TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C.
TBR EVENT PERSPECTIVE
The IBM Watson bet pays off for IBM
and customers a...
www.tbri.com
TBR
manager and their respective need for actionable outputs from the underlying technology these
line-of-bus...
www.tbri.com
TBR
IBM Watson: Expanding into new industries and further down-market as
Moore’s Law allows
Watson represents...
www.tbri.com
TBR
Stitching IBM Analytics technologies into the fabric of the business via simple
manipulation and output c...
www.tbri.com
TBR
individualized “moments,” as opposed to broad campaigns based on demographic segmentation, to build
susta...
www.tbri.com
TBR
TBR believes this integration will remain paramount to Smarter Commerce expansion as IT and business stra...
Upcoming SlideShare
Loading in...5
×

The IBM Watson bet pays off for IBM and customers alike

279

Published on

The name Watson represents high-level big data and analytics and the catalyst for deep and far-reaching changes in the ways IT provisioners deliver, and customers consume, technology. IBM is well positioned to capitalize on the market opportunities these changes create. The purchase and consumption shifts obliterate historic best practices in ways few companies fully fathom. The blueprint IBM laid out to analysts in Toronto on June 5 and 6 indicate it has made the operational changes and technology investments necessary to protect its market position and capitalize on displacement opportunities arising from competitor adherence to outdated go-to-market business models.

Published in: Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
279
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
14
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Transcript of "The IBM Watson bet pays off for IBM and customers alike"

