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In this episode of Unfiltered Stories, Saurabh Gupta, President of Research and Advisory Services at HFS Research, sits down with Jason Kelley, GM of Strategic Partners at IBM Consulting, Stacy Short, SAP Global Partnership Executive at IBM Consulting, and Christine Rhoads, Global VP of Business Development at SAP. Together, they explore the 52-year partnership between IBM and SAP and its lasting impact on the tech industry.
You can listen above or watch this HFS Videocast here:
Key insights from this discussion include:
Read the associated highlight report “IBM and SAP embrace OneEcosystem to drive next-level business value” here.
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This transcript was auto-generated from the original recording and lightly edited for readability. We've done our best to catch errors, but names, technical terms, and company references may be misspelled or imperfectly captured. For the definitive version, please refer to the original audio or video. Views expressed are the speakers' own.
Welcome, welcome, everyone. Welcome to today’s edition of HFS Unfiltered, where we are going to discuss the power of collaboration and bring the concept of what HFS calls the one ecosystem to life. My name is Saurabh. I lead our research and advisory services here at HFS and I’ll be your host today. And I am delighted to be joined by three wonderful guests from two very powerful companies, IBM and SAP. So let me start by asking them to introduce themselves — name, rank, serial number — and I’ll start with you, Stacy.
Thanks, Saurabh. Thanks for having us today. We’re super excited about this discussion. I’m Stacy Short. I’m Global Vice President at IBM responsible for the SAP relationship on the IBM Consulting side of the business. And I’ve spent my last 30 years working with SAP, both in the field implementing the product and now spending the last 14 years managing the partnership here. So we’re excited to talk to you about this 52-year partnership today.
Fantastic. Thanks for joining us, Stacy. Jason.
So Saurabh and team and those listening, I’m Jason Kelley, and I lead the strategic partner and ecosystem business for our IBM Consulting team globally. Last but not the least, Christine.
Really excited to be here to discuss the IBM and SAP partnership today. My name is Christine Rhoads. I’m the SAP Vice President of Business Development, responsible for the global IBM partnership. And in that capacity, I work closely with Stacy and Jason, developing the strategy, enablement plans and how we operationalize our partnership.
So Jason, let me ask you this, right, before we jump into the IBM and SAP relationship. IBM sort of has everything under the sun, right? Why do you need partners?
So that’s a pretty good way to set me up, Saurabh — everything under the sun. But it’s a good perspective, because coming from where we’ve been to where we are now, I think that might be a market perception. So going with that: we have literally gone the opposite direction with our company. I do appreciate it, because we had a larger portfolio. We made some very strategic shifts in this company where, led by our current CEO before he was CEO, we made a declaration that, look, we’re going to go on an open platform. We’re going to buy Red Hat — 34 billion reasons why we need to continue to make that successful. And then we said we’re also going to spin out what’s not important for our company, and we spun out Kyndryl. So I’m starting with that to show that we’ve actually shed significant parts of the company and brought in significant parts to say, look, this is what we’re going to do. And we really refined it to say that we are a hybrid cloud and AI company. And that’s very simple, because you can say it in one sentence and you get it done. And then, coming into strategic partners and ecosystem, we took it a step further to say, look, first we’re going to model something off something that’s 52 years old. What is a partnership? It’s a 52-year-old partnership with SAP. And it stands the test of time. But why does it exist? It’s because we do some things that are very simple: we make commitments together, we communicate, we do it consistently, and it equals one thing, which is trust. That’s what we have with SAP. It’s a trusted relationship. And then you say, well, why not just SAP? Well, of course, we have other strategic partners and other ecosystem partners. And what we’ve now focused on over the last three years, we’ve built a business that now consists of just about 50% of our overall IBM Consulting business. I’ll say that again: our strategic partner and ecosystem business is about 50% of our overall business. So it does say we’re making a bet here. We’re making a bet on our ecosystem and strategic partners, and not just by setting up individual groups — an SAP business and a Microsoft business. It’s saying, look, we’re going to have them work together and we’re going to orchestrate that. We’re going to make sure that they’re working together as an ecosystem, because that’s what our clients want — you look at our major clients, they don’t have just one thing. And they’re also going the other direction. They don’t want everything on the face of the earth. They say, these are the three things we’re going to make a bet on, and we are making a bet that SAP is going to be there more than 90% of the time and we’re going to be with them, and that we’re going to be able to help with the