Defence's ERP bill with IBM hits $575m

The Department of Defence has inked a fresh agreement with IBM related to its enterprise resource planning (ERP) overhaul, bringing the value of the total engagement to at least $575 million since 2019.

The latest $18.7 million agreement, set to begin on September 1, covers a year’s worth of consultancy support as Defence pushes ahead with its multi-year SAP S/4HANA rollout.

The new contract, in addition to recent amendments of existing deals, valued at $13 million and $33 million respectively, has significantly increased IBM’s footprint in recent months.

These developments roughly coincide with Defence’s delivery of tranche 1B – or the foundation release, which was delivered in May 2025 and introduced core capabilities across finance, procurement, logistics, materiel maintenance, and engineering.

This was originally set to go live on October 7, but was delayed "to allow for additional testing and assurance", Defence confirmed at the time. 

In a statement to iTnews about the latest agreement, a Defence spokesperson said: “The Defence ERP program is a multi-year program to standardise business processes across key functions and integrate processes into one ERP solution.

“Over the life of the program, there are multiple releases of work as part of the three tranches.”

First conceived in 2016, Defence’s transition to the new SAP system was meant to be delivered by 2025 [pdf] and with an original budget of around $1 billion.

Although Defence’s 2024-25 budget put the total approved funding for the ERP program at $1.64 billion, the total lifetime expenditure is closer to $3.5 billion. 

This includes estimates for unapproved future scopes, as well as contingency and sustainment funding projected until 2033-34, iTnews understands. 

Defence has been working with IBM on the ERP program since 2019, when the vendor won an initial $95 million deal for the design phase of tranche one, a deal which reached $112 million upon expiry in July 2021.

IBM was contracted to deliver the second phase of the program in April 2021, initially for $127.6 million, but having climbed to $210.7 million as of its expiry in October 2024.

Defence then followed with a new system integration agreement, starting at $14.6 million, which has since grown to $47.2 million ahead of its expiry on August 29 this year.

Another system integration deal, signed in February 2025 for $19 million, was later amended on July 31 to add a further $13 million, bringing the total to $32 million. This agreement runs until June 30, 2026.

Defence is expecting to complete the program’s third and final tranche by 2030, revised from an earlier target of 2025, via a staggered release.