As with previous books, I have been excerpting 10% of the contents. You can buy the book at several stores (online in paperback at CreateSpace and ebook at Amazon).
2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 3 over nearly 30 pages grades S/4 and identifies areas for improvement. Here is one of the graphs from the book.
“S/4 is clearly a work in progress, but I have attempted to grade the offering against incumbent SAP technology and those from SAP competitors in Exhibit 2 below:
Readers have enjoyed my posts in the past about software salespersons tricks. In the last few years, and especially as I have written the two SAP Nation books I have heard of more stupid behavior towards “end of life” - “compliance” audits and demands for more money. Not just SAP, talk to many CIOs and they will tell you their favorite Oracle, IBM, CA and other vendor story. And not just on-premise vendors, a Walmart exec invokes the Eagles hit when talking about cloud vendors in this BusinessWeek story “You can check out anytime you like, but you can never leave.”
Here’s what is funny – most vendors will pompously say “we have to protect against abuse of our intellectual property”, but the triggers which lead to such demands usually smell of entitlement and vindictive behavior: “how dare they ring fence our software with someone else’s?” or “we had a two tier solution, why did they go elsewhere?
Here’s what’s not funny – most customers who get hit for such charges report a significant drop in trust. I know of one customer whose group made sure the vendor did not get invited to 20X the deal flow of the amount they got from the audit.
Here’s what would be even more un-funny – I can see class action suits and even worse, regulatory action if the behavior continues.
Software vendors are handsomely compensated – shows in the gross margins in the 80s and 90s. Do we need to be that greedy when we have quit delivering value to customers?
Finally, here’s what would be tragic. I have heard terms like “extortion” and “Guido came knocking”. Do we really need the software industry’s reputation to sink that low?
In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.
2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 3 over nearly 30 pages grades S/4 and identifies areas for improvement.
- Albert Einstein has been credited with the enigmatic quote of “Everything Should Be Made as Simple as Possible But Not Simpler!’ In keeping with its new “Run Simple” branding, perhaps SAP was trying to keep the S/4HANA messaging simple. This chapter will explore the many questions that still need answering:
When will SAP catch up to functionality that reflects dramatic changes in every industry?
When will SAP environments be truly “simplified”?
When will the SAP cloud become world-class?
Will Fiori be able to keep up with rapid advances in UX design and expectations?
In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.
2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 2 looks over 20 pages on the launch in New York and subsequent updates in Orlando and elsewhere.
- As an innovation author, I find one of the most enjoyable topics to write about is the birth of new products and initiatives. Product launches have become increasingly sophisticated. You have to marvel at how Apple managed the launch of the 3G version of the iPhone in 2008. It was launched in 22 countries, followed by 50 more countries over the next few months. The logistics of producing tens of millions of units with its contract manufacturer, Foxconn in China, then shipping them around the world via FedEx and coordinating with hundreds of country- specific phone companies has raised the bar for complex yet well-coordinated product launches.
I have also written about new versions of humbler products like Lexmark printers, more complex products like Boeing planes and breakthrough data centers like those at Facebook. I like to talk to the designers marketers and project managers about how they decided on which features to include, the engineering challenges they faced, the launch logistics and the risks they balanced.
So when McDermott announced a next-generation product in February 2015, “our biggest launch in 23 years, if not in the entire history of the company,” I was excited and went back and re-read some of the case studies in my books and the questions I had asked of each.
- On that day in New York Dr. Plattner and Leukert only had 45 minutes for their presentation. However, they have elaborated their passion for in-memory computing in a 300-page book, The In-Memory Revolution: How SAP HANA Enables Business of the Future. The book (with the obligatory disclaimer that it is not “official SAP communication material”) describes the genesis of the S/4 product starting back in March 2012 and internal debates at SAP on how best to design a “nondisruptive” next gen product.
- Maybe we have all been spoiled by Apple product launches, and in particular by Steve Jobs’ signature “one more thing” portion of the speech where he usually introduced something spectacular. McDermott’s “one more thing” (at SAPPHIRE in Orlando) came across as odd. He chose to have his staff demo the Concur (a 2014 SAP acquisition) travel expense management product. Now, travel administration is a nuisance in most companies, but from the largest application vendor in the world you expect bigger initiatives.
- I asked an executive at a flagship customer in one of SAP’s major industry groups if he thought it would be ready to move to S/4 by 2020. His response: “I think 2020 is too aggressive. SAP’s 25 industry groups will massively compete with each other for R&D investment dollars...”
- If you analyze Enslin’s comments, the S/4 adoption to date is modest. Simple Finance has been talked about for over a year and you would expect more customers to be live. Logistics functionality will not be available till later this year, and it is not that interesting to many of SAP’s customers in banking, services and other industries. Many of the early adopters like Shell are trying out multiple projects—so, the “137 running projects” Enslin mentions are at a small fraction of the 900 plus customers who are supposed to have bought S/4.
- The SAPPHIRE event in Orlando, three months later, did not shorten the list of questions and it looked like SAP would have to keep clarifying the scope of S/4. When you are dealing with complex enterprise software that is not totally unexpected, but it sounded more like a “rolling launch” where the final shape of S/4 would not be known for months, or even years.
Nice, and fairly comprehensive research by Forrester analyst JP Gownder. I like his balanced tone, not the Chicken Little tone so many recent books have taken
“We forecast that 16% of jobs will disappear due to automation technologies between now and 2025, but that jobs equivalent to 9% of today's jobs will be created. Physical robots require repair and maintenance professionals -- one of several job categories that will grow up around a more automated world. “
Add to that the efficiency of robots and machines should reduce waste and increase average disposable income of most citizens, likely leading to other economic growth and jobs.
JP, however, focuses mostly on IT/digital technologies. So many new careers are opening up in healthtech, cleantech, nanotech, biotech, space research and other STEM influenced fields.
Five years ago, in The New Polymath, I had highlighted the list of 14 Grand Challenges developed by the National Academy of Engineering. Look at the NAE site even today and they remain challenges – think what new career paths await as we solve these:
In time for Labor Day weekend reading, Amazon is launching 2.0 on Kindle today. It is starting to show up in book stores (print on demand at CreateSpace ). As with previous books, I will be excerpting 10% of the contents over the next few weeks.
2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 1 looks over 10 pages on the SAP landscape in which S/4 was introduced
- SAP’s runaway success in the ‘90s came about because its R/3 product dramatically reduced enterprise sprawl…Today, SAP’s cloud competitors are using that very argument against it. Dave Duffield, co-founder of Workday likes to describe having customers on a common code base as the “power of one”. Zach Nelson, CEO of NetSuite touts “one product for many industries”.
- SAP’s product portfolio has exploded, and in the last decade there have been nearly 50, seemingly disconnected acquisitions. That has led Mark Hurd, CEO of competitor Oracle (itself very acquisitive), to sarcastically observe,”I guess we could buy a Dairy Queen.”
- Next, there is the sprawl around SAP’s core applications at its customers. According to Panaya a tool vendor “More than 50% of SAP shops have 40+ satellite applications. Of these less than 10 are SAP applications.” CAST Research Labs has analyzed customizations at several major SAP customers and found most of the customizations were sizable, with many of them high-risk, according to its benchmarks.
- Finally, there is significant growth in the partner ecosystem. At its Global Partner Summit this year, SAP announced it now has 13,000 partners—a five-fold increase in the last decade
- The wide diversity in SAP’s portfolio and its customer base is vividly on display in its advertising budget. This runs the gamut from radio spots promoting the Concur product to small businesses, SuccessFactors billboards at competitor events, corporate branding at hockey stadiums, three-page spreads in The Wall Street journal, hot air balloons and HANA commercials which ask “Can a business have a mind, a spirit, a soul?” It would appear every taxi driver, sports fan and New Age practitioner who can influence software decisions is being targeted. This marketing carries over to social media where SAP executives and fans rave about individual products as if they represent the whole SAP economy
- On this side of the pond, in a patriotic July 4 (U.S Independence Day) guest column titled, “A nation of underdogs,” McDermott wrote:
“From equal tights activists to entrepreneurs, our nation’s history is rife with stories of people who believed the impossible was possible. Indeed, a notion that an underdog can win—whatever his definition of winning may be—is part of our country’s DNA. It’s a truism I know firsthand.”