  1. 1. TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C. TBR EVENT PERSPECTIVE The IBM Watson bet pays off for IBM and customers alike IBM Big Data and Analytics Analyst Insights 2013 Toronto, June 5–6, 2013 Authors: Authors: Geoff Woollacott (geoff.woollacott@tbri.com), Senior Analyst/Engagement Manager Bryan Belanger (bryan.belanger@tbri.com), Professional Services Practice Analyst TBR Perspective The name Watson represents high-level big data and analytics and the catalyst for deep and far-reaching changes in the ways IT provisioners deliver, and customers consume, technology. IBM is well positioned to capitalize on the market opportunities these changes create. The purchase and consumption shifts obliterate historic best practices in ways few companies fully fathom. The blueprint IBM laid out to analysts in Toronto on June 5 and 6 indicate it has made the operational changes and technology investments necessary to protect its market position and capitalize on displacement opportunities arising from competitor adherence to outdated go-to-market business models. The springboards for IBM’s multifaceted initiatives around big data and analytics are the multibillion-dollar investments in Watson development, the attendant acquisitions of large solutions sets from SPSS, Cognos and Unica, and the niche-specific, tuck-in acquisitions of entities targeting financial services and fraud risk assessments such as Algorithmics and i2 Group. Watson will begin to scale as the hardware engines required to drive it become smaller, pushing the capability down-market and horizontally, with the latter being launched with Watson Engagement Advisor for Artificial Intelligence-based call center and customer-initiated query. Similarly, IBM will drive Watson deeper into the initial industry targets of financial services and healthcare through acquisition and companion application sets in the medical diagnostics fields. IBM intends to: 1. Continue operational convergence of its Software Group (SWG) and Global Business Solutions (GBS) organizational silos. New buyers drive IBM move to converged solution selling. a. IBM excels at C-Suite communication, and it knows there will be new buyers for their technology and IP capabilities as consumerized IT becomes reality. IT managers driven by demands to shift IT consumption from capex to opex need the ability to listen to each specific line-of-business
  2. 2. www.tbri.com TBR manager and their respective need for actionable outputs from the underlying technology these line-of-business purchasers have little interest in understanding, or learning how to operate and maintain. b. Continue evolving how IBM monetizes its IP assets, with large consultative engagements at the forefront of this shift. IBM highlighted its key banking partnership with Grupo Financiero Banorte General Director of Technology Guillermo Guemez and IBM Global Leader, BAO Transformation Services Glenn Finch, outlining in detail the output-driven contract arrangement between the firms. IBM remuneration will be tied to a select set of five to seven KPIs that will be reviewed and modified annually and against which IBM’s payments will be calculated. Technology will not be the determinant of that compensation; instead, compensation will be based on direct top- or bottom-line business impact. c. IBM announced the creation of an Integrated Center of Competency (iCOC) virtually staffed by 650 high value specialists from their Global Business Services and Software group teams and the unwillingness to sell IP assets from one without tight integration with the other. The intersection results in what TBR calls IP optimization (IPO), which others coin as “hardened” process or “industrialized” process. 2. Continue consumerization of analytics development and output manipulations for consumable analytics capable of putting at the fingertips of executive road warriors the metric levers they need to pull to optimize their businesses on the fly. This will result from hardened process essentially baking into the tools, GUIs and thought leadership of its data scientist team to quicken time to intelligence. SPSS and Cognos tools continue evolving to simplify and mask the underlying technologies less critical to technology consumption than the resulting outputs these tools create. IBM Data Analytics: Operational convergence and contractual simplicity and accountability The industry's focus on and perpetual talk of its newest shiny object, linguistically coined "output," articulates the impatience end customers have for discussions around basic technology that do not translate into actionable business value or the outputs. In an ever-changing landscape, customers want to focus on the results and care far less about the underlying technology. During the first day, IBM highlighted a financial services customer use case and feathered in discussions around pricing and converged competency centers melding SWG and GBS expertise. IBM talked at length about the rigor associated with the negotiations for its contract with Grupo Financiero Banorte, and laid out the simple, flexible contract pricing for the engagement. Each year IBM and Banorte established five or six KPIs to be monitored during the year, which drive IBM’s overall engagement fees. IBM stresses these have to drive longer-term contract lengths (and therefore represent defensive posturing against shorter BPO/ITO deals) as well as a high level of customer collaboration and trust. To underscore the way in which it will reorganize to address these emerging customer requirements, IBM announced the creation of iCOCs between the SWG and GBS. As IBM finds ways to drive cost takeout on the more process-oriented maintenance services, it expects customer cost savings will be reinvested in the converged IP offerings emanating from these two organizations, with the pricing modeled after contractual arrangements deployed with Banorte. No itemized SKUs, no piece parts — just one flat fee tied to business value as determined and monitored by the actionable customer outputs IBM technology and intellectual