other components of the ecosystem to bring that together successfully for the client. Then finally, as a differentiator — because others could say that. Now I really get to the heart of your question. As we’ve said, these are the only things that we do in IBM. Those are also the things that we bring to bear as IBM Consulting with our strategic partners and ecosystem. Because just saying I can pull together the right recipe is one thing, but then to say I also have some of those ingredients so I can do it quicker, better and faster than others — such as watsonx, such as components like Maximo, such as security capabilities and other partners such as Palo Alto — we’re going to bring those things together and we say, look, here’s your starter kit. You can choose, because it’s clients first, but with a point of view. For us, we want to walk in and make sure we’re doing that. That’s the differentiator, Saurabh, and that’s where I do believe — and we’ll talk about it more — this thought of, when you’re talking to a client, is your ecosystem stronger than your competitor’s ecosystem? Can you do it quicker, better, faster because of how you’re making your select — not your rainbow buffet of products, but your select ones and solutions that you’re pulling together that are specific for your industry? That’s the differentiation, and that’s what we bring with IBM: that industry expertise, the distinct partnerships, and being able to bring that together even with our own technology.
Yeah, that’s fantastic, Jason. Let me ask that same question to you, Christine, if I may. If you could describe what’s in it for SAP and what’s the evolution of this partnership with IBM, and also mention a little bit about this new GenAI-related partnership features and functionality that I think we are all very interested to learn more about.
Yeah, absolutely, happy to do that, Saurabh. Every few years, SAP and IBM announce a next phase of our partnership, and we’re always focusing on modernizing the strategy around delivering business transformations and aligning that to both our corporate strategies from an IBM and SAP perspective. But most importantly, we always align to our customers’ priorities. In 2016, we announced the digital transformation initiative, and then in 2020 we announced the Evolution Partnership initiative, and those things are really focused on helping drive value to our clients. So the evolution of our partnership just keeps changing over time. About three years ago, we launched RISE with SAP, and it has really made an impact. It’s a game changer for both our partnership and our joint customers, and IBM has embraced that wholeheartedly as a partner. For SAP it’s really our major motion that we go to market with. We’ve added AI now, and, as you heard, the generative AI partnership that we’ve recently announced — we’ll talk about that a little bit. I think Stacy’s going to really focus in on what the Value Generation Partnership is about, but it’s a critical aspect of what we’re going to be doing together as we go forward. As we look at RISE, we really focus and tailor it, as Jason mentioned, around industries, really getting things sticky, trying to help our customers transform in the best ways we possibly can. And we worked with IBM on a premium supplier offering recently. Over the last couple of years, we’ve had that, and it really has helped us. They were the first consulting company to be able to offer that, with infrastructure, technical managed services and business transformation, along with application management, all under one bundle. So that’s a differentiator that we did with IBM — not many of our partners were allowed to do that. And then finally, with regard to RISE, we announced the breakthrough partnership with IBM a couple of years ago, and we’ve done hundreds and hundreds of customers and helped them adopt the RISE solution. And not only when we announced a partnership do we collaborate around it — I would say one of the things that differentiates us as partners is that we get the sponsorship at the top level, we also enable down to the local level, and we get impressive results. We scorecard across customers, hundreds of customers, joint account plans, showcasing industry motions, and we have customer success stories, and we build all that out. Our partnership has evolved and really honed in on the fact that you can’t just do that strategic initiative at the top level, you have to operationalize it. I think between IBM and SAP we’re actually masters at collaborating around the strategy and setting the bar, but we’re also masters at execution, and most importantly at making our joint customers successful. So that’s really where we focus. From an AI perspective, we’ve really teamed up to help enterprises harness the power of AI and use it as a source of competitive advantage. About a year and a half ago, we also partnered to embed IBM Watson into SAP Start, so that SAP and IBM could partner and create more effective and efficient user experiences for our customers. And our partnership has changed significantly over the years, but what’s driven our evolution is our shared vision of delivering value to our joint customers and meeting them where they are in their cloud journeys, which is really critical. We use lots of different models to meet our customers where they are in their journey, and that’s really what I would say is our differentiator as well — along with, as Jason pointed out, trust and collaboration and transparency.
