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SAP use case reveals big things for PwC

Started with a simple SAP use case

In early 2022 PwC shared a few use cases on its website. One in particular, A mid-cycle SAP upgrade creates efficiency and unlocks strategy for a tech company, drew TBR’s attention, particularly its assertion that “PwC and SAP co-developed a process to allow clients to migrate to SAP’s Group Reporting module at any point in the year.”

 

While that may sound relatively vanilla and nondescript to some, the possibilities around co-development of software, ownership of the IP, and whether this new process was something PwC could package up with SAP and sell to more of their shared clients piqued TBR’s interest. TBR’s questions led to a discussion in April with PwC’s Chip Sherrill, a partner in the firm’s Consulting practice who worked on the specific engagement. The following reflects both the discussion with Sherrill and TBR’s ongoing analysis of PwC, SAP, and the broader consulting and digital transformation space.

Examining every ecosystem angle

Like any ecosystem play, it’s best to look at the use case through at least three lenses (with a bonus fourth based on TBR’s view of the world): PwC and the client; PwC, the client and SAP; PwC and SAP; and solely PwC.

 

A few things about PwC’s relationship with the client proved critical to understanding how and why this engagement succeeded. First, PwC had been working with the client on other issues, and the client understood the firm’s expertise around finance transformation, tax and governance. Second, and possibly due to that established relationship, PwC understood the client wanted a reporting solution integrated on top of its existing IT and ERP infrastructure, rather than a stand-alone piece of software or bespoke platform. Third, PwC was able to make the business case that it could help solve the client’s problem without breaking budgets or creating future problems.

 

Adding SAP into the mix, Chip noted that the client had a different vendor on-site assisting with the client’s migration to SAP S/4 HANA, which surprised TBR given the following details from the published use case: “a delay meant five more months of waiting, expenses, scheduling issues with key personnel and a potential loss of executive sponsorship. And, as both PwC and the tech company understood that SAP’s Group Reporting module would eventually become part of a larger move to the entire SAP S/4HANA suite, PwC helped the company look beyond its immediate needs to discover how the current project dovetailed with its long-term digital transformation goals.”

 

Critically, in TBR’s view, PwC was able to show the client and SAP that in solving the specific problem with an accelerated solution, PwC would be advancing the client’s move to S/4 HANA even though PwC was not responsible for that migration. How? On the specific issues of data integrity and risks, the client considered SAP’s default answers inadequate. Additionally, the client needed fewer months of parallel processing. As a result — and this goes back to knowing the client and being able to map out the business value — PwC proposed an alternative time frame to what SAP suggested and SAP’s standard practice. The client got a “40% reduction in expected implementation time” and a “75% decrease in time required for tax consolidation, compared to before the migration,” according to PwC.

 

Work with this client gave PwC a proven method for accelerating one aspect of SAP’s vast ERP universe, leading TBR to ask: Who owns the intellectual property, and will PwC go to market with SAP and this new solution?

 

Fully aware of PwC’s recent evolution of PwC Products & Technology and the firm’s willingness to sell software “as a Service,” TBR anticipated IP ownership would stay fully with PwC. As for co-marketing with SAP, PwC would be bringing the solution to SAP clients, with the potential to expand beyond existing PwC clients in the near term.

Technology as the firm’s fertilizer

At TBR, we’re always starting with the vendor itself, understanding how an individual firm’s or company’s strategies and performance reflect its place in the market and the challenges, opportunities and trends it can expect in the near term.

 

With this use case and with TBR’s long-running analysis of PwC, three points stood out. First, PwC securing SAP work with a client despite not being the lead vendor on the client’s migration to S/4 HANA underscores the firm’s sustained success in relationship building and expanding its footprint with key accounts. Second, PwC’s The New Equation strategy provided the framework to bring in tax expertise on consulting and technology engagement, allowing the firm to “bring all [of PwC’s] messages together … doing a better job now across the firm explaining what [PwC does] well.” And, third, PwC has better technology capabilities than many of its competitors realize, which will become even better known as this solution scales across the large market for this capability.

