deal architect

Forged by fire

Dennis Howlett writes about the "current levels of public angst among independent industry analysts at the state of enterprise software". He cites Raven Intel, Josh Greenbaum, Upper Edge, Brian Sommer, Jarret Pazahanick and me pointing to different problem areas in the market.

What's interesting is most of them are in my upcoming book, as are many other industry observers like Holger Mueller, Frank Scavo, Cindy Jutras and Dennis and his colleagues at Diginomica. However, in total they probably make up 50 pages in the book. 40 customer case studies make up 250 pages. In many ways, the customers are more critical than the analysts. As I write in the intro to the book

"All were brutally honest about what they did or did not like on their projects. Vendors will cringe when they read some of those comments, but other customers should benefit from their candid feedback. A point worth making is that vendors are likely to home in on the negatives in comments about their competitors. Trust me, all of them have similar warts."

Here's the reality. 20 years of cloud computing, yet 80% of customers are still hanging on to antique, on-prem solutions. Certain segments of the market like HCM and CRM have decent coverage - most operational areas do not. We are being delusional if vendor executives and analysts together do not scream out loud and say "something is not right". I pointed out a few areas in my note 'Polishing Brand ERP'.  My colleagues have other issues.

Vendors love praise. Some of them live for the stream of tweets they get at their events. Not sure that helps them close deals. Very few buyers are on Twitter, and only when they are in evaluation mode (once every couple of decades) do they read streams about vendors they decided against. They do listen to analysts, consult with them and read their long form reports. Especially balanced reports which point the good and the bad, and then allow them to make their complex decisions.

I was part of the analyst corps at Gartner from 1995 to 2000 which can take credit (and blame) for advising clients on 000s of ERP and related SI decisions. Ask vendor execs who dealt with us then - we were a terror. But if they are honest, they will also acknowledge that we made the market stronger and the solutions durable enough to last as long as they have. Current vendor executives would similarly benefit from a much more vigorous back and forth with analysts. As the saying goes "the strongest steel is forged by the fires of hell"

Having said that, I was pleasantly surprised at the openness I saw at SAP while writing the book. I write in the Acknowledgments

"Next, I want to thank Stacey Fish at SAP. While many others at SAP were helpful, she was my go-to contact and arranged for me to talk with several SAP customers and executives. In a world where software vendors only want to publicize positives, she allowed me "unfiltered access" to these executives.  I told her to help SAP put its "best foot forward." What I expected was plenty of marketing; what I also got was plenty of conversation and candor."

I would love to see similar conversation and candor from other vendors. I cannot force it from them, but I will continue to talk to their customers. I have gotten used to the heat in the forging shop.

Oracle and SAP: Quit sniping, start leading!!!

In the Steven Spielberg movie, President Lincoln on the cusp of victory in the Civil War, is clearly grateful to Lieutenant-General Ulysses Grant and clasps his hand with both of his. However, he also says

"We've made it possible for one another to do terrible things."

Sometimes, I wish Oracle and SAP would honestly say that to each other. They love to point fingers at each other to justify their poor behavior on audits, snipe about products they continue to together sell to customers, to justify the "empty calories" in their maintenance and many other areas. And unlike Lincoln and Grant, they have not won many victories. In fact as I point out in my upcoming book they have missed out on all kinds of opportunities:

"You have to look back to 2000 when enterprise tech vendors—especially ERP/CRM vendors led by SAP, Oracle, their systems integrators and other partners—were set to dominate the corporate technology landscape. They had emerged very strongly from the Y2K crisis, and the launch of the EU’s common currency promised another bonanza. Instead, their share of the enterprise steadily declined over the ensuing two decades. They missed out on the contract manufacturing of smart products, digital marketing, cloud infrastructure, industrial internet, process automation and several other trillion-dollar markets."

Recently, Mark Hurd co-CEO of Oracle took shots at SAP for its Qualtrics acquisition. Let's face it. Oracle's own acquisition experience has not exactly been stellar. As I mention in the book

"Oracle continues to dominate the database market. By many measures, Oracle should also by now be the undisputed leader in enterprise applications. Starting with the PeopleSoft acquisition in 2004, Oracle went on its own binge, claiming it was time for "industry consolidation." They made significant acquisitions: PeopleSoft for US$10.3 billion, NetSuite for US$9.3 billion, Siebel for US$5.6 billion, Micros for US$5.3 billion and Hyperion for US$3.3 billion. Other investments like i-flex, Portal, Primavera and Retek brought them banking, telecom, complex project and retail functionality, respectively.  By 2006, they were loudly celebrating that they were "halfway there" in developing their own next-gen Fusion cloud applications. 

