SAP ERP Comes to the Microsoft Azure Cloud: Understanding Project ‘Embrace’

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Companies using SAP ERP have until the end of 2025 to transition to SAP S/4HANA. They also have to decide on a cloud and deployment model. SAP’s partnership with three cloud leaders—Microsoft Azure, Amazon Web Services, and Google Cloud—offers opportunities to make ERP more powerful, efficient, and strategic.

In the life-cycles of enterprise-level software, five or six years is not all that long. It can take companies several years to deploy an ERP system and reap the benefits. Major infrastructural and technical changes can also require long-term planning and budgeting. Then, as such a significant undertaking comes closer, it may still require thousands of small steps—interactions, negotiations, and agreements—to ensure that project managers and stakeholders are on board and available.

Thus, it’s easy to understand why, in the spring of 2018, SAP published a deadline of the end of 2025 for companies using its ERP software to migrate to SAP S/4HANA. At that time, the company’s ERP software will only run on the HANA database. Customers using other SAP database software, or databases from Oracle and other providers, will need to transition their ERP-supported processes and data to S/4HANA. At a minimum, that means designing, testing, and performing data migrations. Business users, as well as IT, will need to become familiar and comfortable with the new software.

An Impactful Technology Change

For organizations that decide to keep their SAP system on-premises, moving to S/4HANA will also require new purchases of server, storage, and networking hardware that can run the ERP system and database clusters, and that will also perform optimally with Linux. Linux is the one operating system that will work with the SAP technology. If their current instance of SAP ERP software is highly customized, a re-implementation could become more demanding and time-consuming. If they currently run SAP on-premises and decide to move forward with ERP in the cloud, they must choose a cloud platform and architecture that fits with how they manage their operations, data, and applications, and prepare accordingly.

For SAP, bringing all ERP customers to S/4HANA is likely the best way to focus its resources and continue delivering innovation and continuous improvement. However, this transition comes with risk for the software company and its customers. For one thing, customers have been slow to adopt S/4HANA: currently, the system accounts for less than five percent of SAP’s installs. Some companies may consider that juncture as the right moment to consider the merits of other ERP offerings, and a few of them might change course. In any case, the status quo is not an option for them because SAP will stop supporting older software. No matter what companies decide to do, they need to practice effective change management and risk mitigation to ensure that their ERP transition is as smooth and non-disruptive as possible.

Today’s Leading Cloud Technology Meets Enterprise ERP

Not all customers were immediately enthusiastic about SAP’s 2025 announcement. In the view of some CIOs, SAP S/3 is a powerful, familiar technology and a valued business asset. In contrast, the faster-performing HANA database of S/4HANA has not proven to be as mature and robust. Experienced systems integrators and consultancies can help a company ease the transition, but concerns about the risks, costs, and complexities remain.

A major ERP upgrade, together with a platform change, will never be quick and easy, even if companies own or have access to advanced SAP and cloud expertise. A recent announcement from SAP makes it clear that the company is hoping to transition its customers to S/4HANA and reap the innovative, operational, technical, and economic benefits of modern cloud technology.

Project Embrace, as SAP calls it, brings together Microsoft, Google, Amazon Web Services (AWS), and SAP itself. Companies can decide whether the cloud environments of Microsoft Azure will best serve them, Google Cloud, or AWS as the digital home for their S/4HANA and SAP Cloud Platform solutions. They will have access to the answers and resources available on Azure, AWS, or Google Cloud, along with the surrounding, global networks of ISVs, systems integrators, consultancies, and managed service providers.

Roadmaps for ERP Success with Complementary, Leading Solutions

What are the outcomes SAP and its customers might hope for from S/4HANA cloud migrations? They could include faster implementations with better risk mitigation, streamlined negotiations and engagements with well-aligned technology providers and implementation partners, and a shorter time-to-benefit for their SAP ERP solution in the cloud. SAP and its three strategic cloud partners will also develop reference architectures, templates, and roadmaps to help customers in specific industries perform successful cloud implementations of SAP S/4HANA. SAP uses the term “market-approved journeys” to express that roadmaps and other guidance provided within Embrace are not merely good ideas—they refer to real commitments and practical strategies that are meant to deliver tangible benefits to SAP customers.

SAP, Microsoft, Google, and AWS may, to a degree, compete, but their technologies and approaches are also highly complementary. The four partners obviously determined that there was no gain in presenting SAP customers with challenges they didn’t ask for. Another likely consideration was that many enterprises running on SAP ERP would be loathing to face what might look to them as a potentially disruptive and costly move to another solution. They are not likely to adopt another vendor’s technology unless there is a compelling business case to be made for doing so, and an implementation partner can show them how they could perform a controlled, low-risk deployment. Customers may not abandon SAP quickly but might be more inclined to do so if another ERP system could be implemented in a streamlined, predictable manner. They might also find that the ISV solutions to extend ERP they can see in the Azure, AWS, or Google Cloud environments could be of value.

SAP ERP with Azure is Good News for SAP Customers

Sikich has been in a partnership with Microsoft and helped companies take advantage of Microsoft Dynamics, Microsoft Azure, and other solutions for decades. We agree that it makes excellent sense for Microsoft and SAP to collaborate in serving customers. The companies know each other well and fruitfully coexist in many of the world’s markets. According to Microsoft, 110,000 users internally use SAP, just like SAP’s workforce of 84,000 uses solutions from Microsoft. Also, 92 percent of the Forbes Global 2000 are SAP customers, while more than 90 percent of the Fortune 500—which lists U.S. companies—run on Azure.

To companies building their SAP ERP and database infrastructure on Azure, Microsoft promises rapid and straightforward data backup and recovery, vastly scalable storage, and the ability to within just minutes spin up systems with as much as 24 TB of RAM or 60 TB scale-out storage for HANA. These businesses can also take advantage of Microsoft Dynamics 365, the cloud-based, widely adopted portfolio of ERP and CRM capabilities. Companies running on SAP were using Microsoft Dynamics, for example, to support individual business entities or meet specialized, regional requirements, long before Dynamics moved to the cloud. Documented, well-proven best practices for deploying SAP with Microsoft Dynamics have been available for many years. However, with both SAP S4/HANA and Microsoft Dynamics 365 on the Azure platform, companies can enjoy greater flexibility and ease in integrating the two technologies to their advantage. One way to deploy SAP and Dynamics 365 jointly is to use a hub-and-spoke architecture, as we discuss in another blog post.

At Sikich, we speak the language of your industry, and we have a proud track record of hundreds of successful ERP implementations. If you’re looking for sound expertise and strategic insight, please get in touch. Sikich ERP and cloud consultants can help you map an implementation of Dynamics 365 in a hub-and-spoke environment with SAP. And, if you’re interested in potentially shifting your SAP system to the Microsoft Azure cloud, we’ll gladly provide information and guidance on how you could accomplish this.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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