 

TBR does not expect PwC will become a software giant or a competitive threat to SAP and others, but the firm’s persistence in underpinning consulting, tax and even audit engagements with proprietary, tested and well-managed technology will help it grow ahead of peers in the next few years.

SAP and Ericsson in Egypt: Thriving in an expansive environment

Ericsson and SAP anticipate further expansion in Cairo

Ericsson has also leveraged this environment to support its global strategy, by tapping local talent in the fields of artificial intelligence, software development and digitalization. “It is the existence of the required competent engineers, with various backgrounds and capabilities, that makes it very attractive to operate in the country,” an Egypt-based Ericsson executive noted. Ericsson has been operating a digital services hub in the country to serve the Middle East and Africa region. The Ericsson executive stated, “Since we are covering the Middle East and Africa, Arabic is an advantage for working in Arab countries.

Egyptian professionals have relatively better English communication skills as well to add on top. Plus, Egypt provides reliable telecom infrastructure that can help different engineers to communicate and engage remotely with colleagues and customers.” According to Ericsson, the environment has been very encouraging to do more and serve on the global level as well. The Egyptian government has a strong focus on the ICT sector, is making more spectrum available to operators to improve mobile broadband experience, and has the aspiration to introduce 5G. In Ericsson’s estimation, Egypt is a firm believer in building a connected society and smart cities and is already executing on a solid national artificial intelligence strategy.

Notably, in October Ericsson announced the shipment of the first AI-enabled software developed at its Artificial Intelligence & Analytics Hub in Egypt to be used by Ericsson’s customers globally. According to the press release, “The AI & Analytics Hub has accelerated the execution of Ericsson’s focused strategy in Egypt by using AI and automation technologies to create data-driven, intelligent products and services.”

Looking ahead for SAP, Mansour explained that she hopes to hire more resources in digital marketing, digital sales, presales and services, and, if SAP’s management approves, to establish more partnerships with the headquarters of companies serving the region. For Mansour, a true coup would be to convince the Egyptian talent currently employed in Germany to return to Cairo and help “regain historic leadership of the region.” Potentially accelerating that effort would be SAP’s continued success with SAP Business Suite 4 SAP HANA (S/4HANA) implementations and expanded opportunities with IoT, analytics and other emerging technologies. Ericsson’s Egyptian future, according to its executives, depends on ever-increasing internet connection speeds, recruitment of local talent, and support of a wider array of Ericsson products and services.

Building on the company’s legacy in Egypt, which dates back to 1897, when the first Ericsson telephony equipment was introduced in the country, connecting Alexandria to Cairo, Ericsson believes 5G will be next significant step. Ericsson executives noted that the Egyptian government “took proactive steps in launching 4G in the country … a testimony that the country realizes the importance of technology in building economic development. From a technology point of view, [Ericsson is] ready to switch on 5G on the existing 4G networks, so it is all a matter of getting the 5G license in place. [Ericsson’s] focus area now is to offer the latest solutions and technologies to existing customers for their 4G networks while working together on paving the way to launching 5G.”

Earlier in 2020, TBR spoke with Egyptian officials about the country’s continuing efforts to build a robust alternative for companies looking to outsource their IT services operations. As part of a follow-up, TBR also connected with SAP (NYSE: SAP) and Ericsson (Nasdaq: ERIC) executives to understand why both technology vendors have chosen to expand operations in Cairo. The following reflects those exchanges and TBR’s ongoing analysis of offshore IT services centers.

Cloud vendors go deep with industry solutions

Google Cloud and SAP are flagship examples of vendors building vertically oriented strategies with the introduction of industry cloud solutions

Over the last year, as more organizations accelerated the migration to the cloud, it has become evident that a horizontal cloud does not always meet the specific needs of certain industries, especially highly regulated ones such as banking or healthcare. In response to the increasing complexity of certain industries and the regulations that they are governed by, along with the overall uptick in cloud adoption during the era of COVID-19, cloud vendors are investing in the development of clouds that cater to industry-specific nuances and the demands of safely distanced or remote work. The narrowing of focus is part of broader strategic objectives that extend beyond just the immediate commercialization of opportunity and revenue impact.

