Why Microsoft Azure and SAP is the winning formula for digitization in the enterprise

What do SAP SE and Microsoft Corp. have in common? These software giants have been hugely successful with their Enterprise focus, with both showing upward trends in their 5-year stock charts. SAP still dominates the global ERP market but has struggled to be competitive in the cloud, while Microsoft — as one of the four ‘cloud hyper scalers’— has an extensive cloud portfolio, led by Azure infrastructure and Microsoft 365.

Both companies share a huge number of enterprise customers, and this strategic overlap resulted in them announcing ‘Embrace’, a joint go-to-market partnership program, in the fall of 2019.

When we at Neptune Software share our vision with clients of ‘digitizing at their own terms’, a common challenge is the organizational alignment of the two traditional enterprise IT camps: SAP and non-SAP. The tension between these two IT departments is a major threat to transformation strategies and harmonizing application landscapes.

SAP IT is often perceived as merely “keeping the lights on” with non-SAP IT seen as nurturing “sexier innovation activity”. As a result, finding common ground to drive digitization is often an afterthought.

We see this common challenge across enterprise landscapes. But we’re also experiencing a lot of success among our clients, whose cross-functional teams take a modern, holistic approach to integration and are delivering successful digitization campaigns.

Here is why Neptune Software sees Microsoft and SAP being at the heart of thriving integration projects.

“Hybrid cloud is the new black” as Sven Denecken, SAP’s Head of Product Success,  points out in his business trends blog (SDE2020). Most companies acknowledge the need to adopt SaaS solutions alongside their on-premise digital core / central ERP. With these being businesses critical and often a source of competitive advantage, these core systems are strategically kept at arm’s length from IT architects looking for compromise in a SaaS-dominated world.

Senior ERP Consulting Executive and author of ‘Digital with Impact’, Brian Sommer (BSO2020) goes further, questioning whether ERP customers are asking the right questions when it comes to the next 10 to 20-year vendor-commitment in his assessment of ERP upgrades in the 21^st century. Gartner underlines the shift to hybrid solutions by predicting more than 80% of product-centric companies that currently own a legacy ERP solution would have considered a federated ERP application approach to fulfill their product-centric business capabilities by 2021 (GAR2019). Add in trends from central Europe, the latest DSAG investment report supports the hybrid theory, outlining a clear push towards SAP’s current SAP S/4HANA offering, with the SAP S/4HANA-public-cloud option stagnating at single digits (DSA2020).

But hybrid architectures need to enhance user productivity. This requires a long-term UX strategy, paired with easy-access and minimal training-efforts that show tangible performance improvements. This is where Microsoft’s portfolio comes into play.

Microsoft 365 (M365) is a global success story of cloud-adoption — with 1 in 5 corporate employees now using an M365 service globally (PTG2019). Worldwide more than 800.000 companies have adopted the Office suite (STA2020) since 2011, with over half a million businesses using Microsoft Teams — including 91% of the Fortune 100 (PTG2019). This number is only going to grow, with most business users, worldwide, logging in to M365 daily.

Behind the scenes, M365 uses Microsoft Azure Active Directory (Azure AD) to manage user identities. Every M365 subscription includes Microsoft Azure AD so that companies can integrate the two to sync passwords or set up single sign-on (SSO) with their on-premises environment. As most business users log on to M365 first thing each day, Microsoft has managed to bundle three of its main assets — Microsoft Office suite, Azure cloud, and Active Directory (AD) — to form a portfolio that’s an easily-justified investment to make for almost any enterprise.

The only remaining challenge for Enterprise IT architects is how to integrate this suite into the hybrid IT landscape architecture around the core ERP solution without cutting off other innovative digital solutions and technology stacks.

A major tobacco industry player has worked with numerous system integrators to provide its workforce with both native and progressive web applications (PWA) to broaden access to several SAP-based self-services. These modern apps — designed in line with B2C design guidelines — enable people to fulfill HR-related employee self-services as well as provide functional processes across the ERP landscape.

Using M365 credentials to authenticate to the app meant the organization had to find a way to connect to several SAP backends — each with its own SAP user master data — while supporting logon for native applications running on iOS and Android as well as several PWAs.

The solution was to integrate Microsoft Azure AD with the Neptune DX Platform to provide an authentication mechanism, supporting both offline and server-side, by using built-in principal propagation functionality to log on to multiple SAP backends with the matching SAP end-user. Without devaluing the investments already made in developing several native apps, Neptune DXP meant the IT teams were suddenly able to configure and deploy all apps with integrated M365 single-sign-on authentication. It also meant they could improve dev times for future digital products needed to access any desired backend system.

Another global player, this time in automotive, needed to integrate its global SCM architecture to gain central control of and insights into isolated silos across its worldwide supply chain.

Managing and supporting more than 6.000 suppliers — along with a reverse supply chain for packaging materials — was a challenge. Its scattered IT landscape had over 50 major backends and thousands of proprietary interfaces. It took years for a team of enterprise IT architects to create an API-centric strategy that finally broke down the technology silos and cracked open the organizational silos that prevented performance improvements.

Integrating applications and dashboards with Oracle’s Transport Management solution, Microsoft Azure Data Lake Analytics, and multiple SAP S/4HANA backends enabled the team to free up major systems.

Using the Neptune DX Platform, the team replaced proprietary interfaces and gateways with a common REST-standard. And created a central control system, adding application by application with a common UX and AD-based single-sign-on.

The joint go-to-market partnership announced in October 2019 between SAP and Microsoft will further strengthen the efforts to bundle Microsoft Azure technology with SAP ERP applications with a focus on SAP S/4HANA migrations.

As SAP SE’s former co-CEO commented, “The partnership is all about reducing complexity and minimizing costs for customers as they move to SAP S/4HANA.”. “Bringing together the power of SAP and Microsoft provides customers with the assurance of working with two industry leaders so they can confidently and efficiently transition into intelligent enterprises.” (SAP2019) While the focus of ‘Embrace’ is on streamlining customer journeys into SAP S/4HANA in the cloud, the large pool of joint Microsoft and SAP customers that continue to have on-premise requirements will also be heard.

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Typically, both Microsoft and SAP technology stacks are managed individually, with both vendors having introduced lots of custom code, modifications, customizations, integrations, and reports over time – especially for ERP. We now live in the hybrid IT era where companies with a digital core are establishing ways to adopt cloud-solutions and build cutting-edge digital products on top.

It must, therefore, be any CIO’s goal to develop a coherent IT-strategy to ‘digitalize at your own terms’ and embrace these IT giants. Neptune DX Platform is the bridge that allows you to choose how you overcome the most challenging IT landscapes, whether it is with SAP, Microsoft, or any other system vendor.

Want to know more about how Neptune Software can integrate Microsoft Azure with SAP? Get in touch now: