In business, change is the only constant. Markets evolve, strategies shift, and companies must adapt. While much attention is often paid to growth through mergers and acquisitions, there is an equally strategic and sometimes even more complex scenario: the carve‑out.

A carve‑out — where a company separates a business unit, division, or subsidiary — is more than just a legal or financial exercise. It sets in motion a full‑scale operational transformation. And perhaps nowhere is that transformation more profound than in the IT landscape. Systems, data, applications, infrastructure — all must be disentangled from a shared enterprise backbone to enable the new entity to stand on its own.

This is where strategy, technical expertise, and careful orchestration come into play. At Axellect, we’ve helped dozens of companies navigate these intricate transitions. In this article, we are going to put the carve‑out under the microscope to see what challenges, decisions, and pitfalls navigate this process.

The reasons behind IT carve‑outs

Selling or spinning off part of the business sounds like the most common scenario for the IT carve‑out. In this case, there’s an immediate need to define what stays and what goes, not just in terms of people or products, but in how technology supports them. The IT landscape that once served a single, unified entity must now serve two.

In many cases, the technology infrastructure is deeply integrated. Business applications might support multiple units across a shared IT environment, with intertwined data models, workflows, and reporting frameworks. Separating this landscape becomes not only a logistical puzzle but a strategic imperative.

However, it’s not always a business carve‑out that initiates an IT separation. Sometimes, regulatory requirements drive the need. GDPR, for example, may necessitate complete isolation of personal data. Local data sovereignty laws in various countries might restrict where and how data is stored. In these cases, carving out part of the IT landscape becomes not just a business choice but a legal obligation.

Choosing a path: IT carve‑out strategies

There’s no universal blueprint for carving out IT systems. The optimal strategy depends heavily on the carve‑out’s context: its scope, urgency, compliance requirements, and future operating model.

In some situations, a complete separation is the most logical path. This means building a fully independent IT landscape with its own infrastructure, network, applications, and data governance. This approach offers maximum autonomy but comes with significant costs and complexity.

Other times, it’s more practical to operate under a Transitional Services Agreement (TSA). Here, the parent company continues to provide certain IT services, such as hosting, licenses, or network access, for a fixed period after the separation. This model gives the new entity the foundation to build up its own capabilities, but it also introduces dependencies and timing constraints.

Hybrid models often emerge as a middle ground. For instance, the new entity might build isolated application systems while maintaining shared infrastructure for network services. Or it might selectively integrate with the parent company to enable group reporting, financial consolidation, or shared HR functions.

In rare cases, a company might choose to rebuild everything from scratch. This is a so‑called greenfield approach. While this provides a clean slate, it also demands time, budget, and a highly mature project governance framework.

Preparing for the carve‑out: more than just technology

Carve‑outs are not simply technical migrations. They are transformations. They affect people, processes, and platforms. That’s why preparation must span across three major dimensions: strategic and operational planning, technical architecture, and change management.

Aligning with the bigger picture

One of the most critical early considerations is timing. IT separation needs to align closely with legal deal closure. Too often, companies underestimate the effort required to migrate systems and data, only to find themselves scrambling near the deadline with insufficient resources or clarity. Rushed migrations rarely end well; they increase the risk of data loss, compliance violations, and service outages.

Another key factor is cost. Beyond the obvious investments in new infrastructure and software licenses, businesses must budget for hidden expenses, such as TSA fees, consulting support, cloud migrations, or potential penalties for delays.

Then there’s governance. It’s essential to define early on who owns which parts of the IT stack. Will the divested business have full control from day one? Will the parent company retain oversight of certain systems during the transition? Clear roles and responsibilities prevent confusion and reduce the risk of scope creep.

Regulatory compliance also looms large. Data privacy laws vary by region, and businesses must ensure that sensitive data (particularly customer and employee information) is handled in accordance with local and international standards. Improper handling of this data during the carve‑out process can result in significant legal and reputational consequences.

Navigating the technical terrain

On the technical front, the list of decisions is long and layered. One of the first is where the new IT environment will live: in the cloud, on‑premises, or in a hybrid setup. Cloud solutions offer flexibility and speed, but some industries or regions require data to be hosted locally or under stricter access controls.

