IBM is six months into a massive ERP modernization, moving core on-premises systems to Power servers running in its own cloud as it upgrades them from SAP’s legacy ECC software to the cloud-ready S/4HANA.
IBM’s ERP transformation will be one of the largest under the “Rise with SAP” umbrella — perhaps rivaling that of Microsoft, which announced its own adoption of Rise with SAP for the first stages of its move to S/4HANA in March 2022.
Rise with SAP is an all-in-one subscription offering from SAP, under which the software vendor takes on the hassles of software license management and coordinates the activities of cloud providers and systems integrators chosen by its clients.
In February 2022, SAP named IBM as its first premium supplier for Rise. To earn that designation, IBM combines advisory, implementation, and application management services from IBM Consulting with technical managed services from IBM Cloud, a combination it calls “Breakthrough with IBM for Rise with SAP.”
IBM’s internal transformation will be the first one managed under the Breakthrough offering, according to Joanne Wright, the company’s vice president of enterprise operations and services. Work on it began in late 2021, a few months before Breakthrough was announced.
Some companies might migrate a small department or country system first, as a proof of concept. That’s certainly the approach Microsoft’s consultants are taking, moving just three small areas of its highly customized SAP software to Azure while they figure out processes.
Largest business segment first
In a show of confidence, though, IBM is first moving its largest and most profitable business segment: software, which accounted for $24 billion of its $57 billion revenue in 2021.
That bold choice was driven by the need to free up the software segment from constraints on its growth. Over the years, acquisitions and moves into new geographical markets had left it with a complex product and pricing structure requiring a lot of manual intervention in the sales process.
The move to S/4HANA has enabled IBM to simplify and harmonize processes, eliminating complexity and customization and introducing more flexibility, Wright said: “We’ve been able to deliver touchless process capabilities for the bulk of our transactions.”
IBM has already migrated the quote-to-cash processes for its $13 billion subscription-based software business to S/4HANA in a series of two-week sprints, Wright said, with the rest of the software segment to follow by year-end. After that will come technology services next year, then consulting some time in 2024.
On the way, Wright says, IBM has been training the teams who will migrate and then operate the new platform in other business segments using its internal learning platform. She hopes that their collaboration will also have helped educate SAP about running other customers’ workloads on IBM Power systems. “We’ve helped them, I think, to be trained up and enabled on Power and Red Hat,” she said.
Key to IBM’s internal transformation is the ability to run SAP applications on Red Hat Enterprise Linux on Power servers in its own cloud, a capability it will now be opening up to other companies under the Breakthrough banner.
“This is our technology stack, and the opportunity for us was to be ‘client zero.’ We wanted to be a user of the experience that our clients would have,” said Wright.
IBM’s multiple roles in this project — as client, consultant, and cloud provider — might at first glance leave little room for SAP, but Wright says the software vendor is highly involved.
“We are very engaged with SAP and are leveraging SAP Consulting on the project alongside IBM Consulting, and an SAP executive will be on our steering committee,” she said. “We also have top to top alignment with SAP as a strategic partner.”
As if to prove Wright’s point, SAP CEO Christian Klein mentioned IBM’s ERP transformation early in his opening keynote at Sapphire, SAP’s annual customer event in Orlando this week.
“Take IBM, a great partner, and as a customer we are helping them now, with Rise with SAP, to transform their portfolio, investing into new business and divesting other businesses in an agile fashion,” Klein said, adding: “We are moving over 375TB of data into the cloud and consolidating 300 instances into one global instance in the cloud.”
This article has been updated to include Christian Klein’s comment from Sapphire.