T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .


IBM aligns its SAP practice to de...
dollars for front-end transformation work focused on business analytics, mobility, social business, Smarter
Commerce a...
IBM recognized shifting market trends ahead of peers and adopted a business outcome-focused approach to SAP
and overal...
prepare IT architectures for long-term evolution and adoption of new technologies. On the front end, IBM
can instill g...
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IBM aligns its SAP practice to deliver KPI-enabled business outcome transformation


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IBM aligns its SAP practice to deliver KPI-enabled business outcome transformation

  1. 1. TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C . TBR EVENT PERSPECTIVE IBM aligns its SAP practice to deliver KPI-enabled business outcome transformation IBM Insights for SAP Experts 2013 Singapore; Nov. 13 to 14, 2013 Author: Bryan Belanger (bryan.belanger@tbri.com), Professional Services Practice Analyst TBR Perspective Large legacy SAP systems integrators face continual market share encroachment from vendors across the professional services spectrum. Competition from India-centric players with low-cost delivery models pressures profitability for more “vanilla” SAP upgrade, migration and implementation deals, while the Big Four and pure-play management consultancies inorganically build industry-specialized SAP mobility and analytics expertise to compete on the front end of global transformation programs. IBM recognizes the threat posed by these competitive industry forces and crafted a four-pronged long-term strategy to protect and grow SAP services’ market share, which it outlined in detail at its 2013 IBM Insights for SAP Experts conference in Singapore. IBM Global Business Services’ SAP strategy structurally mirrors IBM Global Services’ overarching strategic road map, which emphasizes delivering services that address the dual mandates of Front Office Digitization and the Globally Integrated Enterprise (GIE). Front Office Digitization emphasizes leveraging emerging mobile, social and business analytics technologies to transform the customer experience, while GIE targets the automation, optimization and harmonization of core back-end processes such as IT and procurement. IBM’s SAP strategy utilizes the integration of the GIE and front office as an agenda-setting framework for its approach to the SAP market, and will operationalize its strategy around four key pillars: (1) Accelerate the front-office shift while maintaining back-office momentum: IBM targets SAP engagements that rely on back-office and front-office synergies. IBM aims to remain competitive with low-cost peers for back-office deals focused on core ERP harmonization, standardization and cloud migration by relying on its Smarter ADM, Application Assembly Optimization, and other delivery assets and templates. Efficient delivery of SAP solutions on the back end enables IBM to free up client budget
  2. 2. TBR dollars for front-end transformation work focused on business analytics, mobility, social business, Smarter Commerce and LOB-specific solutions. (2) Prioritize high-growth industries: While IBM offers SAP solutions in all of its industry verticals, the firm’s long-term SAP strategy calls for a doubling down of investment and sales activity around 10 key industries. As part of the initiative, IBM will focus on four high-growth markets — banking, consumer packaged goods, energy and utilities, and travel and transportation — as well as six other priority verticals — automotive, chemicals and petroleum, electronics, industrial products, life sciences and retail. (3) Drive Blue Sapphire account program: IBM will align SAP sales efforts to focus primarily on key identified accounts within its Blue Sapphire program. IBM will target wallet share expansion with existing large enterprise customers seeking to optimize and transform existing SAP environments as well as opportunities to “land and expand” with new logos through bundled, end-to-end solutions that blend hardware, software and services capabilities to deliver business outcomes. (4) Co-innovate with clients: As the influence of business buyers in IT drives continued demand for business outcome enablement, IBM anticipates innovation will become a prerequisite of the provider-customer SAP relationship. IBM will stay abreast of this trend and grow mindshare as an SAP innovator by leveraging prebuilt industry configurations, IP assets and accelerators, and IBM Research capabilities to deliver flexible innovation that leverages IBM Labs for SAP Solutions customer sessions. Delivering business outcomes forms the foundation for IBM’s long-term SAP practice growth strategy Business outcomes represent the next major wave of SAP and IT services delivery overall, as LOB buyers aim to harness emerging technologies such as analytics to pursue business goals beyond cost takeout. IBM recognizes this paradigm shift and mobilizes its cross-organizational SAP operations to craft strategies, align portfolio investments and gear go-to-market efforts around delivering outcomes. In the hardware space, IBM will tout expert integrated PureFlex systems that offer preconfigured, virtualized and automated infrastructure architectures for SAP to accelerate deployment times and free up IT budgets for innovation activities. In software, IBM integrates infrastructure management tools with SAP management software to offer simplified “single pane of glass” views of SAP architectures. Additionally, IBM builds standardized frameworks and deployment methodologies for layering core SAP systems with value-added IBM analytics, mobility and LOB-specific software tools and assets to provide industry-specific functionality to business buyers. While hardware and software innovations streamline IBM’s SAP approach and provide the building blocks for nextgeneration SAP solutions delivery, true opportunity for differentiation through business outcome enablement resides in the firm’s Global Business Services capabilities. IBM GBS aims to shift the SAP client mindset from “not just doing ERP or IT transformation, but doing what delivers business value and figuring out how we extract business value from designing, building and running ERP and other technologies,” said Mark Sullivan, global leader of IBM’s Consumer Products Industry. IBM is ahead of the curve on aligning its SAP services arm to deliver business outcomes, evidenced by its IBM SAP Value Realization Framework, IBM Value Realization Dashboard Asset and other tools and assets that enable the firm to deliver repeatable, industrialized SAP implementations. Further, IBM’s activeness with developing vertical-specific SAP tools, assets and configurations enables the firm to better align and track financial, operational, cost and quality KPIs with KPI Operational Playbooks that are relevant to clients’ specific business requirements. IBM’s ability to deliver across the “design, build, manage” life cycle gives the firm an advantage in delivering business outcomes during SAP implementation www.tbri.com