For all that, Oracle has done just OK with applications. It has seemed more intent in going after Amazon for the cloud infrastructure and platform markets. Oracle has focused more on Workday and Salesforce with HCM and CRM functionality, and not so much in manufacturing or other verticals where SAP has greater presence. Its NetSuite acquisition, while helping it increase traction with SMEs, has also led to some brand confusion around its own Fusion product line. While it has launched an exciting autonomous version of its database—which it calls "self-driving"—it has not brought a similar level of automation to enterprise applications." 

In turn, I also point out how SAP whines about Oracle

"In the first volume of SAP Nation, I pointed out SAP liked to benchmark itself against Oracle and claim to be a "cleaner" company. SAP used to behave like it was on higher moral ground—even though in 2007 Oracle sued SAP for copyright infringement. The case was settled in 2014, with SAP paying Oracle a sum of US$359 million."

The industry needs both of them to quit bitching about each other and start leading again. Here is what has transpired while they have been claiming moral superiority over each other.

"Two decades ago, not many of us had heard of Accenture Interactive or Foxconn. Few of us considered Amazon or GE or Alibaba as tech vendors. Few of us would have speculated that Apple, near dead or Google, not born yet would have many times SAP's annual revenue. The market is fragmented—waiting for fast followers who missed out on the first wave of opportunities."

And let's not forget what Salesforce, Workday, ServiceNow, Plex and others have also done in the vacuum.

Polishing brand ERP

Kudos to Cindy Jutras for her study "Real Facts About ERP Implementation". Her survey showed that two-thirds of respondents graded their ERP implementation as "successful" or "very successful." The survey found 31% thought their ERP project was at least a partial success, while 2% thought they were "not very successful." Only one out of 315 thought their ERP deployment was a failure.

ERP needs more positive press. In my upcoming book SAP Nation 3.0, I have several case studies of customers who have implemented S/4HANA "greenfield" and others who have migrated from ECC. The great news - most had modest expectations, did pragmatic implementations and had small doses of big brand SIs. There are other sections on its ByD SME focused product including the fact that "the best compliments they get from customers is that their IT expense around ByD does not grow anywhere as fast as their revenues." I also have several case studies which talk of their experiences with Plex, Workday and other products.

Having said that, we also need to point out realities in ERP world and the fact that the majority of SAP, Oracle, Infor, Unit4 and other on-prem customer bases are not migrating to their newer products. Several reasons why

Manufacturing, and business, is global

A fundamental tenet of manufacturing is to make things close to demand. With middle classes growing around the world, manufacturing in China, Vietnam, Slovakia, Mexico and other countries is not at all unusual. Even more importantly, these plants get moved around the world at dizzying speed. The U.S., with its strong economy, is seeing lots of manufacturing move back here. All this calls for ERP vendors to globalize and in a hurry. Franck Cohen of SAP told us about a multinational customer who asked him, "We love your public cloud but you have to offer us 189 countries localization out of the box.” Customers got that in on-prem versions - why should they expect less in the cloud?

We are surrounded by automation

Today's shop floors and warehouses have robotics, wearables, sensors and AR goggles. Our 3PLs have telematics. Our accounts payable can use AI for fraud detection, our expense processing uses receipt image processing. We need UX which works on noisy floors where your hands need to be free from keyboard and mouse.  It is amazing how many ERP vendors pretend as if all that only happens on planet Pandora. It's our reality and it is embarrassing that ERP vendors are not delivering processes which reflect this changing man/machine mix.

We need to emphasize the operational part of ERP

Part of the bad image ERP got in the last wave was customers mostly implemented white collar, HQ type functions. They missed out on the plant, the warehouse, the shipping dock, the R&D lab and the quality control areas. That's where the high-value payback happens. We run the same risk this time around. We have vendors who have none of this operational functionality but still call themselves ERP vendors. There are other vendors who claim to have extended ERP to insurance, retail, utility or healthcare but have no operational books of record which support claims processing, merchandising, customer billing or clinical functionality for those industries. Let's call them what they are  - "accounting" or "CRM" vendors not ERP or vertical industry vendors.

We keep sending mixed messages

I see vendors justify their moves to next-gen products by telling customers to retire their old customizations. Then they turn around and tell them to use their platforms to write new customizations when that should be delivered as part of their functionality.  I see vendors who say "manufacturing should be done on-prem, not in the cloud". Then they glibly talk about machine learning. How much can machines learn if so much data continues to be squirreled away in customer data centers?   

