IBM’s massive SAP S/4HANA migration pays off

IBM is at SAP’s Sapphire conference in Orlando this week promoting its consulting services and wisdom gained from its multiyear transformation to SAP S/4HANA on IBM Power Virtual Server.

Ann Funai, CIO and vice president of IBM’s Business Platform Transformation, says Big Blue has achieved a 30% reduction in infrastructure-related operational costs since completing its migration to SAP’s cloud ERP platform last July.

IBM’s migration to S/4HANA, which Funai says is one of SAP’s largest installations, has also led to improvements in contract registration cycle times, as well as greater efficiencies in billing by reducing invoice-generation cycle times. The shift from on-premises ERP to ERP on the cloud has also sped up payment reconciliation while reducing errors in account receivables.

IBM standardized on SAP’s on-prem ECC system in 2012 after years of supporting a hodgepodge of custom “mini-ERP” systems adopted by various units within the massive corporation, Funai says. The migration away from its on-prem installation to SAP’s cloud platform began in earnest in 2022.

Building business on lessons learned

The migration is part of IBM’s blueprint to streamline its business processes and ensure its IT systems remain agile for the cloud and AI era, a theme delivered by several IBM executives at Sapphire this week.

“If we run this very clean core, we pull out our homegrown tools, it’s making the business more efficient,” says Funai, who began her career with the IBM Power Group and rejoined IBM in 2022 in IT after a brief stint as CTO of Under Armour, as IBM was getting under way with the migration.

As SAP continues to push its large enterprise customer base to migrate to S/4HANA, IBM, a major partner and customer of 52 years, will try to persuade reluctant CIOs to achieve the benefits of migrating now rather than waiting until the stated deadline of 2027.

But it is not an easy sell. Even with the depth and breadth of IBM Consulting leading the way, Funai acknowledges the complexity and difficulty of such a massive migration project given that ERP is the beating heart of any enterprise and cannot falter.

“This is the scary stuff, right? This is the account ledger. This is your most financially significant, government-regulated [software]. This is what keeps your supply chain and your distribution channels going,” the CIO says. “It is the core. Businesses that use this are dependent upon this technology working flawlessly.”

Funai adds: “I think there’s a natural human instinct to have a little bit of fear about touching that. … I think that’s some of the difficulty.”

To be sure, ERP transformations remain a make-or-break initiative for IT leaders. Yet Funai is clear that enterprises dragging their feet are resisting the inevitable move to a SaaS model.

“What we see is SAP moving to more of a SaaS-oriented world, which drives their ability to provide us with updates, changes, and modifications,” Funai says. “For us, we recognize it’s the right direction for our company. It’s a SaaS world and if you’re not there, you are going to be there. That’s how you modernize.”

Funai is pleased with the initial benefits of moving to S/4HANA, which she estimates involved roughly 400 IBM employees to complete. ERP operations are more streamlined and easier to manage, she says.

“Shutting down all those systems, our infrastructure costs and operational costs, has meant a total reduction of about 30%. That’s systems consolidation. That is automation we’re able to put in place,” Funai says. “Frankly, from my seat as CIO, it’s a single team to manage the system. That has been tremendously helpful for us.”

Funai feels empowered to help enterprise customers because her IT staff has overcome obstacles and challenges along the way that are relevant to all customers.

“Every CIO I talk to, every person is in the same seat as me, and it’s the same conversation, whether you’re in retail, finance, or supply chain. Everyone has these same concerns,” Funai says. “With us being able to show how we got though the planning, testing, and business alignment. It’s showing the art of the possible.”

A challenging journey

No doubt, it certainly helps to have IBM Consulting services in house, Funai admits.

Forrester analyst Akshara Naik Lopez agrees.

“IBM placed in the leader category for SAP services, which is the topmost category for a Forrester Wave evaluation,” she says. “It is a pretty big deal in terms of assessment of their SAP services practice compared to other GSIs [global systems integrators]. Only Accenture, Deloitte, and CapGemini are the other services firms in that leader category along with IBM’s SAP practice.”

Of course, SAP offers enterprise customers various paths to SAP 4/HANA and 2027 is not a hard stop for large customers, analyst maintain.

Gartner claims SAP customers are continuing their shift to the cloud, including workloads based on SAP ABAP Platform and SAP NetWeaver. And while IBM is running its platform partially on IBM Cloud, most customers prefer to move their SAP workloads to their preferred cloud hyperscalers — and IBM Cloud is uncommon there, with only 1.5% of the worldwide cloud market share, according to recent Gartner findings. 

But Funai’s primary focus is achieving greater efficiencies in house. Standardizing on SAP from its mixed ERP past has also eased the process of merger and acquisitions of large enterprises, of which IBM has completed 191 in recent years, including Red Hat, Apptio, DataStax, Hakkoda, HashiCorp, and a number of Oracle consulting firms.

“Having that single ERP system when you’re ingesting another global corporation is a streamline to the merger and acquisition process,” she says.

SAP continues to make headway on enlisting customers to cloud transformation. According to Gartner, by the end of 2024, approximately 39% of worldwide ECC customers — about 35,000 organizations — had bought or subscribed to licenses to start their transition to SAP S/4HANA. As of that time, S/4HANA had close to 26,900 customers, with approximately 62% of those added late last year being net-new ones.

Still, the sales performance of SAP’s own RISE offering, which bundles S/4HANA with SAP services to move your current ERP data to the cloud, shows challenges, Gartner maintains. Four years after the launch of RISE with SAP, which recently announced a partnership with IBM Power, many organizations “continue to express skepticism” regarding the offering’s value, Gartner claims.

According to Gartner’s estimates, as of April 2025 around 5,800 customers have signed RISE contracts, representing around 22% of total S/4HANA sales to date.

For Funai, however, completing the migration early has paid dividends for IBM, including “higher free cash flow and productivity savings that are real,” she says — not to mention freeing up personnel for higher-value tasks.

“From a CIO standpoint, we now have significantly easier management and maintenance of some of the most delicate parts of the back office of IBM,” Funai says. “We can put brains on more high value things for IBM, but for the rest of the corporation, like for our accounts receivable, they can receive money a heck of a lot easier than they could before and customers get a simpler invoice.”