Solving Three Problems with SAP on Azure! Kao Achieves First Large-Scale Operation of ANF in Japan and Looks Ahead to Global Expansion

Advancing "K25" initiatives looking ahead to 2030 and working on the global renewal of SAP systems

Founded in June 1887 (Meiji 20), Kao is a leading Japanese manufacturer of consumer goods and chemicals with the mission of "To realize a Kirei World in which all life lives in harmony" and aims to "improve people's lives beyond their expectations for a future where humans and nature thrive together." The company now operates in five segments: Hygiene and Living Care, Health and Beauty Care, Life Care, Cosmetics, and Chemical Businesses, with consolidated net sales of 1,418.8 billion yen (for FY 2021 ended December 31) and 33,507 consolidated employees (as of December 31, 2021).

In its mid-term plan "K25," which looks ahead to 2030, Kao has adopted the vision of "Sustainability as the only path" and set forward three policies: becoming an essential company in a sustainable world; transforming to build robust businesses through investment; and maximizing the power and potential of employees. One of the company's key initiatives to strengthen its system infrastructure is to revamp its SAP-based core IT system.

"We use the SAP system to manage global finance, sales, production, procurement, inventory, etc., but some problems arose when looking to the future.” says Mr. Takashi Kasori of Kao's Information Systems Division. “First, the system was largely divided into three regions—Japan and Asia, the chemical businesses in Europe and the US, and Kao USA, the US subsidiary—and we were unable to view information across these regions. We also needed to migrate to a new version of SAP ERP because the current version, SAP ECC 6.0, will come to end of support in 2027. In addition, to support our business expansion, we were required to ensure flexible use of our resources, to build a mechanism for using data from the production environment in the development and verification environment, to improve the efficiency of operations and maintenance, and to establish a global governance structure through migrating our platform to cloud." 

As part of the K25 initiative, it was important for Kao to accelerate its digital transformation (DX) efforts while migrating to and modernizing in the cloud of SAP and surround systems’ platforms and applications. In this process, the company decided to use “SAP on Azure,” which runs SAP systems on Microsoft Azure ("Azure"),  and their partner, Accenture, played an important role in the migration to SAP on Azure. In addition, Azure NetApp Files ("ANF"), which is used as the storage platform for SAP, has also proved to be a great asset in terms of cloud utilization.

Challenges of “data silo”, “SAP support deadline” and “cloud migration”

As Mr. Kasori pointed out, their SAP system was facing three major challenges.

For the first challenge of "data silo across different regions," Kao sought to consolidate the disparate regional and business domains into a single “unified” structure.

"The first country to introduce SAP was Thailand, and from there, its use spread to other Asian countries, then to chemical businesses in Europe and the US, and finally to Japan. With many mergers and acquisitions, customized programs were created to suit each business, and the company's approach to system settings changed, making it increasingly difficult to manage the systems consistently. As a result, we sought to standardize the codes, setup procedures, and approaches and manage them under a single global standard." (Kasori)

A system using SAP Business Warehouse ("SAP BW") for data analysis and reporting was developed for viewing information, but when analyzing data across regions, data had to be collected from different departments, and reports had to be created manually in Microsoft Excel, which often took several days, placing an additional burden on the business units.

For the second challenge, "addressing the SAP support deadline," and the third challenge, "cloud migration," we explored a number of options and decided to tackle these challenges by migrating from the current ECC 6.0 to the new version of SAP S/4HANA. SAP BW and other components that were running as surround systems have already been migrated to the cloud and are running in a hybrid configuration with the on-premise ERP systems.

"Cloud migration is key to the global integration of our core IT systems. By migrating ERP, our primary IT system, to S/4HANA in a cloud environment, we can make significant progress in the cloud migration of our core systems together with the surround systems that have already been migrated to the cloud. We plan to start with Asia and then move to Europe, the US, and Japan to convert to S/4HANA and migrate to the cloud. After we complete the migration to SAP on Azure in Thailand and Singapore in May 2022, we will roll out the new platform while identifying and reviewing the business operations in each country." (Kasori)

SAP on Azure’s capability of integration with existing platforms and cost are highly valued in the selection

This SAP project is a joint effort between Kao, Accenture, and Microsoft. Accenture leads migration planning, system implementation, and technical verification, while Microsoft provides technical support to Accenture. 

"This was a large project, and Accenture had 200 to 300 people working on it, including those involved in the application and off-shore projects. There were also about ten people assigned to Basis and Infrastructure, and they were responsible for design, implementation, and testing, particularly around Basis/Infrastructure,” says Mr. Kentaro Mohri, senior manager, SAP Business Integration Group, Technology Consulting Division, Accenture. “In this deployment, we worked with Microsoft around SAP on Azure, and they provided us with information and implementation support in a variety of areas, which was very helpful. In particular, we could smoothly implement ANF (backup/interface) and DR switchover thanks to technical assistance and consultation through meetings for the purpose. We also had weekly touch points to share information on technical issues in a timely manner, and we were supported not only on the scope of this project (S/4HANA migration), but also on other relevant systems, including BPC, which is being built in a different project." 

The project is being carried out almost fully remotely, using Microsoft Teams. 

"Our initial plan was to retire existing add-ons in line with SAP's Fit to Standard approach, but this required changes in business processes and, in some cases, reduced work efficiency,” Mr. Kasori explains about their approach to the migration. “We, therefore, decided to choose straight conversion approach for the necessary programs, which converts data to the one for S/4HANA without modifying the source codes. We tried to balance the load on our developer resources by prioritizing the development of enterprise-wide functionalities and local functionalities that would be used immediately, and developing functionalities that would be used quarterly, semi-annually, or annually after the system went live." 

