Editor’s note: Analysis: IBM and SAP announced on Wednesday an expanded partnership focused on ways to help clients develop more clearly defined paths to digital transformation, says Technology Business Research Analyst Jennifer Hamel.

HAMPTON, N.H. – IBM (NYSE: IBM) and SAP’s relationship over the past 43 years – which deepened significantly in the last two years – culminated in the April 6 announcement of an expanded partnership to drive clients’ digital transformations.

Since joining forces in October 2014 to deliver the SAP HANA Enterprise Cloud through IBM Cloud Managed Services and SoftLayer, the two companies have worked tirelessly to spur adoption of SAP products such as SAP Business Suite 4 SAP HANA (S/4HANA), SuccessFactors and Hybris, enhanced by IBM’s Global Business Services (GBS) consulting, integration and application management services. In the expanded partnership, IBM and SAP will co-develop industry-focused cloud solutions, add application support and maintenance to current SAP HANA Enterprise Cloud services and offer on-premise and hybrid IT delivery models through SAP HANA on IBM Power systems.

The two companies will also integrate their respective analytics, mobility and digital transformation capabilities to create unique solutions improving line-of-business (LOB) decision making and customer experiences. Initial proofs-of-concept include:

Recruiting Advisor, which combines IBM Watson cognitive APIs with SAP SuccessFactors to enable HR organizations to identify the best candidates for open positions based on internal and external data sources (such as social media);
Heads Up Weather Alerts, which integrates weather data from IBM’s acquisition of The Weather Company with SAP Hybris to enable utility companies to notify customers of potential weather-related outages and special offers;
Fast Fix and Claims Adjust, each of which tie IBM MobileFirst for iOS capabilities into S/4HANA applications to enable employees in the field (such as technical support workers and insurance claims adjusters) to access relevant data and analytics insights from mobile devices.

Finally, and most importantly, IBM and SAP will combine their consulting and thought leadership capabilities to create implementation roadmaps for S/4HANA-enabled digital transformations targeting industries, LOBs and C-suite executives. Complexity, heavy time commitment and high cost of migrations and implementations have challenged widespread adoption of S/4HANA, creating a market need for tools to make the process easier, more efficient and ultimately more cost effective. With IBM GBS positioned as the trusted transformation partner for combined IBM and SAP solutions running on S/4HANA, the expanded partnership enhances revenue growth opportunities for IBM’s Global Services business, as well as its Systems and Cognitive Solutions portfolios.

IBM GBS continues to execute on its strategy to differentiate from system integrator peers in the enterprise application services space

As TBR observed in its event perspective on IBM’s Alliances Insights 2015 conference in October:

“IBM uses IP, delivery scale and business consulting as differentiators in the crowded market for services around SAP, Oracle and Microsoft applications…. IBM aims to combat aggressive competition for SAP implementation projects by leveraging its cloud, Watson, Interactive Experience and agile development capabilities to add value to SAP products.”

The April 6 announcement solidifies this strategy and confirms SAP’s support of IBM’s approach. Many services-led vendors partner with SAP to develop industry-focused solutions, user experience design and rapid deployment frameworks.

For example, in January GBS’ closest competitor, Accenture, and SAP expanded upon their existing Accenture and SAP Business Solutions Group by announcing the parties will jointly develop and market industry-specific solutions run on S/4HANA, with Accenture contributing directly to code development. Still, IBM brings to SAP solutions what most SI peers cannot: a combination of global cloud delivery scale, cognitive computing IP and systems hardware designed to handle big data analytics workloads.

Additionally, IBM’s earlier partnerships (e.g. Twitter, Facebook, Apple) and acquisitions (e.g. The Weather Company) provide high-value data sources and mobile application development capabilities that IBM can use to create preintegrated, ready-to-deploy solutions for customer pain points. We expect these features will help IBM to protect more of its legacy SAP services client base as large enterprise clients increasingly consider upgrading to S/4HANA applications to take advantage of faster in-memory analytics functionality.

Targeted implementation roadmaps and client co-innovation will help to accelerate adoption of IBM and SAP’s digital transformation solutions

Dedicating consulting and thought leadership resources to educate customers on both the possibilities created by digital transformation and the tactical steps required to get there will be critical to the success of the IBM and SAP partnership

According to TBR’s 4Q15 SAP Software Business Quarterly report, “The ability of SAP and its partners to message the business value and use cases of S/4HANA will be critical as the company bets on the solution’s success.” IBM encountered similar challenges in marketing its Watson platform, leading the company to launch the Cognitive Business Solutions practice in GBS in October to advise clients on strategy for adopting cognitive computing, and connect resources and assets from across the broader IBM organization, such as IBM Analytics and Interactive Experience (iX), to provide integration, development and managed services.

TBR’s research around enterprise customer buying behavior shows that as organizations look to cloud and analytics to solve broad enterprise challenges, IT and LOB share decision making in solution purchasing. For this reason, customers look to professional services vendors both for technical expertise to integrate solutions into the IT environment and for industry expertise to configure the best solution for their business needs.

IBM and SAP’s announcement addressed both sets of concerns by offering flexible deployment options for SAP HANA to suit the needs of IT and domain-focused, preintegrated technology solutions to accelerate time-to-market and business value for LOB.

However, since there is no such thing as a one-size-fits-all digital transformation solution, the companies will also co-invest in two innovation centers to develop best practices for solution development and implementations and will leverage the existing global IBM-SAP innovation center network to showcase solutions to clients.

Located in Palo Alto, California and Walldorf, Germany, the new Digital Transformation Centers will bring together more than 40 experts combined from IBM’s Institute for Business Value, Cloud, Cognitive Business Solutions and iX practices and Apple alliance team, as well as SAP’s Value Engineering, consulting, and cloud development teams. Combining thought leaders across business and technology competencies will enable IBM and SAP to create solution roadmaps and marketing plans that target specific industries, LOBs and roles. We expect this emphasis on making solutions seem more tangible – and the results more attainable – for LOB buyers will increase the two companies’ chances of convincing clients to commit time and budget to digital transformation.

TBR will examine IBM Global Services’ progress in shifting to a transformation-led go-to-market model closely during IBM’s April 18 earnings call. An initial response to the company’s earnings will be published by TBR on the following day, followed by a full report within 15 business days.

(C) TBR