What was the secret behind the migration in just seven months? JFE Steel migrates its core system to RISE with SAP on Azure

Adopting Azure as the foundation for SAP System to support digital experience strategy

JFE Steel manufactures and provides unique and highly functional steel products to society under the corporate philosophy of "contributing to society with the world's most advanced technology.” In addition to its steel-based business, the strengths of JFE Group lie in its engineering business, which supports people's safe and comfortable lives through the use of steel, and its global trading business, which delivers the diverse value it creates around the world. 

The seventh medium-term JFE Group business plan for fiscal years 2021 through 2024 calls for "the greatest change since our founding, for a prosperous future for the Earth. The mid-term management plan also includes a major theme of ‘dramatically improving competitiveness by promoting DX (digital experience) strategies.’ 

According to Yuko Tamura, Business Reform Group Leader, IT Innovation Leading Department, “The DX strategy has three pillars: 'Innovative Productivity Improvement,' 'Transformation of Existing Businesses,' and 'Creation of New Businesses.’ In the area of innovative productivity improvement, we are strengthening our internal production infrastructure and improving operational efficiency by innovating the steel mill's core system, opening the JDXC (JFE Digital Transformation Center), a DX promotion base, and optimizing operations through a data analysis platform. Based on the knowledge, technology, and data accumulated through internal initiatives, we will strengthen our efforts for our customers, stakeholders, and society as a whole. For example, we will open remote monitoring bases to transform existing businesses and develop AI-based solutions to create new businesses." 

The DX strategy for JFE Group is being implemented as specific measures by each operating company. JFE Steel is working on the CPS (Cyber Physical Systems) of all manufacturing processes including remote, automated, and robot utilization, DX human resource development and activation, and the establishment of a platform for solution business expansion to create new businesses in order to innovatively improve productivity. In addition, the company is working to establish an agile and flexible platform to promote DX by renewing legacy systems and converting them to an open platform as the foundation for promoting these initiatives. One of the most important projects in building this platform is the shift to cloud computing for SAP systems. 

“JFE Steel has been using the SAP system as a company-wide platform since 2017. Previously, we had been running the system in an on-premises environment, but in order to accelerate DX, we upgraded the SAP system to the latest version and started to move it to the cloud," says Tamura. 

Azure was selected as the operating platform for the SAP system that supports this DX strategy. 

Selecting RISE with SAP, a fully managed SaaS, and leveraging Azure as the preferred platform

There were three major challenges in implementing the SAP cloud migration project. The first was hardware maintenance. The SAP system had been migrated to SAP HANA as the database, but the hardware running the HANA database was reaching the end of its maintenance life. 

The second was to regularly upgrade the software and expand the flexibility of the infrastructure. Regular version upgrades were necessary to take advantage of SAP's functionality. In addition, in order to utilize functions with an eye toward DX, it was necessary to be able to expand the infrastructure flexibly. 

The third was detailed lifecycle management of both hardware and software. This was essential to ensure that the benefits of new functions could be enjoyed in a timely manner in line with technological advances. 

The project owner, Wataru Endo, a JFE Steel senior staff member of the IT Innovation Leading Department, explains:  “J-FACE, a group-wide accounting system using SAP, had been in operation for more than five years, and it was starting to have problems in terms of both hardware and software. The hardware was due for a one-year maintenance extension, and we needed to address the issues before the expiration of the maintenance period. In addition, a project to renew the Material Management System using SAP platform was underway, and it was essential to upgrade the software version. In addition, in terms of system maintenance and management, the company's efforts were being devoted to updating the hardware, and it was not possible to focus on business operations and applications. In this situation, we aimed to upgrade both the hardware and software and conduct regular lifecycle management."

By using the cloud, JFE Steel can outsource the hardware lifecycle management and focus on operations and applications. The company compared the use of SaaS and IaaS as well as on-premises. The SAP system can be run on virtual machines on each public cloud vendor's IaaS service, or it can be used as a SaaS service utilizing the infrastructure of SAP and each public cloud vendor. JFE Steel selected RISE with SAP, a SaaS service provided by SAP, from among various options. 

“RISE with SAP offers S/4HANA Cloud Private Cloud Edition (PCE), which provides S/4HANA in a private cloud environment, as a core service. PCE can use the infrastructure of each public cloud vendor. We decided to use Azure as the foundation for PCE and to use it as a fully managed SaaS by SAP," Endo says. 

The advantage of company-wide services at Microsoft

The decision to use the SAP system as SaaS was based on the maintenance effort and cost, as well as the ability to take advantage of new features. "IaaS eliminates the need to procure physical hardware like on-premises systems,” explains Mr. Etsuo Kasuya, Project Manager of the Business Management System Development Department of the JFE Systems Tokyo Office. “But like on-premises systems, regular database updates and version upgrades are required.” SaaS, on the other hand, is more convenient, eliminating infrastructure work and allowing JFE to focus on application operation and maintenance. “Product support by a dedicated service manager allows us to proactively take advantage of new features. In addition, we can upgrade and patch at JFE's pace," says Mr. Kasuya.

The company chose Azure as its cloud platform because it was already being used as the company-wide foundation for the JFE Group. 

“We considered on-premises and various cloud services based on the three axes of quality, cost, and turnaround time. Azure was the first choice because we had confidence in its quality, and we had accumulated know-how in the company. We also actively use Microsoft Power Platform and other products, and we appreciated the high degree of affinity and integration between the products. In terms of cost, we could use our existing network equipment, and delivery time was also not a problem. We also considered other cloud providers, but they require time for delivery and we needed to build a new network environment, so Azure was the only choice for cloud computing," says Mr. Kasuya. 

