7 lessons from an 18-month SAP transformation at scale

By: Gino Ruggiero

Listen to a press conference after your favorite sports team wins, and you’ll likely hear coaches emphasize “the process.”

The wording may vary, but the message is essentially the same: When you focus intently on planning and executing clearly defined goals, measurements like wins and losses take care of themselves.

This adage proved true for Kyndryl when we embarked on an enterprise-wide migration to SAP. While our journey is unique, it offers key lessons that can be applied by any organization planning a similar modernization.

A transformational journey to simplicity

Our transformation journey began in November 2021, when Kyndryl spun off from IBM to form the world’s largest IT infrastructure services provider. As part of the separation, we entered a transition service agreement (TSA) to exit more than 1,800 existing business platforms and applications within two years. Finance, procurement and quote-to-cash applications constituted approximately 20% of that IT environment.

Following a detailed strategy developed by the CIO office, Kyndryl worked with SAP and two service integration partners to consolidate 375 finance, procurement and quote-to-cash systems, processes and reporting capabilities onto a single SAP platform comprised of 15 SAP solutions anchored by S/4 HANA. The project, which lasted 18 months and involved setting up more than 71,000 S/4 users worldwide, was a full business system update done in real-time without affecting normal operations.

Replacing multiple legacy systems and disparate technology with an integrated SAP platform will provide a continuous, timely and accurate flow of information that employees can use to make transactions and perform real-time analytics. As one of the largest components of Kyndryl’s global IT transformation, our SAP modernization is already playing a significant role in reducing the company’s selling, general and administrative expenses (SG&A) by an anticipated USD $200 to $300 million over time.

How to apply our lessons learned

Whether you’re implementing SAP for the first time or moving ECC to S/4 HANA, here are seven critical steps to help manage SAP transformation at scale.

1.   Assess your current state

Before you begin replacing applications and systems, analyze your existing technology stack and architecture to evaluate performance and identify the strengths and weaknesses of your current systems. This assessment will help you define the scope and understand the complexity of your transformation.

The Kyndryl experience

During our pre-transformation assessment, our Enterprise Applications team discovered that the legacy business system wasn’t a single standardized system; instead, it was made up of hundreds of fragmented systems that supported seven core processes, ranging from accounting and finance to procurement and quote-to-cash. The transformation team determined there were too many customizations and too much connecting code for ancillary applications to replicate in the new, planned environment.

Rather than conduct an extensive review of technical requirements, we focused on the scope and addressed the historical complexity of our project. This approach allowed us to make decisions quickly and avoid delays caused by overanalyzing the initial stages of our transformation.

2.   Identify business drivers

Although the technical work could be the primary objective of an SAP implementation, it’s essential to identify key business drivers—and their preferred outcomes—when planning your transformation strategy.

The Kyndryl experience

Meeting the TSA deadline was our SAP transformation’s most pressing business driver. However, as a significant component of Kyndryl’s larger IT transformation, the SAP modernization was central to streamlining our IT environment and creating a fit-for-purpose technology estate.

Our transformation was guided by the principles of speed, functionality and maintaining operational stability. So, we opted for a standard, out-of-the-box integration that prioritized data unification and centralization, ensuring a smooth transition without disrupting our operations.

Centralizing and standardizing data in the new system empowered the CIO’s office to participate in the integration and help set and drive business goals aligned with the project. For any customization, we started with a preconfigured template as a best practice and then added to it in a controlled fashion with governance.

3.  Create a transformation strategy

Your transformation strategy serves as the roadmap for your SAP modernization. It should be structured enough to keep your organization on track yet flexible enough to accommodate unforeseen obstacles and opportunities.

The Kyndryl experience

For Kyndryl, we determined it was better for our long-term operating strategy to start with a clean slate than to replicate thousands of lines of inherited code from legacy applications. So, we chose a greenfield implementation¹ of select SAP elements. We used SAP best practices for our implementation, staggering application deployment across the 66 countries where we have offices in the following order:

• Central finance S/4HANA for reporting
• Full finance and quote-to-cash on S/4HANA
• Procurement with Ariba and Fieldglass for source to pay

Following the finance consolidation, we performed two major deployment waves, starting with 24 countries already using SAP ECC. This strategy allowed more time to manage the data transformation for the 42 non-SAP countries in the second deployment group. We also scheduled minor releases around each deployment to add features incrementally.

4.  Allow for innovation

Always look for fresh approaches to processes and problem-solving during a transformation, even when facing strict deadlines.

