New supply chain challenges, the growing threat of cyber-attacks, and other geopolitical factors are accelerating the shift to cloud services — a $1 trillion dollar market opportunity, as illustrated by recent research published by McKinsey.

Historically, such uncertainty has catalyzed organizations to invest in modernizing the technology behind their business operating models. But traditional approaches to enterprise resource planning (ERP) modernization have too often fallen short in maximizing business value, leaving C-suite priorities like corporate strategy and organizational mindset as afterthoughts.

To address this, SAP and McKinsey have drawn on their individual strengths to create a strategic alliance that merges technology modernization with strategy execution, thereby driving business results and addressing critical business challenges. With an initial focus on the consumer products, retail, automotive, and manufacturing industries, SAP and McKinsey now offer an end-to-end design for a migration to SAP S/4HANA. The alliance is part of McKinsey’s open ecosystem of alliances and acquisitions designed to advance client impact in a rapidly changing world.

Most recently, Merck KGaA, a world-leading life sciences company, worked with SAP and McKinsey to transform its complex ERP system, moving from a collection of legacy platforms to a consolidated global system, complete with a new organizational structure and governance model.

“In a world that is constantly changing, companies must continually evolve to stay competitive. As part of that, having the right cloud ERP in place is crucial for any business to address this challenge. Building on our history of strong collaboration, our strategic alliance helps ensure that McKinsey and SAP can work side by side, enabling customers to derive sustained value from technology investments and tap into new areas of growth,” said Christian Klein, CEO and Member of the Executive Board of SAP SE.

This alliance has already delivered compelling impact for a range of clients, including a renowned European grocer that was able to counteract increasing cost pressures from competitors while fulfilling the increasing digital demand of customers. Within the four-month initiation phase, the grocer set up a transformation management function that evaluated outside-in perspectives on current trends and future requirements for all business functions. This helped determine a target operating model for the future ERP landscape. As a result, the grocer developed target operating models for retail, supply chain, category management, and finance, establishing a new future-proof business model.

“Technology enables speed, and it can play an outsized role in driving sustainable, inclusive growth,” said McKinsey Global Managing Partner Bob Sternfels. “SAP and McKinsey’s relationship brings together strategic thinking with technical implementation, helping the boldest leaders find enduring solutions to our most urgent challenges.”

Merck Customer Feature

Merck worked on an ERP transformation with SAP and McKinsey. According to Alessadro de Luca, Group CIO at Merck, the company initially approached the effort as a technical project. They had not considered the fundamental strategic challenges of cross-sector business objectives, including disconnects between system architecture and operational reality.

Through physical and process redesign efforts, SAP and McKinsey helped Merck identify possible complexities and develop a global ERP road map that resulted in an integrated business case that addressed business value and IT changes. Overseen by an organizational structure and supported through CEO governance, the effort consolidated Merck’s ERP landscape while decommissioning legacy systems.

“The combination of SAP’s technical skills and McKinsey’s consulting expertise has boosted Merck’s ERP strategy and roadmap, helping us deliver more value for Merck’s business divisions and enabling functions,” said de Luca. “Working with both organizations for this project was critical. Without the seamless integration of their teams, we would not have been able to achieve the level of impact we did.”

Eric van Rossum is chief marketing and solutions officer for SAP S/4HANA at SAP.
Bjørnar Jensen is senior partner and global co-lead of the SAP Alliance at McKinsey.