IDC and IBM discussed the future of application modernization on SAP

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On 28^th September 2020, Allan Coulter (IBM’s Global CTO for SAP Services) and John O’Brien (IDC’s European Intelligent Application Services Research Director) shared a fireside chat on the future of application modernization on SAP.

Below, John has outlined his thoughts on the topic and the discussion from the webinar:

It’s a fascinating and highly relevant topic today in the light of Covid-19, which is forcing many enterprises to accelerate their plans for digital transformation. Before the pandemic, the pressure to deliver on application modernization programs was already intensifying. In an IDC survey (January 2020), 84% of European organizations were already embarking on application modernization initiatives (44%) or planning (40%) to do so within the next 18 months. Now, in the light of Covid, 96% of organizations admitted that they expect their long-term IT strategy to be affected by Covid-19 with cloud playing a more pivotal role.

Organizations need to become data-driven intelligent enterprises to remain relevant in the digital era. But the reality facing many of these businesses is they have application estates that are inflexible, monolithic, and outdated – and they lack visibility on what good looks like.  This legacy is difficult and costly to upgrade.  This is one of the key reasons we’re now seeing a massive rise in the use of automation and intelligence in the way applications are being modernized today, to drive greater speed, agility, and removing manual steps that are costly and inefficient.

Businesses embarking on application modernization, face big decisions, like whether to refactor, re-platform and/or repackage legacy applications into more flexible, often cloud-native technologies. Almost a third are going to keep their monolithic ERP system and look to modernize applications that way. Meanwhile, there’s another group who are moving fast to cloud-native – where apps are built and deployed natively on the cloud – IDC’s new estimates put this at a third of the market, and this is up 40% in 2019. 

It’s not surprising that many organizations still need help understanding their options in this new world, for instance which workloads to prioritize, what skills they need, and how to move applications safely to a new platform. Many can find themselves being left in what we’re calling ‘application modernization limbo’ without clear guidance and support.

It’s encouraging to see IBM’s forward-looking approach to these challenges, whereby modernization is shifting away from a pure technology and cost-orientated topic, to something that is aligned to how the business enables transformation. They are taking their clients on a journey that helps them capture the intelligence and insights that a modern ERP can offer. Allan explained to me that IBM is seeing an increasing need to align the modernized core SAP with digital initiatives, to help clients shift from a traditional view of their operational processes to intelligent workflows using data, AI and automation tools. This now accounts for one-third of IBM’s engagements today versus the classical ERP story.

This pivot is exactly what I see among the top end of the market for some of the leading European enterprises. In fact, IDC Predicts by 2022 50% of GDP will come from digital services & products – and as I mentioned before Covid-19 is only accelerating that shift. It means that if you haven’t yet made the pivot, you’re leaving over half of the potential business on the table for your competitors. That’s only going to diminish more the longer you leave it.

In this data-led future, monitoring, reporting, and decision-making with real-time insights give you an advantage. But getting there you’re going to need a unified view of your data – i.e. all in one place to get real-time insights – this naturally aligns itself to cloud platforms and as a service because it’s about breaking down data silos across the business.

At IDC we recommend clients to develop a ‘digital platform’ that becomes the IT foundation for the creation and consumption of digital product and service innovations. At its heart is the “intelligent core,” where data is managed and utilized and where the algorithms, code, and models live. This is the heart of the intelligent enterprise, supporting innovation at the edge, across multiple channels and interaction points.

IBM’s recently launched Evolution Platform offering appears to be aligning with our ‘digital platform’. This is engineered to take data from SAP, legacy, external sources and manage these multiple-pipelines effectively – creating a unified data capability as the foundation for insights that will be turned into automated approaches baked into the new process layer. Yara, a Nordic agrichemical client, is a really interesting example of the Evolution Platform in action. Yara has used data and insights to transform from a classical B2B company selling fertilizer to one that uses data and AI for precision farming, selling its insights to some 60m+ farmers to improve their crop yield. In doing this, the company is creating new experiences, higher levels of client centricity, and shifting to new business models.

Closely aligned to this transformation is how you democratize intelligence to the front line, to drive step-change improvements in productivity, efficiency and user experience. Non-technical teams are getting access to tools like RPA and AI and workflows that can augment their own work and tasks and even given them completely new opportunities. What’s needed is a much more joined-up connection between IT and business domains to empower teams with the right insights at the right time. That’s why I also co-leading our European Intelligent Process Automation research, to explore this emerging space, which is all about empowering the business user in their particular field.

It seems IBM is doing a lot of the things we’re advocating from a technical and strategic point of view, both to unite the front and back offices with intelligence and user experiences. And it’s a must too, because these digital tools are becoming increasingly vital for business resilience in the new normal we all face today, to support new faster, touchless engagement models, and rapid access to insights and customer response.  A modernized SAP infrastructure needs to be seen in this new context of business resilience. It’s for these reasons next-gen tools like cloud, AI, analytics are going to accelerate ERP modernization faster than we previously thought.

To learn more about moving, managing, and running SAP applications in the cloud, read this white paper.

In order to learn how you can rapidly expand the value of your core business applications, click here.

Are you interested in discussing and learning more on how IBM can help your specific organization on its application modernization journey, then please do not hesitate to contact Allan Coulter (in the picture on the right) at Allan.Coulter2@ibm.com