The Kyndryl experience

During our SAP modernization, the Enterprise Applications team designed a process to run our legacy system while simultaneously feeding data into the new SAP system. This dual-run approach minimized disruptions, allowing the respective departments to operate “business as usual.”

To execute our run-and-transform plan, the team developed algorithms and software to tag master data and hold it for references from transactional data. The master data, a crucial component of our system’s reliability, was managed by SAP Master Data Governance (MDG), which ensured master data was identified and stabilized.

Once the team was confident the master data was stable, transactional data was extracted and cleansed for loading into the new system. This migration approach diminished resistance to adoption by allowing employees to work in the legacy system during the transformation and enabling them to observe the data in the system.

5.   Prioritize transformation governance

Governance begins with executive buy-in, reinforced at all levels of the organization. Without attention to governance and clearly defined objectives and guidelines, your modernization can experience scope creep³ as you address inevitable challenges.

The Kyndryl experience

To help keep the size, scope and budget of our SAP transformation on target, we:

• Assembled a governance board of C-suite executives that met weekly to review milestones, discuss unforeseen problems, and address any issues that had arisen. These meetings allowed the board to assist in problem-solving and allocate additional resources if needed.
• Established implementation frameworks comprised of technical implementations and country deployments. For the first wave, we assigned five specialists to each country deployment for four months. After the first wave of implementation began, we realized we needed more staffing for shorter periods, so we increased teams to 20 members and reduced their assignments to one month.
• Developed business continuity and disaster recovery plans to maximize system availability. For planned and unplanned outages, we created a failover system that continuously synchronizes with the active system to minimize disruptions. We also designed a mirror production site to limit data loss and application downtime in the event of large-scale system failures.  

6.   Anticipate budget adjustments

Budgeting for a company-wide IT transformation is a balancing act of accounting and people management. Commit too much—or too little—money or personnel to one area of your project, and you’ll feel the impact in other areas.

The Kyndryl experience

For our SAP transformation, the Enterprise Applications team used historical data to estimate costs and set budgets. However, during implementation, we encountered the following challenges that required additional funding and personnel to meet a deadline that couldn’t shift without incurring potential regulatory fines or penalties:

• Implementation costs in different locations
• Tax requirements across regions
• Staffing assignments and redeployment
• Regulatory compliance across jurisdictions

By planning ahead for these types of budget disruptors and allocating a percentage of your overall transformation budget to cover unforeseen issues, you can better manage resource allocation for everything from timelines and deadlines to staffing and cashflow.  

It’s important to note that some areas may come under budget, and some may exceed it. However, by continuously monitoring and adjusting the subcomponents of your transformation throughout the modernization journey, you can effectively keep your overall targets within budget, ensuring the success of your project. 

7.   Visualize your future state

Your transformation journey doesn’t end once you go live. You’ll want to evolve continually, whether measuring and comparing KPIs to address post-implementation issues or taking advantage of opportunities and capabilities as they emerge.

The Kyndryl experience

With the implementation of Kyndryl’s new SAP system, daily operations will be significantly simplified. This will free up our engineers to focus on mission-critical work, enhancing their productivity and the overall efficiency of our operations.

Moving forward, employee performance will be measured by their contributions to the business. For example, engineers are now expected to analyze data and generate insights that drive business decisions, enhance revenue, lower costs, and reduce risk.

As a company, we’ll refine our operations and processes as needed and continue to use the evolving capabilities of the SAP platform. We’re looking to:

• Overhaul our pre-sales processes, from sales lead through contract signature
• Change our usage business model, implementing SAP Billing and Revenue Innovation Management solutions (BRIM)
• Decommission two legacy ECC systems
• Expand our use of RISE with SAP

As our CIO says, “Don’t let perfection be the enemy of good.” This means that we strive for excellence but focus on getting the solution to the appropriate business owner and making enhancements as needed. This approach allows us to adapt to changing circumstances, a key aspect of our ongoing transformation journey.

A final word on transformation processes

Kyndryl’s SAP modernization—on time and within acceptable budget parameters—was made possible by the people and processes we devoted to the program. This principle rings true for many transformation projects. By taking a methodical, almost obsessive, approach to planning, managing, executing and measuring organization-wide change, you can achieve business outcomes that enhance the overall success of your modernization.

Gino Ruggiero is a director and delivery partner in the CIO office of Kyndryl.

1 The S/4HANA deployment dictionary: Your back pocket guide to everything greenfield, brownfield and bluefield, SAP, August 2023

2 SAP Enable Now, SAP, June 2024

3 How to overcome the challenge of scope creep, DevPro Journal, May 2023