- McDermott could inspire the “underdogs” in SAP Nation to tackle the sprawl challenge. With his sales background, he has proven his ability to generate new revenue. The SAP economy, however, does not need more selling. The economy needs "un-selling”—delivering on previous promises, lowering prices to reflect new market realities, and more predictable results. If McDermott can pull that off it could be his lasting legacy at SAP. Dr. Plattner has certainly raised expectations with his own “end of history” statement. After introducing the next-gen product, S/4HANA in early 2015, he told a journalist, “If this doesn’t work, we’re dead. Flat-out dead.”
While The New Polymath was overall wildly optimistic, I had a pessimistic chapter about the state of IT, healthcare, sustainability etc.
Five years later the contrast is even more stark.
I see Gartner’s hype cycle on new technologies and it’s good to see convergence of infotech, healthtech, biotech, cleantech in a variety of trends like autonomous vehicles, bioprinting and brain computer interfaces. I see a very nice polymath panel at Popular Science discussing progress in astrophysics, disease mitigation, programming languages and many other STEM disciplines. It is good to see Bill Gates continue to invest in global health progress, Elon Musk push the boundaries of electric cars, space travel and more, Google/Alphabet invest in a wide range of breakthrough areas, Amazon pioneer with robots and drones, Apple with wearables, GE with all kinds of smart industrial machines and so on. Plenty to be optimistic about.
But you look at the state of IT and shake your head. Still way too much spent on infrastructure and back office when companies are screaming for money for digital products and front offices. Dumb security weaknesses. Medieval behavior by many IT vendors as they continue to use trickery and threats to cling to older revenue models. Poor user satisfaction.
Ditto with healthcare. Still too slow drug and device approval and global availability cycles. Big bureaucracies on the payor and provider world.
Ditto with sustainability. Cheap oil, idiotic politicians, short term focused capital markets all conspire to hold back needed progress in alternative fuels, water sources and many other areas.
Over the last year I have been fairly pessimistic as I have written two books on SAP Nation and spent much time talking to customers about back office IT. I need to keep reminding myself the European Dark Ages were followed by an amazing Renaissance. Cannot wait for that with our technologies.
I was in a recent discussion about fears of global deflation, and I thought – everyone is worried about the impact on investors, but most customers are loving the cheap gas prices and the devalued and cheaper Chinese imports. Why are we not cheering for the customer?
My wife, in psychiatric healthcare, was fascinated by the NYT article on Amazon – especially the likely work-related stress issues. I told her Amazon is no different than most driven tech companies. Except that Amazon is benchmarked against retailers and publishers which have traditionally been used to a gentler pace of change. Besides, why are we not cheering for the customer that Amazon has done amazing things for over the last two decades?
People worry all the time about the impact of robots and machines on jobs. I typically respond that a whole generation of new jobs is coming in biotech, cleantech, nanotech, healthtech and even infotech. What machines are taking over will actually make products and services better. Again, something for the customer to cheer.
Folks often ask me – why two books on SAP Nation? I tell them, it’s not Vinnie, it’s the voice of the SAP customer. The books are my way of cheering and jeering for those customers.
I find most people side with investors or labor in most debates. Few stand up for the customer.
I have never had that problem, and glad I dedicated SAP Nation this way.
In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.
2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 4 looks over 25 pages at next-gen software projects in the industry over the last two decades to provide benchmarks on how the S/4 rollout is likely to progress.
- Floyd Teter has a front row seat for the evolution of Fusion, first as a customer, and now as a consultant. He is also a respected member of the Oracle ecosystem as an ACE Director and active participant in the Oracle Applications User Group (OAUG) and the Independent Oracle Users Group (IOUG). Because of his influential role, Oracle has given Teter sneak previews of Fusion as it evolved.
- A much more sobering next-gen story comes from the JD Edwards experience as it migrated its ERP solution from the proprietary IBM AS/400 platform to the open, client/server world. Through the 1990s, Michael Schmitt held several senior positions at JD Edwards, including GM, Central Europe, and SVP of Sales and Marketing. He described to me the next-gen product experience at JD Edwards.
- Frank Scavo, President of Strativa, a California-based management consulting firm that helps companies evaluate software alternatives, commented in an interview: “None of these acquired products had been written purely with the Microsoft technology stack. Axapta, for example, had been written in its own development environment (MorphX), in its own language (X++), using Oracle as its preferred database. Project Green was aimed at converting the four products to Microsoft technology and unifying to a single code base while retaining the best features of each product”
- Since they arrived in late 2010, Infor CEO Charles Phillips and his team have been reinvigorating the company which Phillips has called the ‘world’s largest start-up”. Infor has over 70,000 customers and over $2.5 billion in revenue and Phillips has invested in rationalizing and modernizing the inherited portfolio. To start with, Infor has chosen to focus on 15 vertical CloudSuite modules (such as automotive, fashion, and food and beverage) and three horizontal ones (including corporate and human capital management). I interviewed Cindy Jutras, President of the ERP analyst firm Mint Jutras.
- The common thread across all the next-gen projects described in this chapter is that in the enterprise world, new products take years to develop and then to mature. In the interim, vendors often meander or waver in their commitments. Customer bases, in turn, take decades to migrate. SAP has a massive development army at its disposal, so the S/4 product creation process may be quicker. Still, the scope is daunting. In the Plattner/Leukert book, they describe the need to tackle 400 million lines of code in the SAP Business Suite.
BusinessWeek has a nice article on Keith Block, Salesforce President
“He’s asking software designers to build more products aimed at specific industries, and he’s developed a more rigid, aggressive sales strategy meant to answer any question a big client could have.”
The opportunity to expand the wallet share has long been there. In SAP Nation, I wrote
“The recent wave of cloud challengers — Workday, Salesforce.com, NetSuite, ServiceNow, Plex Systems, Kenandy, Kinaxis and others — are merely nibbling around the edges of SAP. Few have launched a full frontal assault. I have been told that several SAP customers have called and pleaded with these cloud players to expand their functional footprint.”
That’s true as well of Oracle and other enterprise software customers. Salesforce has, however, in the last few years counted more on partners like FinancialForce to develop functionality using its platform. It has expanded its own marketing and other clouds mostly through acquisitions. To meet Keith’s goals, I believe it will need to accelerate its own application development.
The portfolio expansion will be timely as they have hired Vala Afshar as Chief Digital Evangelist. He is an excellent hire, but needs a much bigger product portfolio.
This is an important reminder at a time when every consultant and tech vendor is talking Digital Transformation. Unfortunately, most of them focus on specific areas like social marketing or digital back office processes. That’s clearly needed but will have little impact unless companies make their products, services and business models digital. That in turn leads to a rethink of manufacturing – in my estimate, 20% of BOMs for smart products are now influenced more by Silicon Valley than by traditional industry suppliers. It may mean turning to contract manufacturers and design agencies the tech industry has used for a while now. It also leads to rethinking global supply chains.
I look forward to the product expansion at Salesforce. And maybe a name change? Or even better, lots of new products for the next few years, then a Google/Alphabet type move!
90% of the companies which were on the Fortune 500 list in 1955 no longer exist or are no longer independent.
Most of us are loyal to brands so why that much churn?
Because companies do incredibly stupid things to annoy their loyal customers.
I saw that on a recent trip to Montreal – multiple times with brands we have been loyal to for along, long time :
Bank of America and Royal Bank conspired between their charges to sell us Canadian Dollars from an ATM at a rate of 1.15 when the exchange rate was 1.31. Seriously, a 15% conversion charge in this day and age?
Sprint and Rogers conspired to deliver mobile service at miserable speeds. Sprint is making a big deal about allowing its subscribers data roaming in several countries but it only pays to get on the 2G spectrum of its partners. Seriously, in this day an age when a café can deliver to us wifi as part of our cup of cappuccino speeds we have come to expect? (see the speed differences during that visit in the two graphs)
Marriott had a sign in its Concierge Lounge saying more than 2 guests now have to be paid for. Not unreasonable till you analyze that 99% of my stays (and most of its business guests) I have been alone, and mostly used it for a quick breakfast. How many members abuse the privilege and regularly bring in associates or family members? Why be petty about something you designed for your loyal members?
Then I see Consumer Reports has an expose on auto insurance premiums. It has little to do with your driving record and more to do with your credit score, the age of your kids, and other factors. Here’s the jaw dropping comment “Some insurers even salute your allegiance with a price hike”. Few reduce rates for loyalty and safe history. In other words, it pays to shop around every renewal.
Shop around we will, Fortune 500, and churn that list even faster.
There has been plenty of scorn about the scolding Oracle’s CSO delivered to her customers for “reverse engineering’ its code to test for security vulnerabilities. While Oracle, as usual, comes across as the “bad guy”, it is challenge most large software vendors face.