Initiatives by SAP and Google highlight how innovation and technological advancements in AI and machine learning (ML) factor into the evolution of industry clouds. With recent rollouts and announcements, both vendors have highlighted the importance of creating new types of data-driven cloud solutions powered by AI and ML, augmented by networks of customers and partners. While SAP and Google currently participate in fruitful partnerships together, it will be interesting to watch the common goal of delivering vertical-specific capabilities to their customers unfold to see whether the two companies align or compete in this new chapter of cloud defined by industry.

Google leads with innovation in ML and AI to augment, rather than replace, legacy solutions

In February Google Cloud CEO Thomas Kurian emphasized that Google Cloud’s top priority is to develop a new generation of applications, which will be able to extract data from traditional line-of-business (LOB) applications such as those used for CRM and use technologies like AI and ML to optimize outcomes. Kurian reinforced the strategy of veering away from the development of traditional enterprise applications in favor of industry-specific apps that are designed to extract data from these traditional applications.

Leading up to 2020, the migration timelines for the 80% of companies that had not yet made the move to the cloud rested on comfortably planned milestones that indicated an evolution versus an urgent call to change. Looking back over the last six months, organizations suddenly found themselves in the thick of the impetus to migrate to the cloud and to do so quickly. Even organizations whose cloud journeys were well underway prior to the COVID-19 outbreak are narrowing their strategies and turning to clouds that cater to the specific requirements and compliance standards that industries, especially those that are highly regulated, including the government, require. As a result, a number of leading cloud vendors such as IBM (NYSE: IBM), Google (Nasdaq: GOOGL) and SAP (NYSE: SAP) have recently made strides in building out and refining their cloud strategies to cater to the specific requirements and demands of certain industries.  

2Q20 gives cloud vendors hope the worst COVID-19 impacts are over

2Q20 was better than expected and sparks more long-term optimism

Results in 2Q20 reflect a full quarter’s worth of COVID-19 impact, and the sigh of relief from executives at leading cloud providers was almost audible. That is not to say negative impacts were not felt, though. Transactional activity was once a nice growth driver for cloud providers, laying additional revenue on top of the long-term contracts that typically provide the majority of cloud revenue. Those revenue streams have been hardest hit in the cloud space, as businesses across the board initially looked to trim expenses amid pandemic-driven disruption and financial challenges. Some long-term projects have been delayed, particularly among smaller customers that lack the same degree of financial stability their larger counterparts possess to weather challenging times. And lastly, there remains a considerable amount of uncertainty as to how the economy and customer demand will change in 2H20.

Despite these challenges, numerous positives occurred for cloud providers during 2Q20. Those positive elements not only yielded a better-than-feared performance in the quarter but also gave vendors a reason to believe there could be even more improvement in the back half of the year. One factor spurring this optimism is that, for the most part, COVID-19 has accelerated existing trends within the competitive landscape, rather than dramatically altered them. Customers are not scrapping planned cloud investments, although they may be delaying or paring them back temporarily. The largest vendors, including Amazon Web Services (AWS) (Nasdaq: AMZN) and Microsoft (Nasdaq: MSFT), saw deceleration in their revenue growth rates, but that has been occurring for years. SAP (NYSE: SAP) needed to rely on remote services to take new deployments live, but that too has been a trend for quite some time. Lastly, Oracle (NYSE: ORCL) saw a decline in cloud revenue growth and continues to trail competitors in pace of cloud growth, but that is the latest chapter in an ongoing story.

