Daimler entrusts SAP HANA–based global procurement system to Microsoft Azure

Mandate: go fast

As Daimler AG steers its business into the future, its top three objectives are speed, speed, and more speed. And it’s not talking about the velocity of its cars, trucks, or vans. It’s talking about the pace of innovation.

One of the world’s most successful automotive companies, Daimler offers prestigious brands like Mercedes-Benz cars and Freightliner trucks. The Stuttgart, Germany–based company has realized that its competition today includes not only other automotive companies but also tech companies such as Uber, Google, and Apple who are creating autonomous vehicles, drones, artificial intelligence (AI), and other disruptive technologies. To compete in this new landscape, Daimler knows that it needs to digitally transform.

Daimler has responded by amping up its software development dexterity and embracing the cloud—primarily Microsoft Azure. It has launched Azure-based connected car, truck, and van projects to outfit its vehicles with Internet of Things (IoT) intelligence and remote monitoring capabilities. And it’s moving the company’s core operational systems to Azure to gain scalability, agility, and lower costs.

The first of these major business systems up for refresh and cloud migration was the company’s procurement system, used to manage and interact with more than 400,000 suppliers. Developed by Daimler in the early 1990s, the system had evolved into a complex and mammoth piece of code that was difficult to refresh. The IT team could only manage to release new features a couple times a year. And the purchasing process still included many manual, paper-based steps that Daimler wished to digitize.

“The message from our CIO has been very clear for the past two years—be fast,” says Dr. Stephan Stathel, Operations Lead for New Procurement System and Team Lead for the Build2Run Team at Daimler AG. “For my group, this means be faster to enhance core business systems so that we can support the company’s faster innovation velocity.”

Focus first on contract management

Stathel’s team was charged with building up a new commercial off-the-shelf purchasing system that would help Daimler transform its procurement services by providing greater transparency into contracts and unifying procurement processes across different business units and geographies.

Because contract management is at the forefront of procurement transformation, Stathel’s team prioritized that piece of the solution and made it the cornerstone of the larger new procurement system—called NPS for short.

Daimler chose the Icertis Contract Management (ICM) platform from Seattle, Washington–based Icertis. A leading provider of cloud-based enterprise contract management, Icertis runs its solutions in Azure. The company likes to say that it solves the hardest contract management problems on the easiest-to-use cloud platform.

“We chose the Icertis ICM platform and ICM Sourcing app because of their ease of use, ability to address every phase in the contracting and sourcing processes, and seamless integration with third-party systems that support the entire procurement life cycle,” Stathel says. “The deployment optimizes the source-to-contract process by ensuring best-in-class supplier evaluation, selection, contracting, and collaboration.”

ICM offers a disruptive take on traditional contract life cycle management software. “Contract management has changed from a siloed and standalone workflow into a critical and integrated business process in the enterprise,” says Samir Bodas, Cofounder and Chief Executive Officer at Icertis. “By making contracting a core part of the order-to-cash and procure-to-pay processes, enterprises can more effectively control cost, maximize revenue, reduce risk, and increase compliance.”

Icertis developed ICM in Azure and hosts it there using a software as a service (SaaS) model and multiple Azure infrastructure and platform services, including Azure Virtual Machines, Azure SQL Database, Azure Active Directory, and Azure Machine Learning services. “We feel that Azure is ahead in the cloud race,” says Bodas. “Azure has a wealth of rapidly evolving services, including strong security services that help protect the confidential data stored in contracts.”

Next, run SAP in Azure

For the remaining NPS functionality, Daimler chose to use a suite of SAP products—SAP Supplier Relationship Management (SRM), SAP HANA database software (later upgraded to S/4HANA), SAP Fiori, and others—all running on the SUSE Linux operating system. Daimler chose to site the entire SAP portion of NPS in Azure.