Here is the IT reality these days
a) Most IT vendors have made numerous acquisitions in the last decade. Many take years to integrate. Any prudent CIO would and should consider the separately designed, still un-integrated, un-hardened portfolio a potential security vulnerability.
b) Most IT vendors have under-delivered functionality, leading companies to customize, often heavily. Vendor support policies refuse to acknowledge such changes, and pretend their software pristine as it might be when it is shipped, gets implemented that way.
c) Most CIOs are blending hybrid on-premise/cloud models, ring-fencing around large software hubs, doing two-tier ERP, developing satellite apps etc. It is a corollary to b and larger vendors not delivering to their promise of “end-to-end suites”
In that spaghetti, I do not blame a CIO for trusting “nobody” when it comes to protecting against or investigating a breach. Or to use a Reaganism, maybe trust your larger vendors, but still verify.
It’s not just an Oracle problem. Every vendor better wake up to this reality. The larger ones will just have a tougher time accepting this reality.
Infor just announced its acquisition of GT Nexus. I like it because it is not just a simplistic business network where you order paper and pencils and then burden those suppliers with the costs of running the network. GT Nexus’s network is more about direct components that go into BOMs of many large customers. It also supports (and is funded by) many commerce participants – 3PLs, carriers, trade financiers – and fits in well with Infor’s fashion, retail and manufacturing vertical focus.
I hope this is one of Infor’s continued investments in the supply chain and broader digital commerce arena. Indeed, I hope most large software vendors revisit the space. In the last decade, while smaller vendors like E2open and Kinaxis have continued to deliver value, larger vendors have turned their attention to HCM, CRM and other areas of the enterprise. A comment I have heard from a couple of them “most supply chains are optimized, we can deliver better value elsewhere”
In that same decade, I would say most supply chains have had a chance to be “re-optimized”. If you are not taking advantage of amazing logistical advances such as the expanded Panama Canal, the rail link between China and Germany, extreme oil drilling in the Arctic, the promise of drones and privatization of space exploration you are likely under-optimized. If you are not benchmarking against Apple and Amazon type supply chains, you likely are under-optimized. In that same decades, freight railroads and Fedex, DHL and UPS have become some of the savviest users of technology.
I hope SAP’s Simple Logistics is a recognition of this new world not just a HANA/Fiori update of the old world. Ditto with the Oracle SCM Cloud. Be nice to see the younger cloud players like NetSuite, Plex and Workday invest more in this area.
I did one of my last proofs of the SAP Nation 2.0 manuscript (available for preorder at Amazon) while watching the GOP debate last week. I should say I tried to do both, but the debate dominated my attention
In doing so, I could not help compare our nation’s democratic process to trends in SAP Nation
a) Plenty of history to draw on
The political process this time seems so un-Presidential – leaking of personal phone numbers, tossing phones into blenders etc. Our elections have always been about theater. If you can believe, we used to have duels where candidates actually got killed. When you read the history of our elections you get a very different perspective on what is happening now – and to not get too caught up in the theatrics.
In reviewing the S/4HANA launch I similarly used two sets of historical benchmarks. I compared the launch to that of the Apple iPhone, the Boeing 787, the Lexmark Genesis and a new Facebook data center. Specific to enterprise software, I compared to the path Oracle Fusion, JD Edwards’s OneWorld, Microsoft Project Green, Infor’s CloudSuite and SAP’s own NetWeaver and BYD rollouts. With that history, you get to see more clearly what SAP is doing well and not so well.
b) The choices are many and confusing
During the course of this election process, Americans will hear from (at least) 25 candidates. Our President is not elected by popular vote, but by an Electoral College. Those"electors" are chosen by popular vote on a state-by-state basis. My state, Florida has 29 electoral votes, California has 55, Montana only 3. Candidates craft messages which play in primaries in different states. And covering the whole nation takes months, so it’s a fools errand to predict so far ahead who might win in November 2016.
In writing 2.0, I was struck by how similarly complex SAP Nation has become to analyze or forecast trends in. The nearly 50 acquisitions and HANA have reshaped SAP in the last decade. SAP keeps launching other new products, many opportunistic, not necessarily requested by its long tern customers. In turn, its customers have countless cloud and other satellite applications. Its partner ecosystem has ballooned five times in the last decade with a new set of Fiori consultants, HANA startups. Most market watchers – analysts, user groups, media etc – are hopelessly outdated or siloed in what they know of SAP.
c) The spend is stupid crazy
Hillary Clinton – just one candidate – may end up raising and spending $ 2.5 billion on her campaign. The numbers are unfathomable.
In 2.0, I revised the estimate in the model of SAP Nation to $ 309 billion. That accounts for an expanded number of partners, end user training in a Fiori world, likely inflation for S/4 skills and other factors. But here’s the crazy thing – if I had burdened the model with SAP’s brags of hundreds of millions of users, for non-human users such as smart meters, and for amortization/writeoffs so common in that world, I could easily have shown it as $ 700 billion a year.
As I say in the book:
"What's the point of presenting an even gloomier model?"”
d) The angst is real
Whatever you may think of Donald Trump and whether he will continue to be a factor or fade out, he is tapping into voter dissatisfaction with career politicians and the state of affairs in Washington, DC. I got the same vibe from SAP customers profiled in the two books. Dennis Howlett’s reaction to the sample in the first book was it was a “canary in the coal mine”. Having read an early copy of 2.0, he recently wrote
“in conversation with Vinnie, I pointed out that in a universe of c.200K customers, finding 40,50, 100 who have serious issues is not hard. But it is the variety of issue and the recurrence of issues spanning years that stand out. It is also the size of company we are talking about and the logos that have been looking elsewhere.”
The results of the elections in SAP Nation will not likely be known by next November. But the campaigning started a while ago and as I conclude in 2.0
“Much better answers will come over the next few years as a result of the circle that SAP re-draws around S/4 and the thousands of circles its customers are drawing.”
It will be a fascinating – and frustrating – process to observe.
I enjoyed the GOP debate last night – lots of complex. thorny issues we face as a country but at several points I thought they were talking about the tech industry if you substitute one or two words in what was being discussed
“The difference is, when somebody else uses those laws, nobody writes about it.”
How many times do we hear vendors compare to bad practices of competitors as justification of their behavior then bitch that analysts pick on them and them alone?
Or another where analysts like to brag about “independence”
“He likes to buy and sell analysts of all stripes”
“I have given plenty of money to him”
I walked away more convinced than ever our system is corrupt – no more so than most other countries in the world, mind you, but you have to protect your own family’s interests because no politician or businessman is likely to.
Back to our industry – in SAP Nation 2.0 I have a section on customer advocacy or lack thereof from user groups, analysts, media, academia and regulators and I conclude
“The SAP economy similarly has no government. Many customer executives will say they have little time or interest to “influence the influencers” discussed above. You cannot blame them, but then they need to increase their own oversight and help protect their own interests.”
The debate last night only reinforced my thinking.
Many of my writing and speaking bios use the moniker “innovation historian.” That may sound like an oxymoron because innovation is supposed to be about breakthrough and brighter futures, but I am a big believer you learn from the past, especially from mistakes.
In SAP Nation and now, 2.0 I have four chapters cataloging the history of enterprise software. In SAP Nation, there were chapters about SAP in the 1990s and 2000s, and in 2.0 a chapter on 25 years of next-gen products at Oracle, JD Edwards, Microsoft, Infor and another which looks at SAP’s history in this decade.
The four chapters represent just about 20% of the page count in the books, but they were some of the most satisfying to write. That’s partly because I did not just present the vendor spin on history, but went to alums, partners and independent analysts for perspective.
In SAP Nation, it was nice to get Paul Melchiorre describe the SAP rocket ship he rode in the heady success of the 1990s. BIll Wohl provided color on the marketing successes and challenges SAP faced in the 2000s. Several other alum provided input in background. Brian Sommer and Brad Callahan provided perspectives from their partner roles at Accenture and E&Y. Erik Keller, Michael Krigsman and others provided the analyst perspective.
In 2.0, Michael Schmitt, an executive at JD Edwards throughout the 1990s provided the background as they developed and rolled out OneWorld. Floyd Teter and John Sumser, Oracle partners and analysts provided insight into the Fusion journey. Frank Scavo provided nice color commentary on Microsoft’s Project Green. Cindy Jutras did the same with Infor’s more recent history as did Dennis Howlett and others with SAP’s BYD and HANA efforts over the last decade.
Our industry is a frustrating one full of hype and massive waste and failure. But it also has a rich history and has kept many millions of us invigorated, paid for our kids’ educations and delivered value to countless customers.
