAP systems, but we also have many other applications from SAP running at Microsoft, from SuccessFactors to Integrated Business Planning,” said Couto.
It’s not just the scale of Microsoft’s SAP environment that makes migration a challenge, but also the degree of customization.
“Like the vast majority of large SAP customers, our system has been very highly customized. We have invested heavily in high degrees of automation and high degrees of integration with multiple other systems in-house,” said Couto. “That makes it even more exciting, let’s put it this way, to go through this journey.”
To ensure that things don’t become too exciting, Microsoft is focusing on migrating just three areas of its business for the first phase of the project, working directly with SAP and without the support of a systems integrator.
Couto said he expects to be able to announce the results of this first phase later in the year, and that other partners will become involved after that, as the migration process scales up.
“It’s definitely going to be a multi-year project for us taking into consideration that we also want to leverage the opportunity to build new levels of services, new integrations, new innovations that we can make available for customers,” he said.
SAP’s head of strategic engineering partnerships, Stefan Goebel, said that unraveling decades of customizations will be a challenge for Microsoft, but not the biggest.
“Change management is definitely going to be the largest challenge to begin with, regardless of whether it’s SAP or anything else. If you have software that was initially installed 20 years ago, that’s just going to be a big piece of work.”