  3. 3. www.tbri.com TBR IBM Watson: Expanding into new industries and further down-market as Moore’s Law allows Watson represents the big bet, and the continued evolution of both Watson and the attendant technologies built on and around its capabilities keep paying off, as evidenced by IBM’s announcement it had increased the 2015 goal for BDA revenue from $16 billion to $20 billion. Furthermore, the ability to market increasingly affordable cognitive computing solutions is the equivalent of Moore’s Law, and has enabled IBM to scale the core set of Watson technologies to create offerings at price points that address broader swaths of the IT market landscape. Watson Engagement Advisor is positioned as a call center support tool that uses Watson’s cognitive natural language processing analytics capabilities to enhance data-driven customer engagement. The solution offers two core functionalities: a decision support mechanism for agent-based call center services and a direct customer service tool that allows customers to interact with Watson applications on mobile devices. As part of the announcement, IBM unveiled plans to offer the Watson Engagement Advisor as a cloud service hosted within IBM data centers as well as an on-premises solution. Ultimately, IBM plans to “embed” Watson in enterprises, offering firms the opportunity to access the technology in an “as a Service” architecture to build industry-specific applications. IBM noted that it has drastically reduced the physical capacity of Watson system, boosting its ease of commercialization for enterprises preferring on-premises deployment. IBM has initially allowed only firms in an early customer program, which includes ANZ, Celecom, HIS, Nielson and Royal Bank of Canada, to test Watson Engagement Advisor. TBR believes there are three distinct value drivers that will ensure aggressive adoption of the Watson Engagement Advisor and future commerce-focused solutions based on the Watson technology: 1. Differentiated Technology: Watson has vaulted IBM to the position of market maker in cognitive computing. As consumer preferences and IT consumerization require increasingly personalized approaches to customer engagement, enterprises will seek analytics technologies that can place structured and unstructured data in context. Watson’s cognitive ability ensures it builds value over time and creates context, versus traditional programmable systems where value erodes over the adoption life cycle. As a market leader, introducing Watson for customer service gives IBM a first-mover advantage over peers in leveraging cognitive technology to deliver customer-centric business outcomes. 2. Scalability: TBR believes the ability for enterprises to access Watson “as a Service” to build industry- specific solutions is pivotal to the growth trajectory of the offering. While the initial Watson Engagement Advisor solution will transform customer service and call center operations, it offers a limited scope in its impact on the overall customer engagement continuum, which spans buy, market, sell and service. By accessing Watson on the cloud, IBM consultants, researchers, partners and clients will have the flexibility to customize the technology into specialized solutions, boosting the scope of the solution. 3. Business Cases: The commercialization of Watson in financial services and healthcare has created tangible use cases that IBM can use to pitch the Watson Engagement Advisor and other future cognitive-based solutions to Smarter Commerce clients. In healthcare, for example, IBM’s Watson solutions created with WellPoint and Memorial Sloan-Kettering are used by 90% of nurses and have reduced time to market for new cancer therapies by 75%. These use cases demonstrate tangible business value generated by Watson implementation and will help IBM convince Smarter Commerce customers of the business value of the Watson Engagement Advisor.
  4. 4. www.tbri.com TBR Stitching IBM Analytics technologies into the fabric of the business via simple manipulation and output consumption improves speed of deployment On the first day, IBM spoke of analytics as the silver thread stitched into the IT fabric. It allows the business to explore and mine its business inputs to determine the right levers to pull to drive the business. IBM stressed the skills shortages universally predicted in the industry around analytics. IBM will take its analytics capabilities and “harden” its offerings. Translated, it will wrap GUI-driven tools around core SPSS and Cognos technologies to simplify the data manipulation as well as the data consumption. Line-of-business personnel can rapidly explore the data warehouse for actionable outputs through SPSS Modeler. Similarly, the executive road warrior can quickly consume and comment on the outputs on mobile devices to pull the levers needed to drive the business. IBM Smarter Commerce has built a clearly articulated and integrated cross-organizational vision for its Smarter Commerce business that emphasizes transforming the customer experience and optimizing the enterprise value chain by using disruptive technologies to better understand, as IBM phrases it, “customers in context.” We believe IBM’s capabilities and approach to Smarter Commerce place the firm on a solid trajectory to meet its objective of 14% CAGR growth in a market IBM identified as representing more than a $90 billion opportunity in 2012. However, like its peers in the space, IBM faces three distinct challenges in growing its Smarter Commerce business: 1. Talent: Competition for talent in the Smarter Commerce space will intensify due to an increasing shortage of technical experts, particularly in big data. Furthermore, the influx of competition from relatively new market entrants such as the Big Four will create a crowded hiring environment. IBM will ensure long-term competitiveness for top-tier Smarter Commerce talent by strengthening ties with U.S.-based universities and creating educational programs around Watson and other key technologies. 2. Acquisitions: M&As formed the foundation of the Smarter Commerce portfolio, as IBM invested $2.5 billion in more than 12 acquisitions to add high-value analytics, mobility and other technologies related to Smarter Commerce. As competition intensifies, IBM’s Smarter Commerce expansion will hinge on the continuous identification and integration of strategic M&As that add assets, particularly in big data processing, to its Smarter Commerce stable of solutions. Acquisitions also will enable IBM to supplement its ongoing R&D efforts to commercialize Watson for customer engagements by creating more robust solutions that incorporate both acquired and Watson analytics functionality. 3. Growth Markets: Despite deal wins in growth markets, IBM Smarter Commerce’s key client reference list remains highly centered on the U.S. Effective adaptation of solutions and marketing messages for growth markets will fuel IBM’s Smarter Commerce expansion, as growth markets represent an expansive untapped opportunity. Emerging global enterprises in APAC and LATAM will seek to jump- start globalization by leapfrogging mid-tier systems and undertaking comprehensive, bundled transformational solutions, creating large opportunities for IBM. TBR believes these challenges are good for IBM, as past and current investments in Smarter Commerce will enable the firm to capitalize on investments in these areas. Specifically, IBM’s strategic emphasis on putting the consumer in context, consistent innovation with the commercialization of Watson, and integrated stack of services and technologies will solidify the firm’s stake as a market mover and share leader in the customer engagement/CRM space. IBM Smarter Commerce focuses on putting the customer in context The resounding theme of the 2013 IBM Smarter Commerce Global Summit was the concept of a new class of consumer, the “chief executive customer.” Presenters highlighted the need for marketing organizations to create