I am grateful for a chance, as innovation historian, to document a small portion of this history. I hope you enjoy at least those chapters in the books, even as we argue about vendor philosophies and trajectories.
I am pleased to announce Amazon is taking Kindle eBook preorders for the sequel (click on the badge on left). My company is also taking bulk orders (50+ copies) for the print version. Amazon will offer print on demand for smaller batches when the book is out in early September.
Here is the high level description and attached below in PDF format is the pre-edited preface of the book with details on the chapters.
“In this fast-paced sequel to SAP Nation, author Vinnie Mirchandani updates many of the dimensions of the SAP economy, as big as that of Ireland. The context: In February 2015, SAP announced its next-generation ERP product, S/4HANA. Since then, SAP and its partners have relentlessly marketed the tag word "Simple."
When you factor in SAP's growing product portfolio (much acquired, but not integrated), the customizations and satellite applications at its 300,000 customers, and its ecosystem of 13,000 partners, a different word comes to mind: “Sprawl.”
Will S/4 reduce this sprawl? Will S/4 allow SAP to better compete in the cloud? Will the S/4 rollout mirror that of other next-gen enterprise products over the last two decades? How can customers protect themselves in an economy where new products often result in premiums and overruns?
Anyone with interest in SAP - as competitor, customer, employee, investor, partner - will benefit from pondering the questions in the book. Customers will also profit from its nine strategies to optimize environments on their own while they wait for the SAP promise of Simple.”
“He is outlining what remains to be converted from analog to digital. Indeed, everything in the world — photos, film, music — that was not already digital by now, would soon be, as the digital revolution expanded.”
In 1986. he was way ahead of the world in digitizing stuff!
And you see the digital evolution of music continues 30 years later with waves of Walkmans, iPod/iTunes, DRM free better AAC quality codecs, the iPhone, Apple Match and now with streaming services like Spotify. In turn, it has led to a cottage industry of Sonos, Beats and so many other products that audiophiles have nurtured.
This is an important reminder at a time when every consultant and tech vendor is talking Digital Transformation.
Unfortunately, most of them focus on specific areas like social marketing or digital back office processes. That’s clearly needed but will have little impact unless companies make their products, services and business models digital. That in turn leads to a rethink of manufacturing – in my estimate, 20% of BOMs for smart products are now influenced more by Silicon Valley than by traditional industry suppliers. It may mean turning to contract manufacturers and design agencies the tech industry has used for a while now. It also leads to rethinking global supply chains.
I was pleased Karl-Heinz Streibich invited me to interview many digital pioneers for his book, The Digital Enterprise. As you can from the an extract from the table of contents below we talked to companies about smart products, digital business models, rethought channels and much more.
The other critical need is to think several steps ahead in waves. Digitization usually brings in newer competitors, many from outside your industry (think Whirlpool v. Samsung, Audi v. Google) and that typically leads to an acceleration of feature/function wars and rapid price changes as Moore’s Law plays its hand.
I like to cite the trajectory of GM’s OnStar telematics. With its navigation and emergency services, it was a significant differentiator for GM cars a decade ago. Then the world moved to Garmin and other handheld GPS units and to Google Maps on our smartphones. GM ended up repositioning OnStar via a rearview mirror and on an annual fee basis so even Toyota and Ford customers could avail of it. In the meantime, every automaker has started to offer their own version, even for entry-level cars.
The evolution of music described above is another example of how digitization accelerates change.
Digital Transformations can be exciting as hell. But if you listen too much to those narrowly focused consultants and vendors, it could be ERP redux. You will spend tons of money, and this time, you will do lots worse than just ending up with a bloated back office.
I was reviewing Duncan Chapple’s latest influence quadrant and thinking how much the analyst relations world has changed since my days at Gartner in the 90s
a) Vendor product portfolios have exploded
Microsoft needs a “One Microsoft” initiative to bring together its wide array of consumer and enterprise tech. In the last decade SAP has made nearly 50 seemingly disconnected acquisitions. That has led Mark Hurd, CEO of competitor Oracle (itself very acquisitive) to sarcastically observe, "I guess we could buy a Dairy Queen." How does vendor AR coherently present such a portfolio to analysts? And to how many analysts in each firm? I heard one firm sent 40 analysts to a vendor event last year. 40!
b) Left-field competitors are everywhere
HP’s infrastructure outsourcing has been tormented by Amazon. Accenture’s application outsourcing/BPO is being cannibalized by SaaS vendors like Salesforce – and soon will be challenged by machine learning and process automation. TCS’s offshore model is being challenged by crowdsourcing and rural sourcing. Samsung competes with appliance makers, Google may soon with car makers. Analysts do better when markets mature and a core group of vendors emerges. If you have read my New Florence blog for the last decade, the recurring theme is the “aha” from places and people where you least expect it.
c) Vendor marketing is often misaligned with AR
How does IBM AR explain why Watson and Smart Solutions have been on TV for years now and still contribute only a small percent of its revenues? How does the SAP AR person try to explain with a straight face what “Does your business have a soul?” commercials have to do with its customers? Or try to explain that hot air balloons are good imagery for cloud computing, just ignore the hot air part? Then you have idiotic tweets and other social media gaffes from channel and other partners. AR no longer controls the message.
d) The “analyst” has morphed
Enterprise software markets follow Diginomica, outsourcers follow HfS – neither firm existed a few years ago. Frank Scavo can balance his research with his consulting and benchmarking practices. Ray Wang presents to hundreds of executives every month. Through my advisory work and my book interviews I have had far richer conversations with business executives than I ever did as a Gartner analyst. There are so many of us “small guys”. Not just small - but with access to a large number of executives. Vendors struggle with this proliferation of smaller firms – a bit like Gulliver in Lilliput. The administrators at Oracle and others have taken the word “independent analyst” to literally mean “independent contractor” with all the paperwork needed for IRS compliance. Cannot blame them, but it sure complicates AR.
Long and short – I am looking forward to hugging a number of AR folks during the Fall event season. Their job has become increasingly more difficult. The least I can do is sympathize. So long as they don’t expect me to start writing puff pieces
As I go through final edits of SAP Nation 2.0, I am updating it for its Q2 results. I was pleased to see two interviews with Rob Enslin, SAP's President of Global Customer Operations here and here.
He provides some interesting color on the S/4HANA rollout
Expects a strong adoption year in 2016 once Simple Logistics becomes available
Only a handful of Simple Finance sites are live to date
Almost all S/4 deployments are on-premise ( his partners likely prefer he call it private cloud)
137 projects in the 900+ customers SAP says have bought S/4 – so mostly shelfware for now.
What I liked was he presents the facts, with little spin. That is so refreshing to see in the midst of the cloud, “simple” and other noise coming from other SAP executives and even more from its partners.
I hear from several that he is down to earth and customer centric and I have included some of his comments in the book.
Of course, I am balancing 360 degree input about S/4 and SAP broadly from
his competitors and his partners
analysis of two decades of next-gen enterprise software rollouts at Infor, JDEdwards, Microsoft, Oracle and SAP itself.
SAP’s own S/4 materials, courseware, the Plattner/Leukert book and other resources
Going forward, it would be nice to see Rob have more influence on SAP’s marketing messages. And may be when I get ready to write SAP 3.0 in a few years, I can interview him at length at how the S/4 rollout actually turns out and share customer war stories – what he hears and what I hear.
We have devoted 12,000 words in our July 1 issue to an extraordinary story by Peter Elkind on the now infamous cyberattack against Sony Corp….a chillingly compelling, behind-the-scenes narrative of the events leading up to the attack. Were it not about them, the folks at Sony Pictures might make it into a movie.
It’s chilling for sure.
My 2012 book, The New Technology Elite, was about innovation in design, supply chains, business models but I had a chapter on innovation around Infosec. In a section titled “Tarred and Feathered” I had cited, from public sources, “The repeated and public humiliation of Sony by hackers over a matter of months shocked the technology world.”
I had been baffled how a digitally savvy company like Sony had been so vulnerable. If Fortune is correct, it went from the frying pan into the fire over the next couple of years.
Even more chilling, in spite of an unusually long investigation, the Fortune article is actually more about Hollywood (especially the decisions around the movie, The Interview) and Wall Street (an activist investor) than a detailed analysis of the breach and the malware used. In Fortune’s defense, their editors probably had to deal with State Department (because of suspected N. Korean involvement), FBI, Sony’s counsel and who knows who else as they published the story.
So, the wild rumors around what actually happened will continue to fly. In high profile breaches that is fairly common, but the Sony hack took it to new heights.