In selecting SAP on Azure as an infrastructure platform, they compared and evaluated SAP HEC (HANA Enterprise Cloud), SAP-specific cloud platform services, and SAP migration to the public cloud against various criteria. 

"SAP on Azure was superior in terms of cloud platform scalability, security, validated architecture, number of certifications obtained, cost, and integration with surround systems,” says Mr. Kasori. “What stood out the most was the integration with surround systems and the cost. It was easy to integrate with Azure Synapse Analytics and Azure Data Lake, which we use as our data lake platform, and to implement a single sign-on environment and SAML authentication using Azure Active Directory ('Azure AD'). Azure was also better in terms of cost, including licenses and subscriptions." 

First Japanese company to adopt Azure NetApp Files as the storage platform for SAP HANA

The existing ECC was configured with Windows Server as the application server and SQL Server as the database server. When migrating to S/4HANA, the application server was migrated to remained on Windows Server, and the HANA database runtime environment was migrated to Linux.

"The migration from SQL Server to HANA presented the challenge to ensure database redundancy and reliability,” Mr. Kasori recalled. “Then the key was ANF, which we chose as the storage platform for the HANA database. ANF is a highly reliable, fully managed file-based storage service with 99.99% of SLA for uptime ratio. The availability of ANF is significantly higher than that of an NFS storage server on a Linux virtual machine and can reduce the running cost of the database storage. In addition, data can be easily synchronized with a DR site, that dramatically improved business continuity." 

ANF, which was selected as storage platform, has a built-in snapshot feature that works well with SAP HANA Snapshot and quickly creates backup images of the volumes containing HANA databases. Kao also uses ANF’s region-to-region replication feature to asynchronously replicate data between Azure’s Japan East and Japan West regions, configuring a DR site that enables business continuity as a measure against wide-area disasters. And by using Azure ExpressRoute, a private connection service, to connect to on-premise servers, Kao achieves a high-speed and stable communication environment. 

"We heard it was to be the first large-scale SAP system in Japan to use ANF as a storage platform,” says Mr. Mohri. “But Microsoft provided us with its global experience, know-how, and best practices in implementing ANF, which enabled us to apply smoothly to this project. The same was applied to Azure Backup for HANA as a HANA backup service as well as Azure Update Management as a Linux patch management platform, and we believe that the use of those cloud services helped to reduce the time and effort required for design and implementation." 

ANF also has a function to replicate data from the production environment to the development/verification environment.

"Quick data refresh and regression testing using production data, which we wanted to do but were unable to do, can now be done easily. We expect this to make a significant contribution to improving the efficiency of application development and platform delivery." (Kasori)

Mr. Mohri continues, "ANF has also demonstrated a degree of effectiveness in the post-go-live operational phase. The instant cloning feature based on volume snapshots (equivalent to NetApp's Flex Clone feature) is used in the steps of System Refresh and enables to significantly reduce the time required to move DB backups from one server to another, which took longer in the former operation. In fact, during the System Refresh from the production environment to the staging environment done in July to August 2022, the local backup file transfer, which used to take several hours, was no longer necessary, and the HANA DB restore operation was completed in a short time (about 20 to 30 minutes). ANF is also used by Kao as a file-based integration platform. About 50 interface jobs are currently running at a high frequency on a daily basis on it, there have been no failures caused by ANF to date, ensuring stable performance. In addition, HANA DB backups are performed daily on seven systems used as production environments using ANF as the storage platform, as well as staging environments, and these backups are performed without causing any prolongation of its performance." (Mohri)

Praised for global SAP consulting expertise and know-how

Kao has newly selected Accenture as its partner for the migration to S/4HANA. According to Kao, one of the reasons for selecting Accenture from a number of partners was the company's global expertise.

"We believe that Accenture has the world's leading track record in SAP consulting. Kao USA also had experience working with Accenture as a partner on their project and spoke highly of the company's reputation. When we went through the requirements in the selection process, Accenture scored high in many areas." (Kasori)

In fact, Accenture has a long-standing partnership with SAP and has acquired numerous SAP certifications. Accenture also has a strong track record as a Microsoft partner. "Our strength is in knowledge sharing and delivery on a global scale, and we have a very close relationship with SAP, having won the Best Partner Award seven years in a row. We also have a dedicated cloud services infrastructure team and work closely with cloud vendors to deliver consulting services that leverage each vendor's expertise and know-how," said Mr. Mohri.

On a global level, Kao's SAP renewal project has just begun, but they say they have already seen various improvements.

"We cannot see the real impact until the global integration is completed. For example, one of our goals is to be able to see global reports instantly. In that sense, we are only halfway through the process. On the other hand, we are starting to see efficiencies and cost reductions from using Azure in the infrastructure. For system monitoring, we can now use Azure Monitor to monitor systems with fewer people and less effort. Backup, DR, single sign-on, multi-factor authentication, and other services can also be managed efficiently by leveraging Azure services. In the future, we also plan to explore initiatives including the latest data analytics capabilities including Azure Synapse Analytics, and zero-trust security with Microsoft Defender for Cloud, Sentinel, and others." (Kasori)

The global deployment of SAP systems at Kao will be accelerated, and Accenture and Microsoft will continue to work together to achieve the ultimate goal.