Asda's delayed SAP migration forces extension to Walmart's backend support contract

Three years after leveraged buyout, $240M ERP plan yet to bear fruit

Supermarket chain Asda has extended its deal with Walmart, the US retail giant that once owned the UK business, to support backend ERP systems after a project to replace them hit delays.

The supermarket, which Walmart sold to Bellis Finco for £6.8 billion ($8.65 billion) in 2021, signed a deal with SAP to move the on-prem legacy ERP systems to the cloud and its latest S/4HANA software under the German company's flagship RISE with SAP program.

Last year, the annual report from Bellis Finco said that in February 2021 the group embarked on a program called Project Future, designed to separate its IT systems from Walmart's with an initial budget of £189 million ($240 million). At the same time, it created a "Transitional Services Agreement with Walmart for an initial period of three years," according to the report for the year ended December 31, 2022.

With the deadline for the end of that deal approaching, The Telegraph has quoted insiders as saying the retailer now plans to move away from the legacy systems before the end of 2024.

The Register has asked Asda to comment.

The systems integrators on the deal to create an S/4HANA ERP system hosted in Microsoft's Azure cloud are Indian vendor TCS and SAP itself. Both companies declined the opportunity to comment. Also working on the project is Resulting IT, although The Reg understands it works solely supporting Asda's business team.

In its financial report, Bellis Finco said: "The separation programme is one-off and non-recurring in nature, and will transition the Group to a standalone, leading edge IT infrastructure using software as a service from best-in-class digital partners. Having no legacy systems will provide significant competitive advantage, deliver operating efficiencies, enable better use of data, and agility in taking on growth opportunities and in responding to customers' needs."

Sources close to the project speaking to The Register said Asda was wedded to a greenfield implementation from the start, with a vision of what "perfect looked like," rather than building a system that worked in the short term which could be improved upon at a later date.

Asda has also struggled to build a security team as that function had been run entirely by Walmart from the US, the individual said.

SAP launched its RISE with SAP program in 2021, with the promise to lift and shift customer systems to the cloud, while also helping with the transition from legacy systems to S/4HANA and in the business transformation required.

Working with systems integrators and cloud hyperscalers, the German vendor said it would be accountable to customers under a "one-hand-to-shake" model. The company reset market expectations while suffering a 23 per cent fall in share price in late 2020, partly owing to perceived sluggishness in moving customers to the cloud.

With more than 600 stores and 140,000 employees serving 18 million customers every week, Asda was "transitioning from its legacy solutions and embarking on an accelerated digital transformation strategy to better manage its end-to-end business operations," according to a statement published when Asda joined the RISE with SAP program.

Another source speaking to The Telegraph said "there was never an expectation" to complete the transition from Walmart's systems to Asda's own before 2024. Instead, the transition would be complete by the end of the year. ®

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