It will make for a chilling movie – if the details are allowed to come out some day.
I first wrote about ERP third party maintenance (support independent of the software publisher) in 2005. Even earlier, I have written about similar offerings like plug-compatible mainframes and specialty auto shops who do better than official dealers.
I have noticed three things in the last decade:
a) most analysts and bloggers do not write much about 3PM – though Pat Phelan at Gartner recently had a long note about it. Analysts, I find, do not find 3PM as sexy as social, mobile, cloud, Big Data coverage.
b) attorneys on the other hand cannot get enough of 3PM, with the continuing Oracle litigation with SAP (over TomorrowNow) and with Rimini Street.
c) customers, however, continue to get more and more comfortable with 3PM as it is a non-disruptive way to get savings on the maintenance dollar and improve quality of service. If they can negotiate other savings in their infrastructure and application management outsourcing, their on-premise ERP costs start to look lot more reasonable and they can maintain status quo which many find stable enough. Many of these customers report they have looked at SaaS options but the migrations are too pricey and disruptive. If SaaS vendors need more incentive to invest in conversion, testing, change management and integration automation tools and to keep their SI partners in check they should periodically talk to some of these customers.
The Gartner note referenced above says “Recent announcements from ERP vendors regarding their cloud ERP and in-memory computing roadmaps have resulted in a spike in the number of inquiries received by Gartner from clients seeking advice about alternative support options. Some enterprises see a major ERP technology change coming, one that may require a repurchase and a reimplementation of their ERP solution or its replacement by a new solution. For these enterprises, remaining on their current software release(s) until they are ready to make the switch to "the next new ERP thing" is a potentially viable choice for their ERP strategy and roadmap.”
Given that, the 3PM promise of "a higher level of service, no required upgrades and annual support fee savings of 50 percent." sounds pretty attractive.
The publishers themselves have helped the 3PM cause:
Most on-premise customers have avoided upgrades, the major reason to pay the publisher full maintenance. In my upcoming book, I have research on the snail’s pace at which SAP’s customer base has adopted various enhancement packs, and the caution they are expressing about the next-gen S/4HANA.
There was an outright user revolt when SAP decided to raise maintenance rates in the middle of the deep last recession.
Both SAP and Oracle have made tens of acquisitions, but the support has not evolved. It is still siloed by product even as they try to sell broader suites of products.
Customers, especially in SAP world, have made significant customizations, but the vendor support refuses to acknowledge it is that broader code base that needs supporting.
While some outsourcing firms bundle 3PM as part of their application management and BPO services, Rimini Street has broken out of the pack with dedicated offerings and can boast revenues on a $ 100 million annual run rate. Rimini also keeps moving up-market. It claims to now support 150+ SAP customers representing over $ 100 billion in revenue and in the last quarter announced its largest single deal - an Oracle customer for $ 6.5m in annual fees.
Not really surprising when Rimini customers make satisfied comments like:
“We have already logged (and resolved) as many support tickets in two months with Rimini Street as we had in the last two years with the vendor”
“I have the mobile phone number of my Rimini support engineer. Support is a phone call away, rather than having to work through the ticketing system layers at the vendor”
“Our ratio of IT maintenance costs to innovative projects, which formerly was 70/30, is 50/50. And we envision opportunities to go even further than that, putting even more money into innovation, reversing the original ratio to 30/70.”
So, 3PM may not be sexy enough for many influencers but it sure is for many CIOs.
I told John Sumser he was brave to use the term “stack” in an HCM context because it has been hijacked by the infrastructure software folks (e.g. Red v. Blue), but reading his firm’s new report (you can buy it here.), I can see it makes plenty of sense. HCM software is getting deeper and broader by the day and his report explores 13 categories. To use oil industry terms like vertical drilling and fracking, HCM needs to help companies find and nurture secondary and tertiary sources of value in their talent.
“This report is the beginning of our research into the way that companies assemble their HR Technology. We are pretty sure that the “optimal technical stack” varies by region, organizational size, underlying business model, and industry. To fully document that, we begin by understanding what practitioners are actually doing. This report tells the beginning of a story. Our sample set of 785 HR practitioners is not large enough to give us insight into every possible niche. But, we can clearly see trends by software type and business size. We will take you into the data in order to help you understand a new perspective. The report documents the way that practitioners view each of thirteen categories of software.”
The categories the report explores (click to enlarge)
The WSJ profiles Dave Smoley, CIO of AstraZeneca in a story about how cloud computing is pressuring Indian outsourcing. Dave is one of my favorite CIOs and he had allowed me to showcase in SAP Nation his remarkably brave initative to invert the 70% outsourced model he inherited and about the cloud investments he has been making.
But the WSJ could have gone further back. In The New Technology Elite, Dave had described an even braver decision to go with Workday and its implementation consultants for a global HCM project when he was CIO at Flextronics. In 2008, the much safer decision would have been to stick with SAP and a global SI. But Dave did not.
Actually the WSJ could have gone even further back. In 2006, I had blogged about a contract format I had started negotiating for other similarly brave CIOs which blended application management and hosting, on a per user basis. I called it Software as a Customized Service (SaCS) and for years I have implored Indian vendors to move to this model.
Three challenges have kept most of them from getting there, even a decade later. First, they have shied from CapEx needed to offer infrastructure services, so invariably have to partner with a hosting or cloud provider. Investments in Indian world are measured in recruiting and training days, not in data centers and servers. They have also shied away from automation investments to cannibalize some of their labor. Second, (as a corollary to their labor intensity), they are still stuck with headcount/FTE pricing models and reluctant to offer as-a-service pricing. Finally, and probably, much more alarmingly, a continuous improvement culture (which was proudly developed when their commitment to CMM and Six Sigma was intense in the 90s) has vanished. That had helped offset some of India’s wage inflation.
It is gradually changing. Vishal Sikka, formerly of SAP, now CEO of Infosys is pushing for more automation. "The company has set a long-term internal target of up to 70% automation in its infrastructure management business, and up to 55% automation in its business process outsourcing business. Currently, 35-40% of its BPO processes are automated.”
But that automation should have started years prior at Infosys and other Indian vendors. As should a change in business models. Now brave CIOs like Dave are much more mainstream, so the urgency has only increased significantly.
BusinessWeek had two recent stories – one was how quickly the bubble around rare earths has burst. Molycorp has filed for bankruptcy just a short couple of years after the world was fretting that China had a stranglehold on that supply critical for many technology markets.
I am a bit more cynical of the latter. In two decades of technology negotiations for clients I have definitely seen selling of software and related outsourcing evolve, but it always seems like “two steps forward, one step backward”
In my research for my books around SAP over the last year I have heard from several customers the same old tricks from ages ago with a new wrinkle: Gun to the head – unless you sign up for cloud subscriptions. Business Insider speculates Oracle is doing the same with threats of audits to help push cloud revenue. The irony is customers would have gladly bought cloud solutions from them years ago, but are now hesitant in the face of more available market options.
You hear a different story about negotiations around their on-premise versions (and those from IBM and other software vendors) – where they pretend there is no cloud competition and customers do not know how to normalize TCO. In a recent deal, the five year software on-premise cost was three times as much as the winning competitor cloud bid. The on-premise annual maintenance cost by itself exceeded the subscription cost of the competition — which also included hosting, apps management and upgrades in its price.
Outsourcing partners of software vendors are still mostly stuck in headcount/FTE based business models, even as they market “as-a-service” pricing and they see customers adopt crowdsourcing and machine alternatives in labor intensive processes. Worse, it is surprising how siloed outsourcers can be, and just under the covers, how much partnering and sub-contracting they practice. Nothing wrong with that if it is appropriately disclosed, and if the several parts have worked as a whole a few times before.
Cloud salesmen come with their own wrinkles – tricky new fees, long term commitments, and games to avoid demoing functionality (especially industry specific) they know their on-premise competitors can better deliver.
In fairness, many customer procurement groups are also stuck in the past. Too many detailed RFPs go out when scripted scenarios, due diligence site visits and other techniques deliver far better value. Too many vestiges from on-premise world like escrow clauses raise their heads in cloud negotiations.
Many cloud salespeople were raised at the on-premise vendors and many buyers were raised in (and have scars from) the on-premise world. The enterprise hype cycles last way much longer than those around rare earths.So, it will take a generational change for what BusinessWeek describes to become mainstream.
However, change is definitely coming. Enterprises now have many more technology buckets to worry about these days. Those include making their products smarter (with software, satellites and sensors) and making their customer/channel facing operations more digital.
