Jan Jackman, Vice President, Cloud for Enterprise Applications, IBM, visited SAPinsider Studio at the 2016 IoT Conference to discuss the importance of digital reinvention in the cloud for SAP customers. Topics of this interview include how to devise a hybrid IT strategy, benefits of the SAP and IBM alliance, and how customers are embracing digitization to improve customer satisfaction and reduce costs.
This is an edited transcript of the discussion:
Ken Murphy, SAPinsider: Hi, this is Ken Murphy with SAPinsider and I’m at the SAPinsider BI-HANA-IoT event in Las Vegas. This morning, I am pleased to be joined by Jan Jackman, who is the Vice President, Cloud for Enterprise Applications, IBM. Jan is here today to talk to us about the cloud. Jan, thanks for being with us.
Jan Jackman, IBM: You’re welcome. Thank you for having me.
Ken: I was hoping to start by addressing how must SAP customers evolve their businesses and IT environments to compete in today’s market and digital economy?
Jan: Sure. If you look at the make-up of the market today, about 90% of customers in oil and gas use SAP systems, about 78% of all food processing is processed through SAP systems, and 74% of the global transactions touch an SAP system. So these core mission critical systems can’t just be thrown out. So as customers start to think about how do they become a digital enterprise, what they really need to look at is 1) what is their business strategy and 2) how does their IT strategy change to adopt the business requirements and business needs in the world today.
Ken: And what must SAP clients consider in becoming a digital enterprise?
Jan: As you look at what’s happening, there are three disruptive forces that have caused this change. Cloud, which has really lowered the barrier of new entrants to come into the market, you’ve got social and mobile. And what this has done is it’s really allowed a lot more data to be produced that’s coming into the enterprise. And so what they have to think about is how do they capture that and turn it into business insights? And so in evolving their strategy they’ve really got to be able to ensure that they can have this new way to interact with customers and to be able to interact on the back end with their supply chain so that they can look at unpredictable market changes and be able to quickly respond and have their business respond to that.
Ken: So having more data, but making sense of that data.
Jan: Exactly, and if you look at what’s happening, it’s very hard with the evolution of what’s needed to support this data to do this yourself because 90% of the data has been created in the last two years because of all these digital devices. And so how do you grow your infrastructure? The best way to grow your infrastructure is to put it on a cloud that has scalable capabilities to scale up and down based on demand. But clients have to also ensure the security of their systems and they need the same mission-critical availability, performance, business continuity as they evolve their strategy. So they’ve really got to take advantage of this but also do it in a way that it gives them this business flexibility.
Ken: And what are the tangible benefits that accomplishing this achieves?
Jan: Well as clients evolve their strategy to digital, they’re now able to better interact with their clients, they’re better able to have data that they can respond to immediately and have better insights so that they can make fast decisions. So in effect where this helps clients is really to improve their business results so that they can get a bigger share of the wallet, they can have better customer satisfaction because they’re able to better interact with customers through some of these new touchpoints that they have. So it’s all about evolving to take advantage of these technologies and capabilities and new deployment models so that they can be more responsive and have a more flexible IT infrastructure that allows their business to be more responsive.
Ken: So there are a lot of decisions to make to get there; how do you start with a hybrid IT strategy?
Jan: I think what’s important first off, is you have to match your business strategy to your IT strategy. So you really have to think through how do I need to better reach my customers? How do I improve employee satisfaction, client satisfaction, and then what business processes do I need to innovate in order to touch these? And so thinking through your strategy from that perspective there is typically what we see three different types of movement toward a digital enterprise. First, it’s optimizing your existing systems and putting them on a more flexible infrastructure; so standardizing so they can leverage cloud which allows you to extend your reach globally, it allows you to scale up and down because now with this end-user interaction it’s very unpredictable from what it used to be. So optimizing those is one piece. The second piece is enhancing those, so how do you put new front-ends to your back-end core systems, how do you enhance those? And the third piece of the strategy is how do you really innovate? How do you think about new cloud applications that can really innovate to be able to achieve these outcomes? And so it’s really a hybrid IT strategy that most companies have to implement in order to completely evolve into a digital enterprise.
Ken: What are the strengths and the differentiators in the partnership between IBM and SAP in the cloud?
Jan: If you look at IBM and SAP, we have a very similar vision of where we need to take customers to the digital enterprise. So IBM has positioned itself as a cloud and cognitive solutions company. SAP has positioned itself as S/4HANA and cloud, and if you look at the investments that we’ve both made, we complement one another in the capabilities we bring to market. So IBM over the past three or four years we’ve invested over $4 billion in things like SoftLayer’s new cloud capabilities, in Aspera which helps network transfer for large video files or large data files over the web. Companies like Clearleap which give you video cloud solutions, and other investments we’ve made around Watson and other capabilities. In the same way, SAP has made big strides in evolving their strategy around S/4HANA. So together we put these capabilities and help our clients be able to evolve in that 3-step process, or three aspects of how do they evolve their systems so that they can get the business results that really puts them at the top of their game.
Ken: And what are the trigger points for that SAPcustomer to begin that journey and get the ball rolling?
Jan: There are several trigger points. Certainly competitiveness and the need to be able to respond more quickly. But we’re seeing several other changes. Companies have a growth strategy, so let’s take one of our joint customers that has deployed on the HANA Enterprise Cloud powered by IBM; they’re looking to grow their business through acquisition, so to do this existing systems couldn’t sustain the growth that they wanted. So they’re embarking on a journey to really look at how do they improve and implement global business processes using these new capabilities? How do they scale because they have operations throughout the globe and they need to scale capabilities to be able to respond. And then how do they make better decisions based on better data? And so with the new capabilities that jointly we bring to market and the skills that we have that complement one another in implementing these mission-critical systems, we really can offer something that’s very differentiated together in the market.
Ken: And Jan can you provide any specific customer example of SAP clients using these technologies to become more digital?
Jan: Let me give you a really good example. What we’re seeing in the work we’re doing with SAP is the airline industry is really on the bleeding edge of doing many of these new innovative digital projects. And one of our largest clients is implementing the MRO process, and while you think about it and you wonder if it’s innovative, really think about it: You’ve got flights – this particular airline has about 15,000 flights a day – every aircraft has about 360,000 parts as part of the aircraft. The industry measures turnaround time, right, the time you land the plane and the time it takes off again as a key metric and the industry best practice is 25 minutes. But typically it takes 45 minutes or more to turn a plane around. It costs the airline $10,000 for every hour of lost time if that turnaround time doesn’t happen. So the MRO process is really key of being able to have the right parts at the right time with the right supply and right skills to maintain the plane for these flights that may be in hubs across the world. So this is a really interesting use case because as you start to have better control of your inventory and where it needs to be, what is the maintenance record of the airplane? And to be able to put these together in real-time and turn around planes faster is not about cost reduction, it’s really about client satisfaction. It’s really about turning the planes around so both employees and customers are happier while saving costs. And so I think that’s a great example of how do you really improve customer satisfaction by taking a very mature process and adding this type of innovation to it.
Ken: Jan, thanks for being with us today.
Jan: Thank you.