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SAP and IBM deepen partnership to boost digital transformation

SAP and IBM are enhancing their longstanding partnership by teaming up to help companies develop industry-specific applications on SAP Industry Cloud and move to S/4HANA.

SAP and IBM are deepening their longstanding partnership in an effort to help industry customers step up digital transformation efforts.

The SAP and IBM partnership will center on helping SAP customers develop industry-specific cloud-based applications and systems. The companies will jointly develop applications on SAP Industry Cloud, an initiative for cloud-based industry-focused digital transformation that SAP unveiled at its Sapphire Now virtual conference in June.

The first SAP and IBM development project on SAP Industry Cloud addresses the modernization of processes for the industrial machinery and components (IM&C) industry, including lead-to-order and plan-to-manufacture, said Alfred Menger, SAP vice president for IBM global partner management.

The IM&C industry makes machinery and components used in discrete manufacturing industries, such as automotive, consumer products, energy, high tech and transportation.

The SAP and IBM partnership means that industry-specific applications can take advantage of product portfolios, technologies and industry expertise from both companies, Menger said. Customers are interested in getting applications that modernize these processes and solve problems, and aren't focused on the product names, he added.

"We've worked with IBM for many years and now it's all about preconfigured and integrated solutions, which customers want not just as project, but as a solution by design," Menger said. "We can work with IBM and connect these different applications -- for example, IBM is taking SAP S/4HANA environments and connecting that to SAP Sales Cloud configure-price-quote environments. They're actually building the sales intelligence application on top of SAP Conversational AI so that sales reps could run queries about the opportunity status, and that runs through the whole process."

The foundation for the application is SAP's Business Technology Platform, an integrated suite of products, including SAP HANA for database storage and management, SAP Cloud Platform for cloud application development and integration and advanced analytics. IBM will integrate its own capabilities and bring industry-specific knowledge to the partnership, Menger said.

"IBM brings in industry expertise, and we're working with their Center of Excellence and key technology people to figure how to run SAP solutions with IBM capabilities," he said. "That's how we design it and bring it to market."

A relationship evolution

The current SAP and IBM partnership is an evolution of a longstanding relationship, said Keith Costello, IBM's global SAP leader.

"IBM, along with SAP, tends to view things through an industry lens, and SAP is doubling down on industry with the concept of the SAP Industry Cloud," Costello said. "We have introduced a concept that goes one step beyond that, probably multiple steps beyond that, which is notion of the intelligent industry clouds for specific industries like IM&C and telecommunications."

Keith Costello, global SAP leader, IBMKeith Costello

The important thing for customers is to have modern data-driven applications that have intelligence built in but are also easy to implement and ready to deliver value immediately, Costello said.

"Customers have told us that the applications need to be ready to deploy with very little tailoring that they need to do," he said. "In the case of IM&C, we started with a customer council that informed us of the business processes that they need to be preconfigured and infused with AI, automation and other capabilities."

The drive for these companies to undergo a digital transformation and implement modern cloud-based systems has accelerated because of the COVID-19 pandemic, Costello said.

"Many companies are being driven by a sense of immediacy to react to current conditions," he said. "Before COVID, many of these clients were being very thoughtful about a growing economy and growing markets, then COVID came and now the focus is on things like supply chain and immediate needs like how to automate what they do because people on the shop floor are now working from home or been furloughed."

SAP needs a partner ecosystem

SAP Industry Cloud provides a way to deliver industry-specific extensions for its intelligent enterprise platform, said Bob Parker, senior vice president of industry, software and services research at IDC. However, in order for it to be successful, SAP needs a thriving ecosystem of partners that can deliver innovative applications.

Bob Parker, IDC senior vice presidentBob Parker

"So, from SAP's perspective, the partnership with IBM is a very good one as IBM brings a lot of industry expertise, especially from their GBS [global business services] unit," Parker said. "The mutual benefit of it is that it gives IBM access to SAP's large installed base, especially in industries like manufacturing, but also IBM brings in some industries that SAP historically hasn't been as strong in, like financial services."

Parker said he expects that the SAP and IBM will become engaged with common customers first, and work with them to co-fund industry applications that can be shared.

"I think that the initial plan is to talk to individually shared customers, but over time make it more of an industry-wide conversation to look for ways to move the number of applications available on the SAP Industry Cloud faster," he said. "But the success of these things is always in the execution, and when you have two companies the size of IBM and SAP, you really need the right people internally to execute on it, so that remains to be seen in my mind."

An accelerated move to S/4HANA

SAP and IBM are also partnering to help customers have a faster and more predictable migration from legacy SAP ECC systems to SAP S/4HANA.

The IBM Accelerated Move Center offers a prepackaged integration with preconfigured industry templates and automated and configuration tools, Menger said.

"It's about automation and acceleration of the move from ECC to S/4HANA, and we're looking into things like how they can accelerate the process such as putting up a system that's not completely empty," Menger said. "IBM also has hundreds of thousands of preconfigurations for S/4HANA, so how do we bundle that together so you start on a very highly configured system -- that's the acceleration."

IBM has migrated more than 400 companies from SAP ECC to S/4HANA, and the goal is to have hundreds of go-live migrations annually, he said. Part of this will depend on companies being able to build a business case for the migration.

IBM [gets] access to SAP's large installed base, especially in industries like manufacturing, but also IBM brings in some industries that SAP historically hasn't been as strong in.
Bob ParkerSenior vice president, IDC

"IBM has a rapid discovery process that's about assessing your current environment and showing how it will run even better with new business processes supported under S/4HANA," Menger said. "It's about building value cases, how it actually helps the business processes that you want to do."

The IBM Accelerated Move Center should help IBM tap into a market of thousands of SAP ECC customers that are in the midmarket range, which has not been IBM's traditional customer base, Costello said.

"Those customers need to move too, but it's a large effort and you can't do that by ones and twos," he said. "You need a repeatable way to do it, because those clients have cost pressures, they have time frame pressures, they want to understand what the scope of the solution is, and they need to build a business case and go to their boards for approval."

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