Yeah, Christine, I’ll pick up from there, sort of in support of those priorities. What I would say is, we really offer the broad spectrum of consulting services across your entire portfolio, right? From line of business, to RISE, to what we do around industry, as well as data, and also around building business applications on BTP. I think the other point here is we do this through a range of tools, methods, and accelerators. When we think about what we do together around our Rapid Discovery offering — this is our offering that really helps our clients build their business cases and gain that stakeholder alignment for their transformation initiative. Our Rapid Move is another great example, and it actually represents a lot of what you’re talking about around ecosystems of ecosystems, because what Rapid Move allows our clients to do is really take advantage of a bluefield approach to their transformation, where they get to choose a selective data transition, migrating a portion of their data so it’s acting as a true brownfield, but then they’re also selecting where they’re going to drive transformation. And we do that leveraging our partnership with SAP and their tool set. So that’s a great example of this ecosystems-of-ecosystems notion of putting the parts together. Those are a couple of examples of the types of accelerators we have. But really, it comes back to one of the greatest advantages we have that we can offer clients around client value on their cloud journeys, and that’s the partnership and the power of this 52-year enduring partnership, and all the aspects of collaboration that Christine just spoke about. So, super exciting. And if you want me to, Saurabh, I’m glad to comment a little bit more on the Value Generation partnership if you’d like me to do that.
If you look at generative AI, even cloud — cloud is now what, a 20-year-old conversation, and still enterprises are struggling to adopt cloud, whether it’s private cloud, public cloud, hybrid cloud. I think I first had my conversation on cloud in the 1990s or early 2000s, right? It’s still, what, 25 years. Now, generative AI is a 15-month-old conversation for most organizations. And I think the reason enterprises struggle with these technologies is not because the technologies themselves are bad, but because over the years we’ve collected so much debt. We talk about technology debt, but not just technology debt — there is a data debt, nobody knows where to get that data from. There is a process debt: we are still doing these things the same darn way that we were doing 50 years ago. And there’s a skills debt: it’s just so hard to find the right people who can understand both the business and technical aspects of it. So as you describe this Value Generation concept, I would love to understand how this partnership is helping enterprises pay some of these debts, because I just don’t know how we’ll move to the next frontier, which we all want to get to. But at some point in time, we need to pay our debts, right?
Well, that’s exactly what we see, Saurabh, and that’s exactly why we created the Value Generation Partnership initiative, because we think there’s just not enough prescriptive approach to how you get to next-generation business processes. First of all, we have to understand what we’re doing today to make it better, right? There are really four key components around the Value Generation Partnership initiative, and those really start to answer your question. So let’s talk about next-generation business processes as an example. In that first element, we’re really helping clients understand, using CAO, what their current existing processes are. So we’re going to run an adoption POC program this year, doing 40 of those for customers or more. That’s helping them see where they are today, helping them understand what best practice looks like, but also factoring in the embedded capabilities of where SAP has added in AI that they should be taking advantage of. And one of the other things we’re doing in the industry innovation area is really driving a prescriptive roadmap that we worked on with our IBUs at the industry level, saying, look, these are all the places where you could put in generative AI, or AI more broadly, and whether it’s a high-value area or a low-value area and where you should really focus your time and effort. That was really important to us; Christy and I, when we were setting up the partnership, it was really important that we were trying to provide those types of prescriptive roadmaps of where value would be. So industry innovation is that second point, and that’s being done collaboratively with the SAP industry business units and with our joint clients. We committed to the marketplace that in the first year of the partnership we will build 100 of these AI solutions together. We probably already have 20-plus available, and if you go out to the Value Generation Partnership initiative website, there are already six videos there describing some of these. But it’s really about putting that industry expertise into what are the pieces that really help accelerate the next generation of value. So, if we take one that we actually released in January, it’s all around a CPG application around the last mile. So think about all the elements of direct store distribution, and leveraging AI to help that driver with things like route optimization, or to help that driver understand that there is additional shelf space so I should be dropping additional product that’s been loaded onto the truck, or helping in the settlement process. These are the types of solutions that we’re building