Those new focus areas are leading to smaller budgets and mindshare for traditional IT contracts. So, guess where the liquid lunches are headed?
I am always invigorated when I spend time with Plex executives and customers as I did at its PowerPlex event in Nashville last week.
There was a blue collar excitement to the event. Accounting had an industrial engineering flavor with focus on efficiency and waste. HCM was about finding young talent who don’t mind hats and gloves – the industrial kind. The host of “The Edge Factor”, Jeremy Bout keynoted about pride in manufacturing careers. Cindy Jutras of Mint Jutras and others led a breakfast session on Women in Manufacturing (see more here)
Conversations were about lot management, traceability and adjacencies - supply chain management, R&D, plant maintenance. The next-gen tech including wearables (see my note here) on display were not just for the cool factor, but for practical applications on the shop floor. The analytics discussed were about machine performance and product quality. The swag and the buffets showcased things Plex process industry customers make. Everywhere companies and individuals proudly displayed “we make xxx” tags for much more sophisticated products. The partner booths were smallish – representative of their “low key, get it done” attitude to projects.
As Dennis Howlett observed there was a beaming confidence that pervaded the event from the beginning: “It is rare, nay unknown, for the CEO of a software business to keynote a customer conference on the last two days of a quarter but that’s exactly what Jason Blessing, CEO Plex did..”
I spent time with a couple of prospects who, in another sign of confidence, were allowed to walk around the event and get unvarnished input from customers and analysts. Paul Wright, CIO at Accuride shared with me details of the Plex customer community – the leadership seasoned Plex customers like him provide and encourage their peers to provide. He also talked about his openness with Plex prospects in a conversation dotted with terms like “G-codes for lathes” and “maquiladoras”
I did a breakout session with David Morfas of Plex, and I expressed my admiration for the roomful of manufacturing customers (see some of what they make in graph above) and told them they represent the STEM (Science, Technology, Engineering and Math) “cells” for their enterprises and that they should be leading other parts of their enterprises around precision and productivity initiatives with their scientific bent.
Oh and by the way, there was also a bit of focus on cloud computing at the event
Next year, PowerPlex heads to downtown Detroit. With the renaissance of US manufacturing, that should be a great venue.
Amazon had just launched a new way to reward authors for books under their Kindle Unlimited (KU) and Kindle Owners' Lending Library (KOLL) plans. It used to be based on qualified borrows, and now is based on number of pages read.
Just in June (last month), Amazon reports for that 1.9 billion Kindle Edition Normalized Pages (KENPs) read. That does not include eBooks published by major houses, just the ones that use the Kindle Publishing platform. For them, it does not include all the eBooks units bought not borrowed. It does not include hardback or paperback pages read which are for most business books still sold in much larger quantities than eBooks.
What is a KENP? Some science there from Amazon: “We calculate KENPC based on standard settings (e.g. font, line height, line spacing, etc.), and we use KENPC to measure the number of pages customers read in your book, starting with the Start Reading Location (SRL) to the end of your book. Amazon typically sets SRL at chapter 1 so readers can start reading the core content of your book as soon as they open it.”
By my unscientific estimate, if there was a total KENP count in all Kindle, Nook, other eBook versions and print versions bought from bookstores or borrowed from public, university and other libraries it would exceed 100 billion pages a month. Now compare that to the monthly page views of even the big sites like Google, Youtube, Baidu etc.
Like most, I have watched many a “One more thing” announcement by Steve Jobs. While it made many run out and line up for blocks when Apple introduced that shiny new thing, it inspired the author in me to write about the birth of new products and initiatives. In my books, I have written about how the Boeing 787, Corning’s Gorilla Glass, Facebook’s breakthrough Prineville data center, Lexmark’s striking Genesis printer and how many other products were conceived and launched. It’s invigorating to talk to designers, engineers and marketers about form/factors, UX, manufacturing, packaging, launch nuances.
A frustration of mine has been there has not been major, “moonshot” launches in enterprise world. Lots of tactical announcements and technical releases, but nothing that captured my imagination enough to profile in a long chapter.
Then suddenly, in the last 5 months, I have witnessed three game changing events.
Larry Ellison, this week as Oracle launched 24+ new PaaS and IaaS products, summarized the sea change in the industry “It’s remarkable that we are not competing with IBM and SAP these days. Our new competition is Amazon, Salesforce and Workday. Microsoft is the only traditional competitor we see”. Even more startling – he showed a slide where Oracle’s data centers support 700 petabytes of storage and 33 billion transactions a day. Hello, this is a software company? As I told Fortune magazine “Oracle has the biggest number of (SKUs) features in the cloud world. Not all of them sell well, and some aren’t the best, but they are the broadest. No question.”
Dr. Hasso Plattner, ringing the bell at the New York Stock Exchange in February to announce SAP’s next-gen S/4 with new elements like Fiori, HANA and private clouds. Then, for effect, telling a journalist "If this doesn’t work, we’re dead. Flat-out dead.”
Satya Nadella in his keynote at Microsoft Convergence in March barely mentioning “ERP” at a conference built around the Dynamics family. Instead he showcased “One Microsoft” – the world of Azure machine learning, Surface Hubs, Skype telephony, Cortana personal assistants, and cloud based Office 365 – and how they reshape ERP, CRM and other processes. In an org change last week, Microsoft continued what it is calling the “mainstreaming” of Dynamics.
The S/4 launch has given me a chance to write a new book over the last few weeks. It has given me a chance to also revisit other enterprise software product launches over the last two decades.
Now Larry and Satya have given me even more ideas for other books. It is an exciting time for enterprise technology. Trust me, we have waited for this for many years now but when it rains it pours. Enjoy the bounty.
Both sides like to tweak each other. Both like to harangue customers for new revenue. Customers however fume that stuff they have paying maintenance for years cannot seem to get much attention.
So I was pleased when reader Tan Ah Beng pointed out this presentation about SAP support for various Oracle database versions (including the in-memory switch in 12c) and Engineered Systems. I am sure there is similar for IBM DB2 and Microsoft SQL Server, and for SAP’s own Sybase and MaxDB products.
SAP says 6.000+ customers are now using HANA is some form. Which means the majority of its 270,000 are still on the other databases. Many will continue to survive for years as customers have elaborate systems management and staff infrastructures built around them.
With that disproportionate mix, wish those databases would get even a fraction of the public love HANA gets from SAP. And a commitment from SAP and the database vendors they will continue to get plenty of maintenance dollars towards the "junction" where their products intersect.
I am writing the sequel to SAP Nation to update it for the launch of S/4HANA. I analyze the launch and also delve into the history of next-gen products in enterprise software over two decades to provide some perspective on how S/4 may evolve and how the customer base will react to it.
That I thought would be the bulk of the book.
Actually there is a bigger story. Seemingly out of the woodwork, in reaction to SAP Nation I started hearing from/about many SAP customers. The common thread was "wish you had talked to us when you wrote the book - here is what we (or so and so customer) are doing to optimize our (their) SAP environment"
The fragmentation in the customer application portfolio is not surprising as I had described customers trying “ring-fence with clouds”, “two-tier ERP”, “third party maintenance” “sidecar” and a variety of other strategies. Still I was taken aback to see analysis from Panaya, the tools vendor: "More than 50% of SAP shops have 40+ satellite applications. Of these less than 10 are SAP applications". I accessed analysis of ABAP customizations at 80 major SAP customers by CAST Research Labs has - most of the customizations are sizable, and many high-risk by their benchmarks. Little chance they can be retired or modernized anytime soon.
Then there is the fragmentation in SAP’s own product portfolio. which has exploded with nearly 50 acquisitions in the last decade, many still waiting to be integrated. Mark Hurd, CEO of competitor Oracle has sarcastically commented about that "I guess we could buy a Dairy Queen."
Additionally, there is organic product growth. There are growing number of custom Fiori apps. SAP has released over 50 country-specifically localized SAP All-in-one baseline solutions on the latest SAP HANA enabled enhancement package . BusinessOne, with over 50,000 smaller customers around the world, is not exactly dead. Even BusinessbyDesign (ByD) which has suffered from a series of SAP missteps has been called "alive and kicking". At SapphireNow in May, SAP Digital announced a new set of products including a CRM solution at $ 29 a user a month. SAP announced updates to its Lumira visualization software for growing sensor and other IoT data. It showcased the "Boardroom of the Future" . Over the last few years, 9000 people have been part of SAP Code Jam events in 119 cities around the world! SAP claims 17 million Jam users. Most of these products individually contribute 1-2 % of SAP revenues but keep adding to the sprawl.