The network must be redefined, particularly if parts of the infrastructure are shared during the transition. Will the divested entity have its own security perimeter? Will VPNs or virtual network segmentation be used? These aren’t just design choices — they’re risk mitigations.

Equally critical is the application architecture. Some systems can be copied in full; others require selective data migration or complete replacement. Each application must be evaluated based on its role, data sensitivity, licensing model, and future relevance. In some cases, copying an entire system is more convenient; in others, a replacement offers better long‑term value.

Integration architecture also comes under scrutiny. Many enterprise systems, such as Master Data Governance (MDG), HR platforms, and payroll systems, are tightly coupled with business operations. If the divested business still needs to share data with the parent company, integration layers must be carefully planned and secured.

Lastly, data ownership must be clearly classified. Which data is being migrated? What remains behind? How is sensitive data from the parent company being filtered, masked, or erased? These are complex, high‑stakes questions that require not just technical tools but strong data governance frameworks.

Managing the human side of change

Perhaps the most overlooked aspect of carve‑out preparation is change management. IT transformations impact more than just systems — they touch every employee who interacts with those systems. If users aren’t prepared for the shift, even the most technically sound carve‑out can cause operational friction.

Intercompany processes often require redefinition. For instance, if procurement were centralized, how would the newly independent entity manage vendor relationships, purchase orders, and approvals? If CRM systems were shared, how would customer histories, preferences, and support requests be migrated or restructured?

Training becomes a cornerstone of success. Teams need time to learn new tools, adjust to new processes, and understand how responsibilities may shift. This is especially true if the carve‑out involves replacing legacy systems or introducing new platforms altogether.

Finally, the operational model must be considered. Will IT services for the new entity be handled in‑house or outsourced to a managed service provider? Will there be an internal helpdesk? Who will maintain and support core systems post‑carve‑out? These questions shape the long‑term sustainability of the newly independent IT environment.

The three stages of the carve‑out framework

To guide clients through this journey, Axellect follows a structured approach built on three key stages. This framework allows companies to move from uncertainty to execution with clarity and control.

Stage one: Express diagnostics and scope identification

In the first phase, we aim to quickly establish a comprehensive view of the existing IT landscape. Through interviews with business leaders and technical teams, analysis of documentation, and architectural mapping, we identify which systems, services, and data are in scope for the carve‑out.

We also assess risks (both technical and organizational) and prepare detailed heatmaps of the current infrastructure. These insights form the foundation for prioritizing which elements need to be carved out first based on their criticality to business operations.

Stage two: Target landscape design

Once the scope is defined, we move into envisioning the future. This stage involves designing the target IT architecture, selecting the appropriate operating model, and laying out the roadmap for execution.

We help clients make crucial decisions. Which ERP systems need to be replaced or cloned? What does the future data and analytics architecture look like? How should security and infrastructure be set up in the new environment?

SAP carve‑outs receive special attention. We plan licensing strategies, integration redesign, and data migration paths — all tailored to the business’s new reality. At the end of this phase, clients have a concrete plan, timeline, and budget that align with both their strategic goals and operational realities.

Stage three: Execution

Execution is where plans become reality. With the roadmap in hand, Axellect takes the lead in program management, system deployment, and cutover activities.

We handle SAP and non‑SAP system implementations, configure middleware and interfaces, execute data migration cycles, and prepare detailed go‑live plans. Cutover rehearsals ensure that when the final switchover happens, it goes smoothly.

Even after go‑live, our work continues. We provide hypercare support, resolve post‑launch issues, and stabilize operations so the new entity can thrive.

The nuances of SAP carve‑outs

Everything discussed above about overall IT carve‑outs — from strategy and governance to infrastructure, data, and change management — applies fully to SAP carve‑outs as well. However, SAP deserves special attention. Why? Because these environments bring unique challenges. SAP solutions often sit at the heart of business operations — finance, procurement, manufacturing, HR — and are tightly interwoven with other systems. As a result, when a carve‑out touches SAP, it is rarely a matter of lifting and shifting. It’s a delicate and high‑stakes operation that must be handled with precision.