As for the schedule, JFE Steel started a comparative study of on-premises and cloud computing in October 2021, and in 2022, began an incompatibility impact study, various policies, and an implementation plan for this investment. The project essentially began in June 2022 with a project completion date set for the end of October 2023, the hardware extended maintenance deadline. 

"Although October 2023 was set as the final deadline, in reality, we needed to migrate to production over the year-end and New Year period of 2022, taking into account extended maintenance, material procurement, system downtime, and other factors. If we could not meet the deadline, the schedule would be postponed until Golden Week, which would also affect the renewal of Material Management System project. In addition, since J-FACE, the accounting system, is also used by group companies, any delay would affect the entire group and have a significant impact on the financial closing. How to overcome the short deadline of approximately seven months was an important theme," says Mr. Kasuya, looking back on the situation at that time.

An unprecedented seven-month migration

In fact, the project went into production with almost no trouble at all, and the system migration was completed in time for the 2022 year-end and New Year holiday period. This was an unprecedented project with an unprecedented short delivery time for a PCE-based RISE with SAP build. 

The key to the success of the project was the close cooperation between the IT Innovation Leading Department, which led the project, the user departments such as accounting, facilities planning, and technical planning, and JFE Systems, which was in charge of the system construction. 

“On the application side, SAP assigned a Customer Success Partner (CSP) to assist us with various types of questions and topics. In addition, in terms of infrastructure construction centered on servers and networks, we received advice from Microsoft on various Azure services. I believe we were able to complete the project in a short period of time through close communication and collaboration among various stakeholders," says Endo. 

In terms of quick turnaround, the company used standard SAP tools to identify the scope of impact from the planning stage and developed a project plan as well as structure that ensured quality while minimizing costs. In addition, they also made effective use of existing documents, eliminating as much new work as possible, and held regular meetings to share information on the status and issues in the three areas of Basis, Infrastructure (network and servers), and Applications (accounting, facilities, and technical planning) to ensure mutual communication for horizontal development.  

“In particular, we formulated a communication plan at the start of the project and made sure that end users were informed as soon as possible. Rehearsals are conducted in four stages: Migration Rehearsal 1, Migration Rehearsal 2, Production Rehearsal, and Production Operation Rehearsal,” says Kasuya.

Ms. Minako Nakai, General Manager of the Auditing Department of JFE Steel, who served as a Staff Deputy General Manager in the Accounting Section of the Controller Department at the time of the migration, spoke of the communication with users as well as the multiple rehearsal times and types. 

“At the beginning of the project, we were told that the screens and functions would remain the same as before, but once the environment was actually created, we often found that the button positions and feel of the operation were slightly different. In accounting work, slight minor changes often have a large impact on the work efficiency of those in charge. It is important to communicate the intention of the change and how it will be used in the future to those in charge at each group company. We requested that sufficient time be allotted for such adjustment and coordination.” says Ms. Nakai. 

20 percent productivity improvement utilizing Azure and Power Platform

More than 50 group companies use the J-FACE accounting system. Since the project began, Ms. Nakai has taken the lead in contacting each company frequently, explaining in detail the changes that would accompany the system migration and consulting with them as necessary.

“At first, we felt some discomfort with the screen because S/4HANA had been upgraded, but once we became accustomed to using the system, we were able to understand why the deployment was being made. In addition, once we became accustomed to using the system and understood the reasons for each change, the usability of the system improved in various situations. One significant improvement is the faster response time. It used to take a long time to extract a large amount of data, but with the upgraded S/4HANA, it can be processed immediately. The ability to change items on the screen using drag-and-drop operations has also been well received,” Ms. Nakai explains. 

Mr. Kasuya talks about the benefits of adopting Azure as a platform. "Using Azure, we were able to build out the infrastructure in about two months, which normally takes several months. By shortening the time to build the infrastructure, we were able to spend more time communicating with users, conducting mock closing tests that incorporated user requests, and conducting multiple rehearsals. We were also able to secure skilled engineers and address the task set quickly. In addition, we have seen benefits in terms of costs, such as reduced maintenance costs. If we had not chosen Azure, I don't think we would have been able to achieve an efficient SAP cloud migration in a short period of time." 

In the future, the company plans to expand the SAP system to other business areas and strengthen collaboration with cloud services such as SAP Ariba. Regarding the use of Azure, Mr. Endo says, "We are already using Azure for JFE Systems' cloud infrastructure service, JGranz. Up until now, JFE Steel has mainly used private cloud services, but we will optimize costs by using a hybrid of cloud infrastructure and cloud services. For example, as part of our efforts to promote data science and digital transformation, we are working on the development of an in-house Python development environment, and we are currently preparing a mechanism to access the virtual development environment for this on the Azure cloud. We are also considering the use of Azure for the construction of a company-wide data utilization infrastructure (data lake) that will contribute to management and decision-making by centrally managing data from steel mills, sales, logistics, and other areas.” 

Regarding the future outlook, Tamura explains: "We are also promoting the use of Microsoft products in company-wide DX initiatives. In our mid-term management plan, we are targeting an increase in labor productivity of 20% or more, and are working to improve facility productivity, stabilize operations, improve QA/QC, and increase customer satisfaction.   We are using Power Platform to support these efforts. We would like to promote DX by utilizing Microsoft's cloud computing along with Azure, where we are accumulating knowledge in various areas.”

Microsoft will continue to support JFE Steel as it accelerates DX by migrating its mission-critical systems to the cloud.