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IBM & SAP Team Up to Drive Digital Overhaul of Enterprises

Zacks Equity Research
·3-min read

International Business Machines Corporation IBM and SAP SE SAP recently expanded their partnership with the unveiling of new intelligent industry-specific solutions to aid customers accelerate digital transformation.

The goal of the move is to aid businesses in becoming data-driven intelligent enterprises. Notably, the terms of the deal are yet to be finalized.

In particular, both the companies are focusing on enhancing customer’s business value by considering critical areas such as automated cognitive intelligence, customer and user experiences and industry-specific functionality.

The companies also intend to aid customers run SAP S/4HANA in hybrid cloud infrastructure, utilizing IBM’s Red Hat OpenShift platform. Meanwhile, customers can leverage Customer Experience portfolio and Experience Management solutions from Qualtrics, acquired by SAP, to offer an omni-channel experience to customers and boost business outcomes.

We believe the combination of IBM’s robust hybrid cloud infrastructure, strength in Watson portfolio and SAP’s cloud computing software expertise will aid enterprises in their digital transformation journey amid these troubling times.

International Business Machines Corporation Revenue (Quarterly)

International Business Machines Corporation Revenue (Quarterly)
International Business Machines Corporation Revenue (Quarterly)

International Business Machines Corporation revenue-quarterly | International Business Machines Corporation Quote

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The incremental adoption of the new offerings will bolster revenue growth for both the companies in the quarters ahead.

New Offerings to Rev Up Software Enterprise & Cloud Market

Amid the COVID-19 pandemic, the number of companies utilizing analytics and AI to automate their business processes is increasing. The companies want to leverage machine learning and analytics to obtain accurate customer insights in turn assisting them to make apt business decisions.

Higher integration of SAP’s enterprise software capabilities and IBM’s hybrid cloud infrastructure services is expected to bolster customer base of both the companies. This is expected to strengthen IBM and SAP’s competitive position against peers like Microsoft MSFT and Oracle ORCL in the rapidly growing software as a service (SaaS) market.

SAP SE Revenue (Quarterly)

SAP SE Revenue (Quarterly)
SAP SE Revenue (Quarterly)

SAP SE revenue-quarterly | SAP SE Quote

Markedly, per Technavio data, the global SaaS market is anticipated to grow by $60.36 billion between 2019 and 2023 at a CAGR of 9.22%.

Moreover, per IDC report, global spending on public cloud services and related infrastructure is anticipated to hit $500 billion in 2023, from $229 billion in 2019, a CAGR of 22.3%.

Per MarketsandMarkets data, digital transformation market is envisioned to witness a CAGR of 18.1% to reach $665 billion by 2023 from $290 billion in 2018.

IBM and SAP’s efforts to strengthen industry-specific cloud-based services with data-driven cognitive capabilities, in order to power intelligent enterprise, reinforces their growth prospects in this domain.

With the ever-transforming IT environment, increasing spending on cloud-based applications and growing clout of digital transformation are likely to favor the growth prospects of the extended partnership.

Zacks Rank

While IBM currently has a Zacks Rank #3 (Hold), SAP carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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