One of the defining challenges in an SAP carve‑out is managing the data. In most cases, the systems used by the parent and divested companies are deeply integrated, and the same SAP environment holds master, transactional, and historical data for both. This raises a fundamental question: how do you transfer what the new company needs without also migrating what it shouldn’t have?

To address this, a clear data separation strategy is essential. Master data must be filtered and cleaned. Transactional data (especially open items like purchase orders or sales invoices) must be validated and migrated with care.

However, the most significant challenge comes with historical data. Should it be migrated in full, partially, or not at all? That decision depends not only on business needs but also on compliance. GDPR, for instance, may prohibit the transfer of data related to individuals who are no longer associated with the new entity.

It is critical to properly plan for the transfer of archived data and historical documents, such as invoices, contracts, and audit records, stored within the SAP system. This data often resides in external archive solutions or document management platforms tightly linked to SAP. Extracting and migrating it correctly while maintaining traceability, legal compliance, and searchability is a highly specialized task that must be factored into both the carve‑out strategy and timeline.

Beyond the data, infrastructure readiness is another major consideration. The new SAP system must be provisioned and configured to operate independently. This includes everything from infrastructure sizing to licensing adjustments, system replication, and sandbox preparation. Depending on the hosting model — cloud, on‑premises, or hybrid — the architecture and setup requirements will vary, and all of it needs to be in place before testing begins.

Integration is another layer of complexity. Many SAP environments rely on a dense web of internal and external interfaces connecting to everything from planning tools and warehouse systems to payroll platforms and customer portals. During a carve‑out, these interfaces must be re‑engineered. Routing needs to be updated. Dependencies mapped and revalidated. And because some systems might remain shared for a period under a TSA, the integrations need to be designed to operate across a hybrid architecture.

Business processes must also be adapted. For example, intercompany transactions between the parent and carved‑out business will need new process flows and routing logic. Reporting tools may need to be restructured to reflect the new entity’s legal and operational identity.

The final hurdle is go‑live preparation. SAP carve‑outs typically require a detailed and tightly orchestrated cutover plan. That includes multiple testing cycles (technical, functional, and integration) as well as full rehearsals of the system blackout period. The goal is to minimize downtime, ensure data accuracy, and deliver a seamless experience to end users when the switch is flipped.

Drawing from our extensive experience, we have identified

Key success factors for SAP carve‑outs

1. Early and sustained engagement from both the parent and the divested company’s leadership, especially business users, BPO leads, and IT stakeholders.
2. Direct collaboration with all involved vendors and partners to ensure timelines, tools, and roles are aligned.
3. Transparency and flexibility throughout the process: clear communication of risks, options, and trade‑offs.
4. Rigorous testing cycles, including a full rehearsal of blackout activities, to validate functionality and build user confidence.
5. Meticulous cutover preparation, both from a technical and business standpoint, to ensure readiness across all workstreams.
6. Blackout period management, including fallback strategies and pre‑approved emergency protocols, should anything go off‑script.
7. Go‑live readiness, including the transfer of middleware, final data loads, and handover plans.
8. Staggered launch of integrated systems, avoiding simultaneous rollouts that increase the risk of failure.

In other words, SAP carve‑outs demand a special kind of attention. They aren’t just about replicating a system. They’re about re‑establishing the digital core of a business, without missing a beat.

Life after carve‑out: Sustaining the momentum

A common misconception is that the carve‑out ends at go‑live. In reality, that’s just the beginning of a new phase that requires consistent attention to maintenance, development, and security.

Newly independent IT landscapes need dedicated support. This includes infrastructure monitoring, application updates, vulnerability management, and ongoing development to adapt to evolving business needs. Cybersecurity also takes on new urgency, particularly for companies that previously relied on the parent’s security frameworks.

At Axellect, we provide full‑service post‑carve‑out support, ensuring that the systems we help create continue to deliver value long after separation is complete.

Considering a carve‑out or struggling with regulations and restructuring?