We need to expect more - way more - from SIs and resellers who implement and maintain ERP

As an industry, we have implemented or upgraded ERP software tens of millions of times. It is absurd that we tolerate the failure rates and cost overruns that has become synonymous with ERP. Every aspect of ERP was a reason to gouge - close to 100% gross margins on software, ridiculous MPLS circuit and storage pricing, you name it. Offshore vendors who could show CMM Level 5 continuous improvements suddenly forgot that discipline when it came to ERP support. Much of what is delivered by SIs and outsourcers can and should be automated - see several ideas here 

The ERP brand definitely needs polishing. There are plenty of us like Cindy who are willing to step up to emphasize the positive. But part of that needs to be tough love. We have to demand more from ERP vendors and their ecosystems.

Davos: Not just for the elite

Alan Alper, VP and Editorial Director, has his fingerprints on most Cognizant marketing publications and events. He has been involved in the planning of Cognizant's presence and pitches at the annual meeting of the World Economic Forum for the last several years. For a variety of reasons, he did not have a chance to personally attend. He did this year and I caught up with him about his "rookie" impressions of Davos.

This was my first year onsite in Davos.  I was really struck by the fact that there really are two Davoses.  There is annual meeting, where the elites of the world in business, government, policy, and academia get together to try to take on the world's grandest challenges.  Then there is the outside the Congress Center, what we call the alt-dot-Davos experience in which there are popup presences and storefronts up and down the Promenade hosted by big technology companies; banks and brokerages and the economic development authorities of developing countries; and also, not-for-profit and NGO organizations all trying to get heard above the din.

It was fascinating to me to see what I thought was both a divergence and convergence inside and outside the Congress Center.  Inside the Congress Center, clearly the conversation was all about the 4th Industrial Revolution and the impact that globalization is having across our ecology, economies and social systems. There is the hope and the dream that technology - AI, automation, blockchain - applied correctly, can help to alleviate some of the bigger challenges --which is WEF's mission to make the world better. 

There was the continuing conversation inside the Congress Center of keeping up with the demand for talent, primarily in the digital world, how we make sure that folks are well versed in technology, trained, equipped to help society progress and to leave no one behind.  There were murmurs of the tech backlash,  how big-tech is grappling with issues of trust and data stewardship.  And questions about whether we are heading for a global recession.

On the ecological front, I think the talk that took people by storm, really grabbed at its heartstrings was that of Sweden's Greta Thunberg who did a presentation titled “Our House is On Fire.”  I think she stole the show.  I mean it was just so authentic and genuine, this 16-year-old girl who basically is telling the world leaders that if we don't fix the ecological issues of our world, we are sunk - and time's a wastin. 

Inside the Congress Center, there was a lot of conversation about making the world inclusive.  Yet, when I looked at some of the data coming from  WEF, only 23% of the delegates are women.  That's only up 1% from last year.  I would draw a comparison to what's going on outside the Congress Center where, at least in my travels, I  encountered many, many women who are involved and passionate about addressing the issues of the day. They led conversation on the caring economy and how to make FinTech work so that there is more democratized access to information services not just in the developed world, but also in developing economies.

There were a number of really interesting women events, one that was sponsored by an organization called Female Quotient that I dipped in and out of a couple of times.  I could barely get in.  It was standing room only.  Again, they were tackling all the big issues of the day.  It was great to see that, at least outside the Congress Center, women are playing a huge role trying to create a dialog around issues that seem to be vexing to most business leaders and to everyone else.

Tech Talk

Reskilling, upskilling, humans to thrive in the future of work, that was a big topic everywhere you went. The conversation about job losses was a little more subdued this year.  I think people are now finally coming to realize that the whole notion of fearing the bot may be overplayed and that it's going to be some time before AI and intelligent process automation will take lots of jobs from people. 

I think there are places where clearly the rote and routine jobs are going to start to disappear.  But the prevailing wisdom is that, to make businesses work, we need to make technology more appreciative of the human condition.  The future of work is not "no jobs".  There are going to be new jobs that open up as a result of AI and automation.  They're just different jobs than we've seen today. 

Most of the people that I spoke to reject the notion put forth in the infamous Oxford study that 40+% of all  jobs are at risk of being automated away.  There may be tasks that go away, but not full jobs.

We did an event on blockchain, that was quite well received.  I think, down the road, we're going to see places many places where blockchain will boost underserved communities by providing data  and services, what some people call micro-moment applications.  For example, we're working with MetLife on a pilot project in Singapore that enables women with gestational diabetes, once they take a test to see whether they are susceptible to it, and if they do contract it, are able to be compensated for treatment directly on their cell phones without having to file a claim.

