Microsoft and SAP share the love in new ERP mega deal

Microsoft has chosen RISE with SAP on Microsoft Cloud, making it the first public cloud provider to adopt the solution.

Microsoft and SAP have a long track record of collaboration and the Redmond giant has run large parts of its internal operations on SAP ERP for decades. However, the announcement that Microsoft has signed up to RISE with SAP to deploy S/4HANA Cloud (private edition) is still a huge endorsement of SAP’s cloud credentials – considering Microsoft has its own cloud ERP solution in the form of Dynamics 365.

RISE with SAP got off to a slow start but momentum for the ‘transformation-as-a-service’ offering is gathering pace – and that pace is reflected in SAP’s cloud revenue trajectory which has been going in one sharp direction for five straight quarters.

RISE with SAP will allow Microsoft to deploy new capabilities and technologies faster and run its business on a flexible cloud-first solution that is integrated with the other SAP solutions that Microsoft uses. The decision to adopt RISE with SAP builds on its wide adoption of SAP technologies, including SAP SuccessFactors solutions, the SAP Integrated Business Planning for Supply Chain solution, SAP Business Technology platform and other SAP solutions running on Microsoft Azure.

Microsoft’s implementation of RISE with SAP will deepen Microsoft’s expertise with SAP solutions and establish best practices that can be shared to the benefit of its and SAP’s joint customers. As part of its own transformative journey and to gain operational efficiencies, SAP will optimize IT operations for some critical internal business systems under the operations model used for the RISE with SAP solution hosted on Microsoft Azure.

The deal is a huge win for SAP and a bold statement by Microsoft, but it does raise one obvious question: why doesn’t Microsoft use its own ERP solution?

Put simply, Dynamics was never designed to run a behemoth like SAP. Despite being the fastest growing cloud ERP solution – by as much as 45 percent at its current rate – customers that are selecting Dynamics will most likely have simpler businesses and Microsoft is an obvious fit if you are already using Teams and running workloads on Azure.

Microsoft has been happily pecking away at both the Oracle and SAP install base – picking up large volumes of customers that were running legacy ERP and driving those impressive growth rate numbers. That may be annoying for both vendors, but they are also converting large swathes of their on-premise customers to cloud – and winning a load of net new names along the way. It seems that in the cloud ERP world there is enough meat for everyone – so much so that one of the key protagonists is quite comfortable announcing to the world that they are using a competitor’s products for their own operations.

Commenting on the deal with SAP, Charlotte Yarkoni, president of commerce and ecosystems at Microsoft, said: “Our goal is to simplify and accelerate our own journey to SAP S/4HANA Cloud. Modernizing highly complex, legacy SAP systems is directly relevant to us at Microsoft and to many of our customers. Leveraging the power of the RISE with SAP solution on Azure will give us the flexibility and agility needed to scale quickly, meet the needs of our own business and share that experience with our customers.”

Florian Roth, chief digital and information officer at SAP, said: “Microsoft’s move to RISE with SAP is a testament to the commitment and strength of SAP and Microsoft’s ongoing partnership to simplify customers’ journey to the cloud by accelerating adoption of SAP S/4HANA Cloud on Microsoft Azure. Likewise, SAP has optimized its critical internal business systems running on Microsoft Azure to benefit from its security, flexibility and scalability. We will be sure to use the learnings from these deployments and share best practices with our customers.”