to create that next generation of value you talked about. Because when we talk about this initiative helping customers become next-generation enterprises, that means they need to be doing things like leapfrogging competition, finding those areas that really drive value. So that’s the second element, around industry innovation. The third element is super important when you talk about technical debt and the path forward with cloud, and it’s all around next-generation architecture and really customer adoption approach. What we’re talking about here is, we don’t think we’ve been prescriptive enough around approaches like Clean Core. Our clients are kind of scared of that word — you wrote hundreds of thousands of programs in ABAP, and now I’ve got to convert them all to BTP overnight? That seems like a lot. But what we want to lay down with the new partnership is really, again, a roadmap: do this core thing first — and it’s going to be different for each client — but do this core thing, and then let’s look at how we approach this in waves to drive you to a more Clean Core approach over time. And we get to use some of the new tools from SAP, like LeanIX, to really define that best-practice architecture and help clients understand what that looks like. And then it’s also about helping them drive value in the way we deliver programs, and that’s infusing generative AI into the way we do SAP projects. What we mean there is using GenAI to do things like test script generation, or user story creation, or — the hard one that we’re all working on, and working on with SAP as well — things like ABAP code creation, and actually ABAP conversion from ABAP to BTP-type objects. So that’s what we’re talking about in that area. And then the last area is super important to all of us as well, and an element that Christy and I felt passionate about: we know that to get all these clients to a next generation of value, to get them to RISE, to get them to take advantage of the elements we’re talking about, we really have to help expand this ecosystem of resources. So what we’re going to do is combine a lot of the great programs we’re already doing around veterans, around our women’s initiative, around our university alliance initiatives. We’re going to put the power of those programs together and really help expand resources, as well as work on one or two new social impact programs together that really look at at-risk populations as another place where we could train and add additional resources to the ecosystem. So we’re super excited about the partnership, and I think it answers the question you were just asking about how do we get to that next generation of value?
Yeah, no, it’s fantastic. You actually addressed all my four debts, Stacy — process, data, technology, and skills. So that’s fantastic. I think, Jason, I’ll ask you another debt, which is the culture debt. We all want to live in our little silos, within the four walls of whatever we define as our organization, our function, our department. And you’ve been advocating this ecosystem approach, or even the ecosystem-of-ecosystems approach, for several years now, if I’m not mistaken. How do you get people — I think the first reaction is, yeah, it makes sense, but then, oh, this is my way of working, how can I do this? It gets into the cultural aspect of this, because we as humans are not geared to collaborate very well with people who are not in the same organization, under the same roof, and so on. What’s been your experience in getting over that mindset hurdle?
The challenge is real, Saurabh, because it’s like anything else — it’s change. And I think you alluded to this earlier, this thought that 20 years ago it was cloud, now it’s just GenAI, and there were a couple of things between then and now. And it’s never the technology that’s the biggest challenge, it’s the change. So if cloud was here 20 years ago, it didn’t change that much; it was the organization that had to catch up. And so you’re on a key point here. I think that in order to get people to see the new opportunity, it starts from the market back, in some cases. People believe that, oh, I’m just going to take this large organization and change it, and then the market will get it. But too often you end up doing something that’s before the market is ready. We as IBM know how that works — we’ve done that a few times. We were seeing AI a decade ago, and the market wasn’t ready. The good thing is we hung on to it, named ourselves an AI company, and now we’ve come full circle. But what has happened is that we start to look at the market. So let’s focus on the change. What have we seen? First, let’s start internal to the market. There is a challenge inside to make sure that you have the skills and resources, and we’ve put a lot of investments — and collaborative investments, because SAP has invested back into us for skills, so they’re at the top of the list of saying, look, let’s make sure you’re tooled and ready to do what you’re saying you’re going to be able to do — by coming up with innovative ways to create unique and industry-focused solutions. That begins to open the minds of the market, because if you just walk in and say I’ve got a great idea and it’s on PowerPoint, it’s just a great idea on PowerPoint. But when you walk through the door with SAP and it’s real, and they understand how this new capability can relieve or even convert some of that organizational and technical debt, then they start to believe it. They say, oh, this is real, and I understand what you said. So it starts with being able to have the skills and tangible content and solutions that