The silver lining that was consistently reported across 2Q20 earnings calls is that customer demand for cloud solutions long-term is expected to strengthen. Many vendors are looking to endear themselves to customers now by helping customers reduce expenses and by aiding in COVID-19 response. On the pricing front, vendors strategies range from pricing flexibility to discounts to assisting customers in finding efficiencies that reduce costs. To help customers respond to COVID-19, cloud vendors have developed targeted solutions and IP that support shifts in business operations, many of which are being offered free of charge or at a deep discount in the near term. These efforts may dampen some of the short-term growth for cloud solutions. However, cloud vendors have growing reason to believe they will reap the benefits of accelerated cloud investment once the economy and their customers’ businesses improve.

Cloud Revenue Growth Trending 2Q19-3Q20E

COVID-19 has not impacted all industries equally. Though cloud proved resilient during 1Q20, there was still trepidation about how customers in harder-hit industries like travel, entertainment and transportation would react through the remainder of 2020. Not only were results in 2Q20 stable for leading cloud vendors, there is optimism that demand for cloud technologies will remain robust through year’s end regardless of how other industries and the broader economy perform. 

Integration: Prepare for the future

While integration has always been important from an IT perspective, recent trends have reinforced the strategic importance of integrating applications and data to provide customers with analytics and automation capabilities to better serve their needs. Being agile with new services deployment and building resiliency into operations and IT systems both require integration. Businesses were already using integration to enhance their capabilities across these areas coming into 2020, and COVID-19 reinforced the importance of this strategy in a big way. The good news is that most organizations are confident their current integration strategies and platforms are adequately supporting their business needs. The not-so-good news is businesses are much less confident their integration strategies will be able to meet changing and evolving future requirements. Organizations that are highly confident with their existing integration strategies provide some clues around how to develop a future-ready integration strategy, including enabling citizen developers, establishing competency centers, and utilizing platforms and partners that know their business. While there may not be a silver bullet to improve integration strategies, collectively these strategies can enhance the ability of IT to support future business needs.  

Click here for more information about SAP’s integration capabilities.

SAP enhances its best-of-suite strategy with core apps running on HANA and improved industry approach

COVID-19 impacts highlight the value of SAP’s existing portfolio and road map

Before SAP CEO Christian Klein took the virtual stage for SAPPHIRE NOW 2020’s keynote, Chief Marketing Officer Alicia Tillman spoke with the company’s regional leaders for EMEA, APJ and the Americas. Across geographies, there was consistency in customer sentiment, particularly around the benefits of using technology to react quickly to changes in demand and supply chain challenges.

SAP’s president of Asia Pacific and Japan, Scott Russell, summarized many of the regional leaders’ key points by saying, “There’s one thing that I keep on hearing from our customers small, medium and large, whether you’re in the manufacturing sector, which is really strong in this region, or in other industries, is that ability to be flexible, agile and act with speed. And that’s the expectation of SAP: You need a digital platform … to give you the information you want in real time, so I can make better decisions and adapt to a situation, which for all of us is very unpredictable.”

The pandemic-induced, turbulent business environment has created a new lens for customers to look through and appreciate SAP’s portfolio, but at its core, SAP’s strategy has remained consistent in recent years. SAP has been building upon its Intelligent Enterprise vision, in which customers use wall-to-wall SAP products to integrate their IT environments and gain AI-enabled insights from their data. However, the pandemic did enable Klein to double down on SAP’s messaging about the value of IT modernization, stating, “We have all realized companies which use innovative technologies were more competitive before the crisis and are more resilient in the crisis. Those that enabled new digital business models drove automation and adapted their supply chains and were better prepared for the unexpected. This crisis shows us if your business is not resilient, you will be left with nothing.”

SAP (NYSE: SAP) held SAPPHIRE NOW 2020 Reimagined, with the “Reimagined” branding stemming from the event’s virtual delivery method. While this was a new delivery method for SAP’s annual event, the vendor’s messaging stayed largely the same, with a focus on SAP Business Suite 4 HANA (S/4HANA), S/4HANA Cloud, Qualtrics and emerging technologies — all part of SAP’s Intelligent Enterprise vision. In addition, SAP’s recent strategic shift toward industry-specific solutions in the back office added a new flavor to the vendor’s go-to-market strategy.