  5. 5. www.tbri.com TBR individualized “moments,” as opposed to broad campaigns based on demographic segmentation, to build sustainable relationships between individuals and brands. IBM Smarter Commerce focuses on delivering these moments and transforming customer engagement through a three-tiered process of understanding, connecting with and engaging customers. Emerging social, mobile, analytics and cloud technologies form the foundation for this multiphased Smarter Commerce engagement approach. Paul Papas, global leader of Smarter Commerce, IBM Global Business Services, cited three best practices for optimizing the customer experience through Smarter Commerce: harness big data, maximize and own the moment, and exploit the convergence of the physical and digital experience. Predictive and cognitive analytics solutions serve as the core engines that enable IBM to help clients better understand consumers through data, while building end-to-end social media strategies and creating comprehensive mobile solutions allow enterprises to maximize the moment and create individually tailored experiences. Shifting Smarter Commerce solutions to the cloud allows clients to rapidly generate ROI by reducing cycle times for delivering new customer-centric innovations. Craig Hayman, general manager of Industry Solutions, cited multiple client references that showcase IBM’s ability to successfully deliver on these three best practices. Hayman cited ING Direct and how IBM is delivering a bundled Smarter Commerce suite of services and technologies to optimize the bank’s Orange Snapshot mobile banking initiative. IBM will focus on helping ING Direct create unique customer experiences by creating tools such as Small Sacrifices, a social-media-enabled application that helps create links between day-to-day savings activity, such as passing on a cup of coffee, and larger, long-term investments such as retirement. IBM Smarter Commerce offers a clear, consistent message, supported by a robust portfolio of solutions and an impressive list of client references. However, as the customer engagement process increasingly emphasizes the individual, IBM’s primary challenge will be to deliver Smarter Commerce solutions at scale. IBM’s ability to aggregate M&As, research-developed solutions, services and hardware into productized, repeatable solutions addressing the customer experience, coupled with its integrated global delivery model, will define the firm’s long- term growth and profitability in Smarter Commerce. ‘Integration’ differentiates IBM Smarter Commerce from competitive offerings While the Watson Engagement Advisor offers a unique, differentiated technology, ultimate outputs generated from the tool are based on a range of evaluable, probabilistic options. As such, the value of the solution truly lies in IBM’s cross-organizational integration and its ability to blend this technology with advisory and implementation services, software and research to create solutions that leverage Watson to address client-specific customer engagement outcomes. The organizational convergence accelerated by Watson applies to the entire IBM Smarter Commerce portfolio; the firm’s key source of differentiation in the space is its breadth of capabilities across the solution stack as well as its ability to seamlessly integrate and aggregate existing, acquired, R&D-created and partner capabilities into holistic solutions addressing business imperatives across the commerce life cycle. When asked to define IBM Smarter Commerce’s key source of competitive advantage, Peter Korsten, vice president and partner, Customer Value Strategy at the IBM Institute for Business Value, cited one key factor: integration. This notion was echoed by presenter examples throughout the conference. IBM emphasized the acquisition of Tealeaf, and how the integration of Tealeaf functionalities into core IBM solutions such as IBM Case Manager has optimized its suite of customer experience software assets and allowed the firm to capture client opportunities. IBM also pointed to its recent creation of the MobileFirst portfolio, a new brand that aggregates IBM’s enterprise mobility technologies and services capabilities, as an indication of the firm’s aptitude for bringing to market comprehensive solutions value propositions.
  6. 6. www.tbri.com TBR TBR believes this integration will remain paramount to Smarter Commerce expansion as IT and business strategy convergence precipitates new market entry by large-scale firms and niche solutions providers. While consulting-led firms such as PwC, Accenture and McKinsey are using acquisitions to get closer to technology implementation, investments have been piecemeal to date and pale in comparison to the synergies offered by the integration of IBM’s services, hardware and software assets. Technology-centric vendors such as Oracle have bolstered their technology competencies in the customer engagement and experience space, but lack IBM’s consulting and global delivery footprint, which is pivotal to successful delivery on transformational projects. As a result, IBM continues to win large, transformational deals focused on customer engagement, such as its 10-year contract with Banorte to deliver end-to-end services to transform, optimize and manage the bank’s customer engagement and IT processes. IBM’s cross-organizational integration of services and technology assets, coupled with its research capability, ensures the firm’s long-term Smarter Commerce competitiveness, growth and profitability as disruptive technologies drive CxO-level demand for customer engagement transformation. Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com. ©2013 Technology Business Research Inc. This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.

×