Japanese trading house takes advantage of SAP S/4HANA conversion to move to Azure

Inabata & Co., Ltd is a Japanese trading house specializing in chemicals related to its origins as importer of dyestuffs Inabata Senryoten in Kyoto in 1890. In its 130-plus years of history, the firm has actively expanded its global reach, establishing 60 offices in 17 countries as of March 2021.

Installing SAP systems as the common ERP platform for overseas locations

Around 2013, Inabata decided to update the SAP enterprise resource planning (ERP) solution across the organization. Traditionally, Inabata’s overseas locations had selected and operated their core systems independently. But in recent years, overseas sales had come to exceed those in Japan. Because the importance of these overseas locations increased, the firm decided to standardize their core systems on SAP ERP Central Component (ECC) 6.0. Deputy Senior Manager Hayato Harada of the Global Infrastructure Department in Inabata’s Information Technology Office explains, “We selected SAP ECC 6.0 for our overseas locations because of its strength in being able to respond flexibly in all countries where we operate abroad.”

Inabata engaged IT partner Mitsui Knowledge Industry (MKI) to lead the project. About this choice, Harada says, “Initially, we got proposals from eight potential partners. The key factors that informed our eventual choice were MKI’s deep knowledge of SAP and our sense we could trust the firm. Plus, MKI presented the most specific and realistic proposal around the elements we wanted.”

Hirotaka Kashima of Technology Office 1 in MKI’s SAP Solutions Department agrees, adding, “In the request for proposal we received in 2014, Inabata told us that business process standardization had gone slowly. Risk and inefficiency were also issues in the business management and administration realms. I believe Inabata was impressed that we could accurately grasp these issues and then present them the MKI-Trade Suite, which is based on SAP ECC 6.0, as the optimal solution for fully addressing them.” 

A solution that embodies years of experience building trading house systems

MKI, part of Mitsui & Company, has a deep understanding of how trading houses operate, thanks to its involvement in its parent company’s system. This experience helped MKI craft a proposal that fit with what Inabata—also a trading house—wanted.

MKI had developed MKI-Trade Suite as an ERP template for trading houses, wholesalers, and manufacturer sales companies. Kota Shimojima manages Technology Office 3 at MKI, the part of Technology Department 2 that was involved in developing the template. He says, “MKI-Trade Suite has a solid track record in numerous installations. It can handle the legal and tax systems of not just Japan, but also of 40 other countries. Inabata probably trusted us because we had a template suited to its particular issues, along with a specific deployment methodology born of real experience.”

Though the installation of MKI-Trade Suite proceeded smoothly, Inabata decided to upgrade to SAP Business Suite 4 SAP HANA (SAP S/4HANA) instead. Harada explains, “The introduction of SAP ECC to all locations was scheduled for completion in 2019, but people began realizing that the company would need to take action in five years to avoid the ‘2025 digital cliff’ described in the Ministry of Economy, Trade, and Industry’s digital transformation report of the previous year. Another concern was the end of support for SAP ECC in 2025. Those factors prompted the company to convert to SAP S/4HANA out of consideration for the overall advantages if it dealt with these issues early, given the anticipated resource shortages and associated cost increases when vendors became increasingly busy as 2025 neared.” Inabata reached its decision after also realizing it could maximize the benefits of the new functions in SAP S/4HANA if it opted for early conversion.

SAP S/4HANA conversion spurs migration to Azure

SAP ECC 6.0 runs in SAP’s private cloud, but Inabata decided to migrate to a public cloud when it switched to SAP S/4HANA. In autumn 2018, the company engaged MKI for the project. Inabata used Microsoft Azure in its core system in Japan, so it made sense to also use Azure for the SAP S/4HANA conversion, given the interoperability and reliability of Azure.

Harada adds, “At the time, management was exploring how to strengthen its business continuity plan. This made our team more aware of the convenience of Azure Site Recovery, which became a major factor in our selection of Azure as the destination public cloud.” Azure Site Recovery is designed to help business keep running, thanks to its replication, failover, and recovery processes that help keep applications running during planned and unplanned outages.

MKI helped Inabata move its SAP S/4HANA instance to Azure. Harada explains, “We wanted to complete the project quickly, but looking at the experience of other firms, it seemed it would require one year and two months at a minimum. Since MKI already had experience in simultaneously handling an SAP S/4HANA conversion and an Azure migration, it was the ideal partner to continue working with.”

Yuji Onda of Technology Office 3 in MKI’s SAP Solutions Department handled the Azure migration. He says, “MKI had developed its conversion methodology by running SAP S/4HANA conversions of core systems overseas for Mitsui & Company, acquiring a good deal of relevant expertise from that work.”

Inabata wanted to switch to SAP S/4HANA without altering the business processes in the MKI-Trade Suite. MKI drafted a project plan based on its installation methodology and told Inabata that it could be in full operation in nine months. This part of the project began in November of 2019.

Shimojima worked as the project manager. He recalls, “The important target was to keep the downtime—when business would be shut down for switching to the new system—to no more than 50 hours. We devised strategies to reduce downtime as part of the proof of concept and poured every effort into ensuring that we stayed within the target time by increasing the precision and efficiency via rehearsals.” In the end, the switchover was completed with the system shut down for 48 hours. As Harada remembers it, “I had heard of switchovers taking up to four days in some cases in Japan, so you can imagine how completing it within 48 hours left an impression. By keeping the shutdown time brief, we minimized the impact on operations at the overseas locations.” 

First rollout of a managed service filled with Azure capabilities

This conversion also was an opportunity for Inabata to introduce MKI Managed Service for SAP S/4HANA, which runs the operating system, HANA database, and SAP Basis system administration on Azure.

“We originally asked MKI to run and maintain the applications, but we also had another firm running some of the SAP Basis tasks and the infrastructure. However, we began to feel it was inefficient to spread operations of SAP ERP applications and Basis between two firms, so we sought further efficiencies in management. We decided to use the MKI managed service; this resolved the overhead of multivendor management and also loaded, as standard, the service menus needed for operation,” says Harada.

The conversion to SAP S/4HANA and Azure, along with running operations and maintenance with MKI, was more efficient than Inabata’s previous setup. The company views these projects as first steps toward future digital transformation. As for MKI, its new business model is now centered around creating proposals that combine SAP S/4HANA conversion projects with Azure migrations for other firms.

Onda is impressed at the powerful support the project has received from Microsoft. “The MKI managed service makes generous use of the functions of Azure. For the Inabata project, we aggressively embedded new Azure services that were released just before, and even during, the project—not just those functions that had been incorporated into our original proposal. It was the cooperation we received from Microsoft that helped us incorporate these advanced features. We believe the further evolution of Azure and support from Microsoft will continue to assist both MKI and Inabata in the future as well.”