Hybrid-influenced vendors respond to customer demands, including limited vendor lock-in and seamless, secure integrations

Hybrid-influenced vendors sit in a high-growth market as they rely on proprietary infrastructure to architect in-demand hybrid solutions. Microsoft (Nasdaq: MSFT) is separating itself from much of the market as many enterprises use Office 365 in a hybrid environment and as the vendor wins legacy VMware (NYSE: VMW), Oracle (NYSE: ORCL) and SAP (NYSE: SAP) workloads. Among vendors competing for legacy workloads, TBR expects Amazon Web Services’ hybrid-influenced revenue will continue to grow as the vendor strongly competes against Microsoft for the enterprise migrations.

TBR’s Hybrid Benchmark helps providers of hybrid environments and their partners align to growing opportunity, highlighting the market size of hybrid-influenced public cloud, hosted private cloud and traditional software; the go-to-market strategies vendors are using to drive revenue in the hybrid IT space; gaps in the current ecosystems for enterprises; how vendors are addressing customers’ integration challenges; and more.

IBM, Atos and SAP report cloud growth in 1Q20 despite COVID-19 pandemic

As companies begin releasing 1Q20 earnings, TBR is analyzing the impact of the COVID-19 pandemic on the latter half of the quarter. Our findings from earnings this week show:

  • IBM’s cloud business prospered despite the negative impact of COVID-19 on overall revenue as synergies with Red Hat drove subscription sales, which is a testament to IBM’s hybrid cloud ambitions under new leadership.
  • As cloud-based solutions and other key technologies enable rapid changes in people’s work and personal lives brought about by COIVD-19, Atos’ technology-led value proposition will help the company capture cloud growth opportunities in the dynamic market.
  • Despite a turbulent macroeconomic environment, sustained cloud growth and services and driving SAP’s corporate growth. TBR expects revenue and margins will remain pressured in 2Q20, but will begin to normalize in 2H20.

Additional reports recently published by TBR’s analyst teams

1Q20 Infosys Initial Response

Infosys enters FY21 with a healthy pipeline, but COVID-19 will test the durability of its Navigate Your Next strategy as the company mobilizes its technology heritage to withstand headwinds.

1Q20 Telecom IoT Market Landscape

CSP IoT revenue growth will gradually accelerate through 2024 as more 5G use cases become commercially available. Supporting these next-generation use cases will be contingent on network deployments, including edge compute build-outs and 5G standalone infrastructure.

1Q20 IBM Services Initial Response

Sustaining signings growth will improve IBM Services’ ability to alleviate revenue growth pressures in 2Q20 from macroeconomic uncertainty tied to the COVID-19 pandemic.

1Q20 Atos Initial Response

The COVID-19 pandemic will inevitably challenge Atos’ performance during 2020; however, offerings around digital workplace, cloud, cybersecurity, and unified communication and collaboration will mitigate the negative effect on revenues.

1Q20 AT&T Initial Response

Revenue declines associated with COVID-19, including lower WarnerMedia advertising revenue and decreased wireless equipment sales, will cause AT&T to increase focus on aggressive cost-cutting measures to strengthen its financial position.

1Q20 Ericsson Initial Response

Ericsson sustained revenue growth and high margins in 1Q20 as 5G RAN deployments surged in the U.S., but the company has yet to feel the full impact of the COVID-19 pandemic, which could affect supply chains and demand going forward.

4Q19 Commercial IoT Benchmark

The commercial IoT market continued to show moderate revenue growth in 4Q19, as IoT projects are smaller in scale and IoT is getting baked into other strategic projects. While the COVID-19 outbreak will negatively impact the IoT market in 2020, TBR expects commercial IoT will maintain long-term growth as organizations continue to utilize AI and IoT solutions to lower operating expenses.

