In 2023, Ahlstrom launched a major strategic business transformation project aimed at renewing and harmonizing the operations of its 36 plants worldwide. The solution chosen was SAP S/4HANA Cloud, which enables Ahlstrom to streamline its processes, improve flexibility, and move toward a data-driven and AI-enabled future.

Ahlstrom is a large international manufacturer of specialty materials, with 36 plants around the world and about 7,000 employees. The company’s strategy is to be a global leader in its field.

The business transformation project, called Stella, is the largest single investment in company history. Its purpose is to transfer operations, except HR and product development, to the new SAP S/4HANA Cloud environment. The old group business system dated back to the 1990s and no longer met the needs of global manufacturing. Ahlstrom also uses SAP Ariba for its procurement, which had already been implemented.

“SAP S/4HANA Cloud was clearly the best solution for us, especially for production management and planning,” shared Ahlstrom CIO Kristiina Lammila, who is responsible for the project. “With it, we can harmonize our operations and bring all our plants under the same system.”

Unifying systems and data

One of the main challenges of the project was integrating different systems and unifying fragmented data. With modernization, processes can be streamlined, daily work made easier, and time freed up for more strategically important tasks.

“We have managed to make significant progress with SAP S/4HANA Cloud standard solution,” Lammila said. “We use private cloud, which also allows for fairly flexible modifications. One plant is already live, and next year seven more plants will join. The goal is to complete the entire transformation within five years.”

According to Lammila, the system enables flexible transfer of production from one plant to another and global optimization of the supply chain.

Benefits for both employees and customers

Modern cloud ERP systems benefit all stakeholders. Streamlined production processes reduce waste and improve quality. Harmonized purchasing brings savings and the most visible change for Ahlstrom’s customers is smoother supply chains and better availability of products. The use of AI and analytics is expanding. Especially in sales support, AI solutions built on SAP Sales Cloud data are already in use at Ahlstrom.

“We can integrate even more closely with our customers, as many of them also use SAP,” Lammila explained. “This facilitates and streamlines the flow of information between companies.”

From the employee’s perspective, SAP S/4HANA Cloud makes teamwork easier. For example, order and inventory balances can be checked conveniently based on real-time data. Lammila also pointed out that the updated system supports employer branding, as job seekers expect to have appropriate and up-to-date tools at their disposal.

Strong change leadership is key to success

Lammila advises companies planning similar projects to approach transformations as comprehensive initiatives that must engage all employees, including management, not just the IT department.

“Strong management commitment and a shared vision of where we are going and how to get there are needed. The project must be led as a deep transformation, and the end result must not be compromised due to haste. Poorly executed work is difficult to fix later,” she concluded.

Ellen Vig Nelausen is an integrated communications expert for SAP Regional Communications.

Global geopolitical uncertainty, trade tensions, and national security concerns are fueling the debate over digital sovereignty as well as the market growth for sovereign cloud services and demand by enterprises for secure, local access to the latest AI tools.

The public cloud has ushered in unprecedented benefits for businesses and governments in terms of data access and data flows. But in uncertain geopolitical times, sensitive data — including government classified information and data generated by regulated industries — requires special protection.

As SAP CEO Christian Klein noted recently in an interview with the Financial Times, these concerns have fueled customer anxiety over cloud infrastructure choices and boosted the concept of “sovereign” data centers, where information remains within national borders.

Sovereign clouds

Historically, governments, government agencies, and a select group of private sector organizations in sensitive areas, including defense and public utilities, led the demand for sovereign clouds. Technology companies, including SAP, have responded by providing highly secure sovereign cloud services.

But in recent months the debate over digital sovereignty has widened. As Hayete Gallot, Google’s president of Customer Experience, recently noted, “Sovereignty used to be a very niche thing that applied to very regulated industries, such as defense and intelligence, and suddenly in the current environment, everybody is thinking about it.”

The EU has proposed spending €20 billion to build five “gigafactories” to facilitate digital sovereignty and help Europe compete more effectively in AI against the predominantly U.S.-based hyperscalers and large language models (LLMs). But others, including Klein, are not convinced that it makes sense to replicate the physical infrastructure built by hyperscalers and others.

The data center hardware race is over

Klein argues that spending billions in government funding in the EU on huge new data centers would be misguided, and that European companies already have control and sovereignty over their own data. “The hardware train has left [the station],” he said. Together with other senior SAP executives, he also argues that digital sovereignty is about more than physical infrastructure — the operational, technical, and legal dimensions of data sovereignty matter just as much.

Crucially, SAP Sovereign Cloud offers a model that keeps customer data within national borders and in compliance with local laws, without the need to replicate the existing physical infrastructure. Its services, developed over the past 20 years, are already provided to some of the most security-sensitive organizations in the world, including those in the U.S. through SAP National Security Services (SAP NS2).

Sovereign cloud customers

Outside the U.S., the SAP Sovereign Cloud Services organization already counts more than 170 customers globally and has plans to invest a further €2 billion over the next decade to expand regional coverage. For example, SAP is currently in talks with four Asian countries. In Germany, the unit provides secure sovereign cloud services through Delos Cloud and plans to launch similar services in France through Bleu.

Instead of getting involved in a futile race to catch up with the U.S., SAP executives argue that Europe must now promote the use of vertical AI for individual industries and special areas of application.

In a recent guest commentary in the German business newspaper Handelsblatt, Klein called for a digital strategy for Europe that builds on the region’s digital strengths: “A new, European-defined concept of sovereignty is necessary, one that relies on self-determination rather than self-sufficiency.” He also cautioned that digital sovereignty “is not an end in itself” and called for “profound change” to industry business models.

These models “need to be rethought, processes digitized, and AI used in a targeted manner for more innovation, for greater efficiency, for sustainability,” he added. 

Martin Merz, president SAP Sovereign Cloud, agrees. “The debate around digital sovereignty in Europe has gone on too long with too many buzzwords and too little substance,” he said. “We’ve reached a point where Europe can no longer afford misguided discussions. What counts is value creation. Real sovereignty includes empowering people, industries, and governments to lead through innovation.”

“When it comes to highly sensitive data, SAP Sovereign Cloud comes in,” Merz continued. “It’s purpose-built to protect the most sensitive, security-critical data, enabling the highest level of protection and operational autonomy, without slowing down innovation.”

Locally hosted AI

Underscoring this shift in the data sovereignty debate, many SAP customers are now talking about sovereign AI or what SAP calls “locally hosted AI.” To help facilitate this, SAP CTO Philipp Herzig recently noted that the company is now offering a range of self-hosted AI models in a more secure and local environment. “Starting Q3 this year, we are providing the entire AI foundation end-to-end out of European data centers. This is AI fully managed and operated by SAP,” he shared.

As a result, he said, customers will have access to cutting-edge local models like Mistral Small and Mistral Medium, Aleph Alpha, or the T-Free model used by the German government. “Their data will remain local, trusted, compliant, and secure, and seamlessly integrate with SAP Business AI capabilities without compromising on performance, governance, or privacy,” Herzig added.

He also revealed that Swiss Federal Railways is leading the way as an early adopter, using locally hosted AI with Mistral AI to power innovation in a trusted environment. Speaking during a recent NVIDIA conference in France, he also announced that SAP has formed a strategic partnership with Mistral AI and Capgemini to accelerate AI adoption across Europe.

“Together, we’re building the future of enterprise AI – secure, local, and smart,” Herzig said.