The other thing that got attention was just the humanizing impact of AI, the more we can put an empathetic veneer on AI and how it can enable more genuine, authentic, and meaningful interactions and how we can guard against bias, be it intentional or unintentional.  These are things, with proper governance and structural changes -- such as AI offices that enable organizations to create and follow policies and procedures -- that will ensure that AI is used for good purposes and that deliver great experiences, while weeding out bias that can affect  black box algorithms.

I  stopped by the Facebook pavilion.  Unlike a lot of the big tech companies, they allowed you to come in and browse like you would in a gallery or a museum.  On the walls they displayed  this wonderful narrative about the impact of social networks.  You know, obviously it was a very positive spin, but I was very happy to see that they did treat the whole question of the unforeseen consequences from social networking, particularly the  misuse of Facebook as a purveyor of fake news, and how data privacy needs to be better protected. They could have buried it, but it was there.  They didn't hide from it.

People gazing and networking

For me, personally, it was really enlightening.  We ran into so many interesting people. We were walking down the promenade the first morning, and I ran into Tim Cook.  We exchanged glances, and I decided not to say hello to him because he looked like he wanted to be left alone.  Even though Apple didn't have a pavilion in Davos, they had a presence there, so that was interesting. 

We saw Prince William.  He walked across the street from our pavilion, the Hub Culture Pavilion. We saw the Queen of the Netherlands, who had a meeting in the Hub Culture pavilion. 

There weren't as many big name political leaders. I think Merkel from Germany was the biggest name.  Macron from France didn't come.  Modi from India didn't come.  Trump wasn't there. As I said, I think Greta Thunberg was the lightning rod.  I think a lot of folks were very intrigued by her presentation. 

I met a former WEF heavyweight, Dr. Frank Jurgen Richter.  He runs an organization called Horasis.  It's The Global Vision Community.  He's offered us a speaking opportunity at his upcoming event in Portugal.

The alt-dot-Davos

The general press tends to cover the pronouncements that come out of the Annual Meeting, and disparagingly comments on "Oh, it's all these elites and they all fly in on private jets and fly in and out." That may be true, but the ultimate Davos experience is really all about the activity outside the Congress Center, that’s occurring up and down the promenade -- the people who are trying to collaborate, and work together to solve big challenges that we all face.       

We ran into this young woman, Christine Moseley, founder of a company called Full Harvest, which is focused on creating a more sustainable food supply chain.  She had been brought to Davos by Bloomberg.  She had just received her Series A funding, and she's out hiring people.  A great opportunity for her to evangelize what she's doing. 

Again, it's all these young, bright people who descend on Davos and really try to make a difference.  I don't want to say it's just a millennial thing, but it's a lot of people with high aspiration and interest in giving back to society and making the world better.  I know that all sounds very Pollyanna, but it was true.

In my conversations with our WEF partners, I have to tell you they are very encouraging and supportive of this alt-dot-Davos experience.  In fact, we had a number of them at our Future Workforce event.  Eric White, who oversees the IT and electronics industry community that our Vice Chairman & CEO Francisco D’Souza  leads, came to our event. We had a number of WEF shapers both at that event as well as our blockchain event.  In discussions with them, they're glad to see the experience that is blossoming outside of the Congress Center.         

I think WEF has done a good job of making sure that you get this cross-section of people in Davos who can have influence, have input, and shape conversations and strategies that can at least theoretically start to address what needs to be done.  Then it's for everybody else to kind of pick up and run with it and take the theory and turn it into action.

They could say, "This is a security risk that we don't want to deal with."  We're all better for it because they allow this new experience to kind of layer on top of what they're doing in the Congress Center.

New Florence innovation catalog: 14 years, 6000 posts

The New Florence innovation blog is celebrating two milestones in March. I started the blog in 2005 because enterprise tech was going through an innovation lull and I found inspiration in profiling progress in healthtech, cleantech, consumer tech and STEM topics. Honestly, I thought I would run out of material in a couple of years. After 6,000 posts, I can safely say I grossly miscalculated. 

I am glad I was wrong. In spite of all the doom and gloom around us, the blog's moniker continues to remind me this is what Florence must have felt like during the European Renaissance.

My sources of material have evolved over time.