are industry-focused to get people to go, I get it, I get it. Then you have to make sure that you have the right players at the table with you. And that’s the strength of partnership. You started to allude to this when you said the other partners — when we walk through the door, we’re walking through the door arm in arm with SAP, at the beginning of the conversation with the client. And someone said, well, didn’t you always do that? Well, not really. I don’t think everyone did, and the client didn’t want that, by the way. They would often say, let’s keep SAP over in their corner, IBM, and of course the procurement departments love that. And then there are also the other components that come in and say, well, what about our data, how are we going to map our processes? Well, there’s Signavio as well. Okay, but we’re talking to our end customer, and we have a point of sale and we have a CRM — oh, you’re trying to say Salesforce to them? Yeah, we’ll walk through the door with them as well. And, oh, you’re going to use Einstein? Oh yeah, sure, that’s exactly what we’ll do. And we have a lot of content that we’re going to put in front — it could be video — oh, then you probably want to talk to Adobe and Firefly. Yes, yes. But we’re going to keep everybody in their corner. Well then, we’ll talk about your solution in five years, because that’s how long it’s going to take to pull all those people together if you run it that way. And that’s where we lean on this longtime partnership as an example. We say, look, if there’s no light between us, SAP and IBM, we move faster. And we as IBM, as we’ve simplified — and there’s just technology and consulting — we are the only, I know Christine said there are others, but Christine, this is where you kind of gave me fuel: there is no other company on the face of this planet that has a consulting business at scale that sits inside a technology company, other than IBM. And so with that, you put no light between the IBM capabilities, no light between SAP, you pull in the other ecosystem players, and you walk through the door together. It’s hard to say I don’t get it when that happens with real content, as I said before. So, Saurabh, that’s it. And I’m going to hit on something, because I’m really going to try and preempt your ecosystem-of-ecosystems discussion, because Stacy just said it: you think of the ecosystem I just described and a real client problem that goes from their technical depth all the way out to their end user. But then we also say, are there other things in this ecosystem of ecosystems that we can be touching on that help in other ways? So to think that we’re bringing in our veterans organizations, our people at risk — that’s an even broader ecosystem. So you start to pull these things together, and what you’re bringing to market starts to look extremely different and even more valuable than what someone would consider a point solution of the past.
Yeah, that’s fantastic. 50 years, Christine — that’s a long time. Where do you go from here in this partnership?
Yeah, that’s a great question. It’s actually 52 years — we celebrated our 50th two years ago, so it’s hard to imagine that we’ve been partners that long, but IBM is our oldest and very much appreciated partner. You just heard from Jason and from Stacy the things that make the SAP and IBM partnership unique, but it really is around the shared ecosystem approach. I think we do that masterfully. The investments that we both make in the partnership are significant, and I think it sets us apart and allows us to demonstrate to our customers — which is the most important aspect of all of this — the differentiation, and it helps us to accelerate their journeys to the cloud. That’s really how we bring them back together. Stacy outlined the launch of the Value Generation Partnership initiative, and honestly, the sky is the limit right now. I feel like it’s the hot topic, everybody’s coming together. We made this announcement, we had huge pickup around it in the last week, so it’s really exciting right now for all of us. With the new AI enhancements like generative AI, you’ve got capabilities and industry-specific cloud solutions that are going to help us address our customers’ unique needs and accelerate their adoption of RISE and SAP, and our fifty-year partnership continues to grow stronger and move the industry forward as we adopt all of these different aspects. The next step is to develop and deploy use cases for industries like manufacturing, automotive, retail and consumer products. We already have some going in consumer, but we’ll pick all of that up and start to make this real. Every customer is at a different stage on their journey to the cloud, and our goal with this initiative is to deliver value that helps them get started and ultimately gets them on that cloud journey and transforming their business. So that’s really what we’re trying to accomplish with all of this.
Well, I was just going to add, Christine — I mean, I think we both feel, after watching this partnership, and Christine and I have 25-plus years running this partnership together, that it’s one thing to make an announcement. What we will be focused on now is exactly what Christine said: making it real. It’s about delivering solutions that add value. It’s about providing those roadmaps that really help these customers get to a next-generation enterprise. And what does that really look like? It’s up to us to set that standard, help them understand the steps, and then help them see where that value is. So we’ll be very focused on making it real. I just wanted to add that, Christine.