Finally, there is significant churn in the partners. There are many newer smaller Fiori and HANA focused consultants. Over 2,000 HANA startups and many new private cloud hosting providers. Application management is morphing as those providers automate and move to as-a-service business models. The acquired companies like SuccessFactors and existing products like Business One are seeing changes in their implementation/reseller channels.
The wide diversity in SAP's portfolio and its customer base is vividly on display in its advertising budget which varies from radio spots aimed at small businesses for the Concur product to SuccessFactors billboards at competitor events to corporate branding at hockey stadiums and in 3 page spreads in the Wall Street Journal.
I am a student of ecosystems so I find all this stuff fascinating. But I would be lying if I told you I understand all the cross-currents these represent. I certainly would not call it “running simple”.
I use an analogy in the book of another country. In a few weeks you will get to see what the state of SAP Nation reminds me of.
In the last few weeks, I have had a chance to visit Oracle UX design lab, talk to Infor’s design agency and interview folks about Fiori for my sequel to SAP Nation. I also had a chance to see a fabulous Microsoft demo which pulled together Skype for Business, Cortana’s voice based personal assistant, Surface Hub display, machine learning via Delve and a variety of Apple and Microsoft mobile hardware.
Enterprise UX is going through a revolution. Or so it would seem.
But then I see FastCompany take Apple to task for lagging. Apple lagging when it comes to UX?
"This year's WWDC was a tacit admission that Apple needed to play catch-up. Cupertino spent so much energy over the past five years paying attention to the surface details of their products, it ignored a seismic shift in the industry: AI is the new UI"
Then, I see John Underkoffler, who designed the gesture based interface in the movie Minority Report and is now CEO of Oblong Industries, a design studio say
"We're a digital species now—nothing short of apocalypse will change that! The health of our digital society lies, therefore, in the broadest possible distribution of agency. Agency is circumscribed mainly by the UI—the machinery through which human intent is transduced into the machine. So designing and deploying radically more capable UIs is one of the most important things we can do today.”
So, enjoy your Fiori and other enterprise UX for now but quickly prepare for many waves of gestural, voice, haptic, scanner, machine learning influenced UX in the next few years.
It will be the extension of the Sunday night/Monday morning phenomenon. What users expect at work should not trail what they are already seeing in their cars and in their homes. Or at the movies.
A few weeks ago I wrote this post about how “analyst summits” keep improving. I had previewed the contents with the Unit4 analyst team as they prepared for their first “summit” (they previously outsourced analyst relations and with significant new management talent and product news need a much fuller day of presentations, and more direct analyst contact) and I was really pleased they took what I shared and added several nice touches to the analyst day they hosted in Boston yesterday.
What stood out:
Executive Transparency: CEO José Duarte set the tone with an interactive session and every other session and mealtimes had plenty of time for q&a.
Mix of sessions: Besides the executive sessions, there was a customer and a partner session, and time for some product drilldown, including a session on a just-closed acquisition of Three Rivers Systems, a higher education vertical play. I heard at least 8 accents speaking fluent English during the course of the day – testimony to Unit4’s European roots but growing N. American and other global growth.
Polling: Unit4 polled analysts ahead of the day on what they wanted to hear, the preferred format (they were a bit surprised people did not want 1:1 sessions. I had told them most bloggers liked the interaction of group sessions) and ended the day asking for live feedback – there was a genuine desire to engage with analysts not just present to them.
Convenience: Unit4 “split” the day – in London last week, in Boston this week. The goal was to reduce travel time and effort for the majority of invitees. This of course, meant the presenters had to travel more but again it was considerate of them to focus on the analysts.
Aesthetics: The State Room atop 60 State Street provided a superb, panoramic view of Boston and its waterfront. There was plenty of fresh air on the walk from the hotel and to the dinner. The dinner was “La Famiglia” style, shared Italian and encouraged even more banter.
Content availability: One of my pet peeves is slides from such sessions are often not available for days afterwards. Unit4 had slides available for download from a Dropbox folder at the start of the day.
Very nicely done day – will blog more about product direction in coming weeks as Unit4 removes the embargo on some of the content.
Holger Mueller has a nice Storify summary of the day.
Steve O”Grady of Redmonk has an easy to read book out.
His thesis is summarized as
“By the time Andreessen wrote those words, there were few who would disagree with the core thesis. Those who would were most likely to be employed by industries in the process of being actively disrupted by software. Software was, and still is, the new reality for most industries. Much as Amazon is now more appropriately described as a technology company than a retailer, so too are an increasing number of businesses in an ever-widening number of industries.
A curious thing was happening while software was hungrily consuming the world, however. Even as it was becoming more and more vital and disruptive, software’s commercial value was declining. Software that would have once generated billions in revenue per quarter is increasingly made available for free. Companies that once battled each other and struggled to differentiate similar proprietary products now collaborate with each other on a common platform, competing on implementations and service. Developers that solve interesting problems with software see more benefit than cost to making it available for free than attempting to charge for it.
This is the Software Paradox: the most powerful disruptor we have ever seen and the creator of multibillion-dollar net new markets is being commercially devalued, daily.”
I would recommend the book - it is a short easy read, and it’s available for free download courtesy of PayPal on the O’Reilly site
Reading it, four things came to mind
a) High software margins of 80 to 90% – which explain high valuations - were never sustainable. In economics 101, we were taught “abnormal profits” don’t last over the long haul
b) More buyer executives are like Kent Johnson of Boeing who told Dennis Howlett “Boeing has to reduce the TCO of its aircraft by 1% every year over the product lifecycle. Why don’t software companies do the same?”
c) Most enterprise software tends to be “horizontal” - financials, hr, call center, spreadsheets, IT infrastructure related. In the early 90s I had noticed that Computer Associates, by itself had 15 General Ledgers across its product portfolio. Since then, easily another 250 companies have written GL functionality – each with an incremental feature, or for a certain regional language support or “for the cloud” - but not significantly different. It’s demand and supply. If you want abnormal profits, you have to create a monopoly, not share space with hundreds of other companies. You have to verticalize.
d) The definition of “verticalize” is becoming much more nuanced. Auto companies which need software for their infotainment, safety and other systems increasingly write their own software – millions of lines of code. They can leverage all kinds of software development pools – offshore talent, crowdsourcing, open source communities. Or they license them from their competitors, not from software companies. It’s not just Amazon as Stephen points out, its just about every company as they make their products and services “smarter” with software, sensor, satellite support. More of them are behaving like auto companies – developing their own.
Personally, I am excited software has become so mainstream. We may not see too many “unicorn” valuations, but its impact on our daily lives is worth toasting. And the fact that we have people in California, Bangalore, Munich, Shanghai and elsewhere collaborating with 0s and 1s is worth a second celebratory round.
I know people measure Gartner by its Magic Quadrants, Cool Vendor lists and Symposium presentations, but to me Gartner really shines when it triangulates
a) maturing, large markets it sees from its thousands of client queries each month
b) summarizes what it has learned from vendor presentations, client RFP analysis and other sources it is privy to
c) integrates points of view from its many silos.
I saw a very good example of that – or at least the first two elements in the recent report “Seven Ways to Compare the Enterprise HCM Suite “Big Three” by Ron Hanscome and Yvette Cameron.
There are potentially thousands of replacement deals in PeopleSoft, SAP HCM, Lawson, ADP and other HR customer bases so it’s a market ready for churn. Gartner query shows most customer short lists have Workday, Oracle HCM and SAP’s Success Factors in the mix. Those are the three the report focused on.
What I liked was a nice summation of strengths and weaknesses for each of the three vendors. That’s what clients want – they want pointers to add to their own RFPs, scripted scenarios during demos and other evaluation and contracting processes. A Magic Quadrant with 20 vendors is often a waste of their time. So is research on very mature technologies or way too early emerging vendors.
I would love to see similar reports from Gartner in other technology markets. Focus on market segments which are maturing (“crossing the chasm”) and focus on a handful of vendors who have momentum (at least at the time of the report).
I would also like to see that them add my 3rd point above - take it a step higher with integration across a few Gartner silos. When I was writing SAP Nation, it struck me 5-6 Gartner analysts from their ERP, systems integration, application management outsourcing, hosting/cloud infrastructure, telecom groups could have pulled together what took me months to research. They could have easily pulled together 4-5 times the number of case studies I did.
That’s Gartner's strengths – multiple areas of coverage, tens of thousands of data points from customer queries, ability to cut through vendor BS and net out the good and ugly.