SAP and IBM were prepared, responding rapidly, but are still waiting for COVID-19’s peak impact

The 1Q20 earnings releases of IBM and SAP offered the first glimpse into how COVID-19 is impacting IT vendors financially and into the strategies being used to respond. The two vendors are a positive litmus test for the rest of the IT industry, given their breadth of businesses and customer bases across geographies and vertical industries. From their performances and commentary, it is clear that 1Q20 was a tale of two halves. Before mid-February, business was progressing as normal, while after that point, customer priorities shifted and many deals stalled. In the latter half of the quarter, IBM’s and SAP’s priorities also shifted, including both vendors citing 95% of their workforces have been moved to working remotely. Revenue was slightly impacted during the quarter, but more significantly, the two vendors noted their reactions to the many facets of the virus.

Transactional businesses suffer the first negative impacts

Early results show the COVID-19 pandemic is having the most profound impact on transactional businesses. In broad terms, IT business models fall into two categories: transactional and annuity. Transactional businesses are those where an immediate one-time event results in revenue for the vendor and access to a product for the customer. For IT vendors, examples of transactional businesses are software licensing hardware sales and fixed-price services.

Both IBM (NYSE: IBM) and SAP (NYSE: SAP) cited the stalling of their software licensing businesses as the biggest weakness experienced during 1Q20. The quarter was progressing fairly normally until roughly mid-February, at which point customer priorities shifted dramatically and many sales engagements came to a halt. That behavior is understandable, as at first the uncertainty surrounding the virus caused customers to pause, and then attention shifted to direct COVID-19 responses, primarily the shift of most employees to working remotely. The impact during 1Q20 was amplified by the seasonal dynamics of the software license sales business, which relies on most deals closing just before quarter’s end. By the end of March, the impacts of COVID-19 were in full effect, as most customers dealt with huge disruption to normal operations.

There is both good and bad news for software licensing throughout the remainder of 2020. The bad news is that the first quarter is the lightest seasonal quarter for software licensing and hardware sales — both IBM and SAP expect to experience a bigger impact in the second quarter. The potential good news is that there is still a possibility some of the impacts caused by COVID-19 could fade before 2H20, when the majority of software licensing activity typically occurs. In this respect, the timing of reopening and resuming business as usual will have deep implications for any vendor with a transactional software business like that of SAP and IBM.

Annuity businesses are immune, at least for now

Annuity business recognize revenue from long-term contracts over time, which is an asset in the current environment. For IBM, SAP and Oracle (NYSE: ORCL), annuity businesses are primarily cloud subscriptions and software maintenance, and those businesses have so far remained resilient. Especially for these vendors, the resiliency of annuity businesses reinforces the benefit of shifting to a cloud subscription model, even though it was disruptive to the traditional software licensing model. There has been a marked shift to cloud for IBM, SAP and Oracle over the past 10 years, which increased the mix of their revenue from annuity businesses, of which IBM boasts more than 60%, Oracle 71% and SAP 70%.

For more insight on how COVID-19 is changing IT sales strategies, read Senior Strategy Consultant Geoff Woollacott’s blog COVID-19: Shifting customer loyalties and selling motions.

COVID-19: Shifting customer loyalties and selling motions

Recent earnings calls by IBM and SAP triggered two broad yet interconnected thoughts:

  • The current pause in economic activity presents a pervasive period of thinking slow — recalling the book “Thinking, Fast and Slow” — for businesses, which could result in persistent share shifts.
  • The tactical need for more digital commerce avenues seems poised to accelerate a skill set transformation in selling organizations, away from the affable blue suit seller and toward a more consultative selling model.

Thinking slow requires deliberation, and deliberation comes when life-changing events happen

That headline is the fundamental premise of the book, which nets out as two different lines of thinking. System 1 is our reflexive thinking, and System 2 is our more deliberate thinking. System 2 gets triggered by life-changing events, such as reviewing purchase patterns while preparing to add the first child to a family. This was the underpinning of Target’s strategy to market to expectant mothers to lock them in to long-term buying patterns. COVID-19 has certainly triggered System 2 thinking for business decision makers.