“Icertis ran in Azure, and for peak functionality and robustness, we decided to put the rest of NPS in Azure, too,” Stathel says. “Other areas of the business were using Azure with great success, so we felt comfortable putting this major SAP application in Azure. Our HANA database footprint is expected to grow significantly as we roll out the solution globally. Although some colleagues were hesitant, we felt that Azure could easily fulfill our requirements, including support for SUSE Linux. We used our pioneering genes to try it out.”

Daimler engaged the help of longtime global services integrator (and member of the Microsoft Partner Network) Infosys to deploy, test, and move into production the large, complex NPS infrastructure and to provide managed services for the application once operational. “Infosys had the capabilities to handle the complete scope of the project, in terms of DevOps expertise, setting up the application, operating it, and supporting it,” Stathel says.

Specifically, Infosys set up the entire Azure environment, installed the SAP applications (the SAP HANA database runs on multiple large Azure Virtual Machines M-Series servers), and connected the SAP environment to Icertis, to the legacy procurement system until it is phased out, and to the broader Daimler SAP landscape that still runs in Daimler datacenters.

Daimler uses primarily Azure Virtual Machines (all certified by SAP) to run the SAP portion of NPS. Infosys uses Azure monitoring services for application health monitoring, and Azure VPN Gateway to connect NPS with Daimler datacenters. The SAP portion of NPS connects with Icertis using Azure Service Bus.

Daimler uses Azure Site Recovery to engineer disaster recovery between Azure regional datacenters. The company runs two SAP HANA instances, primary and standby for each production system, and uses Site Recovery and SUSE Linux clustering software to orchestrate failover between different Azure regions.

Transform faster in Azure

Daimler used Azure to transform a key operational system many months faster than it would have using traditional on-premises methods. “To launch a project of this magnitude previously would have required up to 12 months just to acquire the necessary hardware,” Stathel says. “In Azure, we had the complete hardware set up in 12 weeks, which allowed development to start much sooner. We went live with NPS in just three months, which is unheard of by historic Daimler standards.”

Equally important to Daimler as getting the new system up and running in months instead of years is the company’s ability to keep NPS fresh and modern by hosting it in Azure. “Contract management and purchasing are foundational to our digital transformation at Daimler, and in NPS, we now have a modern system that’s easy to maintain and extend with new functionality,” Stathel says. “We could only update our previous purchasing system a couple of times a year. With NPS running in Azure, we can issue updates every day if necessary.”

When the procurement group wanted to test NPS with SAP S/4HANA, it set up a sandbox environment in Azure in hours and successfully installed and tested the new software—and ultimately deployed it—in record time. “By using Azure, we started to deliver months faster than would have been possible in our on-premises environment,” says Stathel.

Scale easily, reduce costs

In addition to provisioning resources with unprecedented alacrity, Daimler has the on-tap scalability in Azure needed to accommodate peak NPS usage periods—such as year-end supplier contract renewals—and organic business growth. “If we need more performance, storage, or other resources, we can provision them in 30 minutes,” Stathel says. “With Azure, cloud agility is real and a huge asset in our goal to move faster.”

Approximately 4,500 Daimler employees will use NPS daily once rollout is complete, and each year the system processes supplier contracts and procurement activities worth about €90 billion (USD106 billion), which is approximately 60 percent of the company’s turnover. As Daimler grows, so will those numbers.

Daimler is not only moving faster but saving money in Azure. Stathel estimates that the company’s hardware costs have dropped by about 40 percent and that IT operational costs for managing NPS are about 50 percent less than for managing the previous system.

Keep improving

Daimler is working with Icertis to further reduce cost, better manage risk, and ensure compliance in the contracting process using new AI-infused ICM components that make use of Microsoft Cognitive Services, Azure Machine Learning services, and Azure Bot Service.

“The NPS project has been the first application of its scale and complexity in the cloud for Daimler, and it has inspired other teams to think about Azure for their projects,” Stathel concludes. “We’ve shown that you can host even large, complex business systems in Azure—everything you need is there.”

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