Yeah, absolutely. And one of the things that SAP and IBM bring to the table — I think when you bring us together, we unlock the power of relevant, reliable, and especially responsible business AI. And I don’t know that others can say that as responsibly as we do. We’re very aligned on that as a kind of mantra for ourselves as we work with our customers. We’re already doing work with IBM to embed AI within our solutions, and now it’s time to drive business outcomes for our joint customers. We don’t deliver the value without the trusted partnership, so the trusted partnership becomes really critical. We’ve developed this over years, as we’ve indicated, and most importantly, the transparency between the teams, the trust between the teams, and the collaboration at all levels is really shared, and that’s across the board, from our top leadership all the way down into my team across the globe and others who help make this thing real. So we really do focus together. So the sky’s the limit, really, on where we go with this partnership.
Yeah, this has been a fascinating conversation, and I think you can feel that this partnership is for real when you’re completing each other’s sentences. So that is fascinating. But I wouldn’t let you go without asking this question. There’s so much change happening in our world, whether it’s IBM, SAP, or our customers. If there was one wish that could come true that you might have, what would that be, as you and your clients and everybody are facing and looking at this change in front of us? Let me ask you, Stacy, first — what’s the one wish that you had?
My wish is exactly what we talked about, what we hope this partnership really produces, and that’s really helping clients get to a next level of value. I started working on SAP in the ’90s, implementing a little bit of R/2, but the early R/3, and running very large transformation programs for my clients like Johnson & Johnson. And there were a lot of times that I could see the solution I wanted to create but didn’t have the technology to create it. And now we have the technology to create it. It’s about how we harness the power of putting those pieces together and really focusing in the areas that are going to produce the most value, and then delivering that to our clients. Because I think we would all say we’ve been talking about — just like you mentioned, cloud — we’ve been talking about transformation for a really long time. We now have all the tools and technology to deliver value at the next level, and I think we must do that. So that would definitely be my wish.
Yeah, taking that a little further, I was just going to say, making it real with our customers. Getting our customers to start their journeys and getting them convinced to move to the cloud can be a monumental task, because there’s a lot of, as you said, baggage and history that’s been there for years. With generative AI, I think we give them, hopefully, that competitive advantage, those competitive thoughts to move them, to allow them to make those moves to transform their business and really become more effective at what they do. That’s really our goal, to support our customers. So that’d be my wish.
And your one wish, Jason?
I think my wish is that across the market we could get people to — and by people, I mean enterprises and organizations, which ultimately are made up of individuals — my one wish would be that we could move at dilemma speed without the dilemma. We saw record digital transformation during a pandemic. People were ready to move, they made decisions, it strengthened the ecosystem. It made your ecosystem of ecosystems there at HFS true, because people were going across every ecosystem they could stitch together. And if we could just drive that sense of urgency and entrepreneurship and trusted experimentation inside organizations with trusted partners like what we have right here, the results show for themselves. It’s like short-term memory — all of a sudden we forget that that brought results. So let’s forget the dilemma and let’s move at dilemma speed.
No, that’s fantastic. And my wish would be that IBM and SAP are actually able to realize what this partnership offers, because I’m telling you, that’ll make work fun for people. Work has become — especially transactional work on SAP has become — so boring. I don’t think it should be that. I think it should be a lot more fun, and I think that’s the power of GenAI, in my mind: it takes away the boring, mundane stuff that we as humans don’t want to do, and lets us do the fun, creative work that we want to do. So I hope this partnership succeeds. I think everybody who’s listening to this can see that you guys gel well together. I think this is a great example of our one ecosystem coming to life. So thank you all for spending some time with us. I learned a lot, and I hope everybody else who’s listening to this learned as well.
Well, Saurabh, my thank you is to HFS for leading this thought leadership effort, and also to our two strong leaders here. Because there’s something on the screen that I love: when I see two women execs who have been in the business for as long as they have, and at the top of their organizations — that’s the other part of this ecosystem. It’s an ecosystem of diversity, and they’re making it happen.
Fantastic. Thank you, everyone.
Thanks.
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