SAP's Vertical Voyage

During the press conference last week, I asked the executive panel why there were so few vertical announcements at Sapphire compared to compliance, analytics, ESA and other horizontal announcements. Henning Kagermann, CEO responded that I should see the annual report that had more SAP industry analysis.  Almost instantaneously, I was emailed a copy of the annual report (thanks, Stacey). Leo Apotheker, President for Global Sales also commented there was a continuous stream of vertical announcements throughout the year. A few hours later, Richard Campione, SVP for Industry Solution Marketing talked to me some more about why they had not showcased industry views as much at Sapphire. His point was it is not the right forum - with such a wide audience horizontal messages are more on target.

Here's the reason for my question at the press conference:

SAP talks about being able to support 28 industries. It also suggests 100% solutions in each. Yet if you look at its solution maps, it has several "white spaces". It talks about extending them with its partner ISVs and SIs with NetWeaver platformed xApps or has future R&D plans for them. So where is it really? 

Widely divergent industry by industry, I would say. In general, it is strong in many manufacturing markets.  But once you leave those SIC codes (which make up 20% of most western economies), is it absent in many major industry transaction engines -  telecom billing,  hotel reservations, state and local tax processing, mortgage processing  to name a few. And even where it does as in insurance or banking functionality, there are usually only a handful of customer references outside of German speaking Europe.

Maybe Richard can show me otherwise, but my view is SAP is still primarily a horizontal provider (financial, HR, procurement, CRM) provider in most industries. And I think it will take a long time before  xApps or its own R&D will be able to provide robust functionality in many critical vertical processes any time soon. Is it better than Oracle in most industries, yes? Does it have anywhere close to 100% industry functionality. Not by a long shot.

Which is why I think it should have more vertical coverage at events like Sapphire. With over 12,000 attendees (since ASUG was running in parallel), it is a great opportunity to segment the audience – and honestly talk about the “white spaces” and talk about customer adoption of vertical functionality in various geographies.

Comments

[Charles Zedlewski]

Vinnie,

I think the fact that SAP actually publicizes white spaces on its web site for everyone to see makes it pretty clear we aren't claiming we have 100% functional coverage for all industries. I'm a bit dissapointed that you siezed upon these white spaces to write about what you see as SAP's vertical shortcomings. SAP should be complemented for providing this kind of transparency to customers & partners. Using it as an opportunity to criticize just encourages software companies to take the standard marketing approach of "we're end to end, we do everything, etc, etc."

Your characterization that SAP only has manufacturing figured out is pretty overreaching. Some non-manufacturing examples for you:

In retail we have industry specific functionality like store management, merchandising and markdown management.

We're pretty renowned for our footprint in oil & gas which covers everything from upstream exploration to downstream to retail.

Let's not forget utilities which covers grid management, energy data management and trading.

I could go on with examples from financial to media to telecom to government.

We have a sizeable development organization that does nothing but develop industry specific functionality. Working with ISV's is a way of accelerating our coverage. We went through a pretty extensive analysis of all of our white spaces across 28 industries, determined what we should build and what we should partner for. We're making big investments on both fronts.

As far as coverage at Sapphire goes, more than a third of the breakout sessions were industry specific.

[vinnie mirchandani]

Charles, yes SAP has to be complimented for publishing the Industy maps. But shouldn't its salespeople also read them and not just talk about "100% solutions". I referenced an attributed quote last week in the SMB article about that kind of talk. Also SAP management loosely talks about "we are the BPM platform". How can you say that when major TP is still being done by non-SAP systems?

To my second point about may be having vertical solutions and penetration in Europe but not much elsewhere. You mention utlities. I have worked with a couple of clients in that vertical. How many US utilities have implemented your CMS? Not too many. How many US retailers have implemented merchandising? I worked in the oil patch in the 80s - the strategic systems are seismic/exploration systems - not SAP's forte. We could go on.

On the vertical sessions at Sapphire. Go back and see content. How many dealt with financial, CRM etc - what I call horizontal implementations in those verticals v/s
vertical specific functionality.

I am happy to ackonwledge SAP single handedly has more vertical functionality than any other vendor (may be even more than all major apps vendors put together) - but to say 100% solutions in 28 industries - long, long way off.

[Nige]

I think the more interesting point is the one touched on by Charles; SAP is both seeking to deliver this vertical functionality AND encourage its ISVs to do it. But how do the inevitable conflicts between SAP and its ISVs get resolved? Why would an ISV strive to deliver the required functionality if SAP is, or might be, on the exact same path? What if three ISVs are providing some vertical functionality, and SAP buys one of them? (see today's comments from Eric Keller on this issue: http://www.sandhill.com/opinion/daily_blog.php?id=42&post=153)

Ultimately, it boils down to this: What SAP ISV can ever hope to compete with SAP itself? And the knowledge that they can't will always hinder ISV efforts. Of course, Oracle and Microsoft are just as problematic!

Thanks for the insights.

Cheers,
Tuffers

[vinnie mirchandani]

Tuffers, also see my latest post SAP as Center of Gravity...Erik and I were together last week

[Nitin Goyal]

Speaking generally, I think the market is clustered in two: companies that specialize in verticals and companies that specialize in "generics" with focus on verticals. I think overall the "generics with focus on verticals" is a more lucrative market to be in, however you cannot have all of it in one go. I think we are a long way off from the day when a company can bring out a truly generic, feature rich product that is also having a lot of industry specific (vertical) plug-ins.

[Nige]

Vinnie,
Yes, I see you refer to your conversations with Erik and others on this issue in your later post, but I didn't see comment on the issue Erik raised. That is, I think there is a general acceptance now that the battle is not just between MS, SAP and Oracle (and IBM), but between each of them AND THEIR RESPECTIVE ISV "TROOPS". Hence, the investment by SAP in developing and marketing its platform to ISVs. And what is really interesting is how ISVs will react when they properly understand that if they are not bought by their Platform Patron, they may well be "crushed" by them. Deliberately. Albeit at some indefinite time in the future.
I can't see a way for SAP (or MS or Oracle) to satisfactorily address this issue.
Rgds,
Tuffers

[viinnie mirchandani]

and of course, IBM, Accenture. EDS, Microsoft are "magnets" in their own right. Yes, the gravitational pull of these planets will influence each other and everyone else in between - violently so...