How Microsoft Speeds Procurement Transformation with SAP
SAP Spend Connect Live 2024 has seen numerous businesses share how SAP’s expertise is taking their operations to the next level.
On Day 2, Sundar Shanmugam, Head of Digital Transformation for Microsoft's Cloud Operations, discussed how SAP solutions aided its procurement transformation.
Procurement transformation is a challenging task for any team to undertake, but the right technology implementation has the potential to speed and simplify processes.
For Microsoft, that technology was SAP Ariba.
Creating data centres
Sundar explained how SAP solutions successfully introduce standardisation and controls – while empowering users with creative, flexible functionality to enhance engagement and outcomes.
Microsoft's data centre infrastructure is growing at a rapid rate, with hundreds of data centres across more than 20 countries in at least 60 regions. This network includes 190+ network Points of Presence and approximately 442,000 kilometres of network.
Sundar said Microsoft was still in a growth phase, with increasing demand for data centre capacity being driven by a surge in AI and cloud computing needs.
Creating these data centres presents unique challenges. The process typically spans 18-30 months and involves complex processes, from project initiation and budgeting to execution and delivery. Throughout this cycle, projects often go through budget revisions due to various factors including supply chain disruptions, design changes or technological innovations.
How Microsoft transformed
To address these challenges and improve project outcomes, Microsoft's digital transformation initiative focused on three key dimensions:
- Managing stakeholder expectations
- Meeting customer growth needs
- Enhancing user and supplier experiences
The transformation project was aimed at overcoming several hurdles, including the need for business process evolution and dealing with global-scale complexities. Prior to the implementation, processes were largely manual and siloed, with contracts created in Word documents and data scattered across various systems.
"We started a stakeholder engagement process early in the game," said Sundar. "The change management was much smoother and the adoption became much easier because we were able to walk along with them."
SAP: A comprehensive toolset
To tackle these issues, Microsoft adopted a comprehensive toolset centred around SAP solutions.
This included SAP Integrated Business Planning (IBP) for supply chain planning SAP Ariba for sourcing and contracting and integration with other tools like Icertis for Contract Lifecycle Management and Microsoft Dynamics 365 and various project management and cost control systems.
Implementation of SAP Ariba played a crucial role in this transformation. The team leveraged SAP category management capabilities to categorise all materials and services using UNSPSC classification codes, resulting in around 16 distinct categories for the construction business. They also implemented strategic sourcing within Ariba, which was instrumental in compressing the lengthy execution cycle of data centre construction projects.
“Our transformation, to be successful, had to be focused on the business even though technology brings value," added Sundar. "I think it always has to be business-centric and business-focused."
"When I saw the category management capability in this particular spend event, it was like music to my ears because it is going to meet a lot of my current needs.”
Positive outcomes
Key decisions that contributed to the success of the programme included:
- Anchoring the digital vision on the best-in-class future state rather than replicating current processes
- Starting stakeholder engagement early in the process to embed change management in decision making
- Establishing data as the foundational element upon standardised processes could be defined
- Transforming 80& of the most critical areas to protect flexibility for future evolution and avoid diminishing return
- Solutions, visioning and validation workshops with 50+ members across 10+ functional teams
- Migrating more than 3,000 suppliers onto SAP Ariba solutions and improved supply chain predictability using SAP integrated Business Planning for Supply Chain
The team learned several valuable lessons throughout the process, such as:
- Business-driven approach to leverage best-in-class, proven enterprise solutions to maximise business value and reduce complexity of transformation
- E2E digital architecture that transform the entire business and carefully consider all upstream and downstream implications
- Experience leaders and strong partnerships with industry advisors and solution experts that bring industry best practices
- Agile, iterative approach to ensure digital transformation goes hand-in-hand with business evolution
“[We] adopted a purposeful transformation approach, basically to maximise the out of the box functionality," Sundar concluded.
"When it comes to Ariba-like tools, which are SaaS solutions, it's sery important for us to leverage the out-of-the-box capabilities, instead of trying to customise or add a field which can fold the solution."
The new system has enabled Microsoft to generate detailed unit price reports, providing unprecedented visibility into component costs. This was previously challenging due to contracts being created with lump sum amounts or line item totals without specific quantities.
The transformation has already shown significant results. Since its release in March, the platform has processed more than US$9bn worth of transactions worldwide.
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