Over the last decade I have been a staunch supporter of the SaaS/cloud model – multi-tenancy, OpEx v. CapEx, collapsing of software license/apps management/hosting into one contract, other advantages.
But writing SAP Nation and now the sequel looking at S/4HANA and other next-gen projects in the industry over the last couple of decades, I have come to realize the single biggest advantage with SaaS, is bite sized, frequent, managed- by-the-vendor upgrades.
The on-premise model delivers cumbersome enhancement packs and other periodic upgrades, and a whopper next-gen product every 15-20 years. The next-gen product takes 4-5 years to mature, and the customer base takes a decade to migrate because it does not want to let go of customizations, because the change management of the upgrade is too complex, the testing hell and the ROI of upgrades which just depends on speed/feed improvements or prettier look and feel is poor.
The concerning thing is many vendors are encouraging their customers to adopt “private clouds” with their next-gen products. Those lower hosting costs from previous models but do not really break the traditional upgrade cycle.
For their own sake, and for that of their customers they really should encourage them to bite the bullet and move to their public clouds. Of course, that means their public cloud versions have to be functionally richer, the migration is reasonably automated, and their public clouds are built to scale. Easier said than done.
The first is from Ben Pring where he invokes the Japanese art of decluttering as applied to IT.
There has never been a culture in “big boy IT” of throwing things away when they’re past their sell by date. There have never been any brownie points for people to question the value of old systems or for dealing with the often complicated and uncomfortable (potentially career limiting) political issues around “Fred commissioned that app; I don’t want to tell him, an executive VP, that the system’s no good anymore”.
Oh there are plenty of vendors who promise “simplification” but only if you buy more of what they want to sell. Many come with monikers like “ageless” and “unlimited” – the systems which have found the eternal Fountain of Youth.
The second was by Steve Case where he describes web 1.0 he helped shaped as founder of AOL. Google and other Silicon Valley firms influenced web 2.0.
He says we are about to move to web 3.0
These third-wave companies will take on some of the economy’s largest sectors: health care, education, transportation, energy, financial services, food and government services. These third-wave sectors — all now ripe for disruption — represent more than half of the U.S. economy.
last year, 75 percent of venture capital went to just three states: California, Massachusetts and New York. But 75 percent of our Fortune 500 companies are located in the 47 other states, and many of them will play a pivotal role in the third wave, as a new generation of partner-friendly entrepreneurs seeks strategic alliances to gain credibility and accelerate growth.
So if you are part of that Fortune 500, every technology dollar should be going into making your products, services and business models digital and prepared for a new wave of competition. It’s GE with smarter wind farms. It’s BMW with its I series of electric cars and UX. Its Progressive Insurance with its Snapshot telematics.
Every IT dollar decluttered could help your colleagues in R&D, channels and pricing strategy invest more in those areas.
Invest in technology in YOUR products and services – you have invested enough in technology in IT vendor products and services. Time to virtualize more than your servers – get ruthless about tidying up and freeing up resources.
This continues a series of columns from practitioners I respect. The category "Real Deal" describes them well.
This time it is Jason Prater who leads product and platform development teams, from design to deployment at Plex Systems, the manufacturing cloud vendor.
Here he writes about dramatic changes sensors, wearables and cloud computing are bringing to the shop floor.
Twenty years ago, it was hard for people to picture a manufacturing shop floor lined with PCs. But it happened. More and more manufacturers began to rely on desktop computers because they wanted to access data on the manufacturing process.
Today, it’s hard for people to picture a manufacturing shop floor with no PCs. But it’s going to happen. And it won’t take 20 years, or even 10.
The way technology is going, manufacturers will soon be able to leverage the Internet of Things and wearable devices to get the rich data they need at any stage of the manufacturing process.
This isn’t just a matter of wanting to get rid of big, bulky, crash-prone computers. This is the dawn of an age of “always-on” communication between man and machine. The result? Leaner, more cost-effective manufacturing.
How can a manufacturing operation thrive on data yet not have a single computer on the shop floor? This may sound far-fetched. But it’s clear that this is where we’re headed.
For example, machines are already becoming smarter (and maybe even smarter than us). We use smart refrigerators, smart thermostats, and smart smoke alarms, and we’re used to it. This is all part of a trend called the Internet of Things in which machines are talking to us, and amongst themselves, in ways that help them run better.
So, yes, the machines are already talking behind our backs. But are manufacturers talking to the machines? We at PLEX recently ran a study to answer this and other questions.
Among the manufacturers we surveyed, 48% already use sensors and 80% say they incorporate consumer mobile devices into their manufacturing operations. Some 27% use low-power Bluetooth—a technology that’s still catching on.
Manufacturers are clearly eager to let their employees communicate with machines in real time. The changes on the shop floor will be obvious, and radical.
Between mobility and the Internet of Things, I’m convinced that the PC will basically disappear from the shop floor within the next five years. Why? Manufacturers won’t need them. Instead, they’ll rely on computers that will be hidden in tablets, phones, wearables, and smart tools and machines.
What does this all mean for the forward-thinking manufacturer?
Your first order of business is to gather, store, and analyze as much data as possible. We have a customer that’s storing sound recordings of the rattles and creaks in the cars they produce. If they can identify trends in the pitches of these noises, they may be able to start predicting problems.
Another PLEX customer—a major manufacturer of large diesel engines—is using sensors to stream data back and forth to each of their custom engines. This way, maintenance staff can know instantly that an engine was built to particular specifications to meet the needs of a specific client. This information helps them deliver more tailored service.
You can’t accomplish any of this if you’re collecting data manually. It’s absolutely imperative that manufacturers tap into the Internet of Things and let their machines talk to each other. It’s equally important to move ERP systems to the cloud so that they can freely exchange data with machines.
Here’s a stat that may blow your mind: more than 50% of the traffic in the PLEX manufacturing cloud is already machine-to-machine. Yeah, it’s safe to say that our customers are way ahead of the curve.
Of course, gathering and analyzing data is just one part of the equation. How will people interact with this data on a day-to-day basis?
Get ready to see lots of your employees walking around with Google Glass and other wearables. Rather than sitting down at a computer to get the results of the latest quality check or download a report on whether machines are running, they’ll just get alerts and real-time updates on their glasses.
Think of what this really means. Less time at a computer means more time at a shop floor. Frequent updates delivered to your body allow for faster responses, earlier intervention, greater efficiency, and less waste. Who wouldn’t want that?
But this doesn’t stop at the four walls of your factory, or even at the borders of your country. If you’re taking your operations global (as so many manufacturers are), you need to gather equally rich data from all facilities. And when you close a plant in Thailand and open one in Brazil, you need to be able to stop and start the data collection process with the ease of flipping a switch.
You can’t do that with on-premise ERP—but you can with cloud-based manufacturing solutions. So, as your machines continue to chat, and as you look for ways to crunch the data they generate, the cloud will become Command Central for the global manufacturing enterprise.
To me, the most enjoyable part of writing a book is the initial research/interviews phase. In the last few weeks working on the sequel to SAP Nation, I have had invigorating conversations with several professionals in SAP world and beyond. Scary smart folks who understand the complexities of launching next-gen enterprise software like S4/HANA and those of related customer base migrations.
In parallel, I did a CIO.com webinar on customer strategies, soon after SapphireNow. Register here if you would like to listen to the recording.
Rimini Street is sponsoring a complimentary 30 minute consultation with me for a handful of SAP customer executives. It’s meant to be a confidential and independent session and I will also share a preview of the research on the sequel I am working on. Request a session here.
Analyst relations at vendors is never an easy job. Sitting between big egos of analysts and just as big egos of their executives is always uncomfortable. They are supposed to be mind readers: “Why did he write this?” or even more “why did she not write about this?”
In recent years, the analyst landscape has changed so much – newer firms (by definition, smaller), bloggers, new media. The communication modes have changed – press releases used to work just fine. Their products have become so much more complex. AR communication is exponentially more difficult than it was a decade ago.
The toughest job they have is often to mask the inefficiencies of their back offices. Most vendors try to sell efficiency and innovation to clients but the expression “shoe maker’s children” applies in spades in many of them. AR folks often run circles to play travel agent, contract negotiator and debt collector on behalf of analysts.
So, I have been impressed as I wrote recently that even mired with tactical stuff, many are showing creativity in analyst summits. Hopefully, that fun planning is a fair trade for the press releases they have been forced to abandon
So, on behalf of vendor executives and my big-ego colleagues, here’s a hat tip to my AR friends.
PS – next time, I talk to you please let me know if you used this to get a raise!