  3. 3. TBR IBM recognized shifting market trends ahead of peers and adopted a business outcome-focused approach to SAP and overall IT services delivery. However, the differentiating value of the outcomes approach will continue to diminish in the long term, as both low-end offshore IT shops and management consultancies refine their business models and transform delivery capabilities through aggressive acquisitions-led strategies to accommodate rising demand for outcomes. TBR believes IBM’s deep portfolio integration and capabilities across the “design, build, manage” life cycle are true differentiators that allowed the firm to build, and will enable it to sustain a unique SAP value proposition at the intersection of business and technology. On the technology side of SAP implementation, IBM’s hardware DNA enables the firm to offer preconfigured, fully integrated systems designed and optimized to run SAP environments to new and existing customers. IBM continues to build out its business analytics and mobility portfolios through software acquisitions such as SoftLayer, and integrate acquired capabilities with core SAP solutions to offer added business value and functionality. On the business side, IBM boasts a global base of vertically aligned business and IT consultants, enabled by an unparalleled suite of differentiated IP assets, frameworks, tools and methodologies that can be brought to bear to optimize SAP delivery. IBM is not immune to competitive pressures on the technology and business sides of the SAP spectrum. Providers such as HP, Dell and Fujitsu offer competing converged infrastructure solutions for SAP, but lack the front-end services capability to deliver truly innovative solutions on the front end. Providers such as Accenture, Deloitte and Capgemini have proven capabilities in SAP consulting, implementation, and applications management, but must source product components from technology partners to build SAP hardware architectures. Deep organizational integration of its technology and business-focused SAP capabilities, coupled with expansive investments in R&D, provide IBM with a distinct competitive advantage over peers that attack the market from solely a technology or business angle. While peer investments aim to fill portfolio gaps on either the SAP technology or business side, IBM already competes with a compelling “design, build, manage” value proposition that fuses these two worlds. As such, IBM will channel R&D and M&A activity to add next-generation business analytics, cloud, mobile, social and LOB-specific capabilities that align to business outcome requirements and further distance the firm from peers in the space. Convincing customers to buy into outcome-focused SAP transformation projects represents IBM’s primary hurdle to long-term SAP practice performance IBM has proven capabilities and expertise in delivering large-scale SAP transformation projects, backed by its endto-end SAP solutions portfolio, delivery model and assets, and base of industry-specific customer references. These types of projects represent IBM’s bread and butter in the SAP space, as such deals offer the firm the time and scope needed to showcase its full continuum of services and establish a framework for developing and meeting KPIs that define business value beyond cost reduction. Despite IBM’s willingness to engage in such deals, attaining customer buy-in for such projects will represent the firm’s primary challenge, as customers remain apprehensive to shifting entire IT budgets to providers touting outcome-based pricing structures. Sullivan noted that 80 cents of every IT budget dollar in the CPG vertical is spent on “manage and run” versus business transformation, and IBM’s goal is to shift the mix to between 50 to 60 cents. However, “The biggest impediment to KPI-enabled business outcome transformation is the people at an organization,” Sullivan said. To successfully narrow this gap between IBM’s strategic SAP practice goals and current customer realities, IBM will focus on three long-term strategic approaches: (1) Tout governance to win with IT: Mushrooming volumes of internal and external data, coupled with shadow IT purchasing of Software as a Service (SaaS) business applications by LOB buyers, create stark governance challenges for the IT organizations of large enterprises. IBM can appeal to these IT constituents by emphasizing its ability to take responsibility for these governance challenges through its breadth of services. In the back office, IBM can optimize, standardize and harmonize SAP environments to www.tbri.com
  4. 4. TBR prepare IT architectures for long-term evolution and adoption of new technologies. On the front end, IBM can instill governance and streamline adoption of business analytics by translating business-level requirements into standardized solutions. (2) Build defined outcome-based pricing constructs: While the industry continues to demand KPI-measurable business outcomes, customer hesitance to these deal structures remains strong due to their lack of standardization and cost ambiguity implications. IBM has the KPI metrics and underlying frameworks in place to regularly deploy SAP projects using value-based pricing structures, but adoption of these deals is ultimately married to customer willingness to forge such contracts. To create customer buy in for valuebased deals, IBM can deploy value-based structures with defined ceilings and choke points. In unbounded value-based deals, vendor achievement of defined KPIs can result in cost overruns beyond what customers would consider an acceptable project budget threshold. To avoid these situations, IBM will scope value-based bids with a predetermined margin requirement, calculate the implied customer-side total contract value required to attain that margin and build KPI metrics that ensure IBM revenues are earned on the basis of outcomes but do not exceed clients’ overall project budgets. (3) Deploy a “seeing is believing” approach to sales efforts: Customers increasingly recognize the potential long-term value of an outcome-based SAP transformation but are often hesitant to shift entire global SAP footprints to a single vendor. To overcome these concerns and bolster its pipeline of large SAP projects, IBM will more actively sell innovative SAP-related services during the proposal process to build critical mass through quick wins that offer near-term ROI and business value. Through constructs such as the IBM Lab for SAP Solutions, IBM can showcase real innovations, assets and frameworks that deliver industryaligned business value. IBM’s success with standardizing and templating assets created on custom engagements will enable the firm to lead sales proposals with preconfigured live systems that showcase IBM’s value and innovation. As IBM Global Partner and SAP Innovation Leader Matt Schwartz said, “The days of selling PowerPoint slides are over, and IBM now needs to sell by using its labs and other related capabilities to sell real SAP innovations to customers.” 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. www.tbri.com