IT is the backbone of digital commerce and, therefore, gets called into question by virtually all businesses no matter where they are on the transformation continuum. Close scrutiny of all discretionary spend and major projects means IT purchasers will be rapidly assessing their buying criteria, including revisiting those used prior to the COVID-19 outbreak to determine if they still apply in light of the current economic climate and somewhat fuzzy future outlook.

IT firms with solid digital practices and the ability to meet enterprise demands from a nimble virtual environment will be able to gain long-term share once the economy stabilizes and thinking fast returns to the business community.

Is COVID-19 the Death of a Salesman?

Both IBM and SAP mentioned in their earnings calls the need to shift more of their selling motions to virtual activities. IBM also highlighted the shift to virtual garages. This movement has a couple of potential impacts:

  • Blue suit selling has to shift from relationship building to advisory selling, satisfying the aforementioned System 2 thinking going on among enterprises around the globe. This shift will require more immediate translation of technical implications and seller capabilities around business pain points — something that was previously addressed in the second or third sales interactions when the blue suit seller brought in a coterie of subject matter experts. In essence, that first point of contact is being replaced by digital tools. That somewhat depersonalizes the engagement, but it also strips considerable cost and turnaround time out of the prevailing selling models while enabling decision makers to seek answers through System 2 thinking. In some ways, this brings the consumerization of IT into the enterprise in much the same way that omnichannel marketing from e-tailers such as Amazon has disrupted traditional brick-and-mortar delivery of consumer goods to the populace.
  • Advisory selling will have to become more of the norm for all technology sellers and not just the high-end advisory firms. Buying more network capacity could be considered a quick-hit selling transaction for a territory sales rep. It could also be an opening to discuss the overall IT estate, the impact of SD-WAN on security and cloud access, and the need to revisit the whole enterprise IT construct for better resiliency lest an economic impact like COVID-19 — or COVID-19 itself — resurfaces in the future. System 1 thinking would have the seller “take the order,” no questions asked. System 2 consultative selling would ask the questions of the purchaser and seek to expand the engagement into a broader discussion more beneficial to the client and more lucrative to the seller.
  • Will the buildup of design centers wind up as a competitive cost disadvantage as more businesses become comfortable with virtual engagements? We saw the phenomenon of virtual activity replacing in-person activity solidify teleconferences as a business after 9/11 curtailed air travel. Now the health risks of in-person meetings will spur further use of virtual meetings and, with it, a potential reduction in demand for these high-cost design-thinking studio facilities.
  • Transformation maturity impacts buying behaviors considerably. Those ahead of the curve on transformation are feeling very optimistic about their ability to weather this economic pause. They did the System 2 thinking and are somewhat comfortable in System 1 mode. They also are likely to have some checklists and deeper understanding of the ramifications that they can step through more quickly than less digitally savvy peers. Others are delaying transformation engagements due to a desire to conserve cash, and still others hear horror stories in other industries and see where digital transformation of their operations could inoculate them against this business threat if they move ahead with infusing intelligence into their front- and back-office systems. So leaders lengthen their leads, the hesitant can fall behind, and the newly awakened can get ahead of the vertical impact by heeding the lessons learned of their business colleagues in adjacent industries.

The global economy as we know it is on pause. Our System 1 thinking — our conventional wisdom — is being seriously challenged. This enables savvy business leaders to take this time to rethink their IT investment decisions. When thinking slow, they will be making decisions on suppliers that will have far-reaching market share implications. In turn, savvy technology companies will need to pivot to virtual engagements to provide customers with the desired self-service content and the technically savvy advisors to help work through customers’ future plans in light of this once-in-a-lifetime economic event still cascading through economic activity in real time.

For more insight on how COVID-19 is changing IT sales strategies, read Principal Analyst Allan Krans’ special report SAP and IBM were prepared, responding rapidly, but are still waiting for COVID-19’s peak impact.