1. some posts are seasonal - every major event, could be the SuperBowl, Chinese New Year, the President's State of the Union address, Warren Buffet's annual shareholder letter and many others provide a nugget to explore. It's fun to see how St. Patrick's Day celebrations have evolved over the last decade!
2. many posts come from my travels - I am blessed to be invited to many conferences. My family is made up of digital nomads so I get to experience or hear of innovation in airlines, museums, event venues around the world. I am also shamelessly curious and ask details about people, products and places others may not notice.
3. other ideas come from Barnes and Noble and from the Texture app - I spent a few hours perusing magazines at B&N every few weeks. I subscribe to Texture and scan 50+ magazines on my numerous flights. Those along with Google News and other subscriptions give me plenty of other ideas.
4. my books provide more fodder - the blog has a symbiotic relationship with my books. Patterns I see across posts become the germ for book ideas. Extra material from case studies for the books become blog posts. I also excerpt chunks from the books for the blog.
5. my advisory work gives me plenty of other ideas but I am usually restricted by NDAs so cannot use much of that material. However, my advisory clients benefit from a rich database of case studies and an annoying array of dinner time stories.
6. many ideas come from readers - their suggestions are always appreciated.

On average, each post takes 30 minutes to research and curate.  I usually validate the stories with a couple of sources, and look for videos and images to enhance each post. It is a labor of love, and I am grateful to my blog sponsors for their on-going support.

I am glad I did not run out of materials after a couple of years. The blog has brought me unbelievable positivity - researching innovation and excellence does that in spades.

Look forward to cataloging global progress across a few more thousand posts! 

Photo Credit of Arno River and Ponte Vecchio in Florence.

Karma can be a real bitch

I am reading Tom Peters' The Excellence Dividend. It keeps reminding me of his 1982 classic The Search for Excellence and how much it influenced my writing style. My focus has always been on present and future excellence. My New Florence blog is approaching 6,000 posts and my books have over 500 profiles of companies which are pushing the boundaries of innovation and excellence. I honestly had little time for the past.

Then, I found myself in a bit of a quandary when I was wrote SAP Nation 2.0. SAP had announced S/4HANA just a few short months after I had released SAP Nation.  I had offered 20 pages of unedited space to SAP in that book. I had heard rumors about S/4 but did not want to speculate and hoped SAP would write about its obviously strategic, next-gen product. SAP chose not to contribute (in contrast, they have been remarkably open during my writing of the upcoming volume 3.0) and so I wrote 2.0  to describe details of S/4 and its likely prospects.

However, I could not find any case studies to write - S/4 was too new. I had to look at the past, at the history of next-gen enterprise products. I researched the evolution of J.D. Edwards OneWorld, Oracle Fusion, Microsoft "Project Green", Infor's CloudSuite and UpgradeX and SAP's own NetWeaver and ByD projects. That required looking at the software industry going back two decades. That allowed me to conclude:

"a next-gen product takes years of development and maturation. Migrating a legacy customer base takes even longer. Those are just the laws of physics. SAP may be able to bend these laws slightly with S/4, but will likely not be able to break them."

DSAG, the German speaking SAP User Group reported earlier this year that only 3% of members surveyed had made the migration to S/4, though the trend is expected to accelerate in the next few years. Oracle, Infor, Microsoft, Unit4 and other vendors with on-prem customer bases are having even less success moving their customer bases.

I similarly had not planned to look back for my next book, Silicon Collar. That had plenty of case studies - automation and work in more than 50 settings: accounting firms and banks, the battlefront and digital agencies, the oil patch and restaurants, R&D labs and shop floors, warehouses and wineries. However, to get a divergent perspective, I also interviewed several academics, analysts, and economists who were worried sick about job losses in the new machine age. As tie-breaker between the pragmatism of the case studies and the pessimism of the academics, I turned to history. I studied UPC codes and scanners as they evolved since 1948; the ways in which cars have gradually been taking over control of driving from humans since cruise control was first introduced by Chrysler in 1958; the rollout of ATM machines starting in the 1970s and progress of artificial intelligence, robotics, self-service over decades. That gave me the confidence to write that societies absorb automation at a pace that’s much slower than technology’s evolution. And five powerful “circuit breakers” help delay and influence the trajectory of automation in surprising ways. My conclusion - machines make workers speedier, safer and smarter and only gradually destroy jobs.

With SAP Nation 3.0, I have proactively decided to use both case studies and history. The book has case studies spread over 200+ pages describing how they are trying out different strategies with S/4HANA, Leonardo, SCP and other products as I described here

The history comes in 3 waves

1. I looked at SAP's 'bounceback". Five years ago, SAP looked vulnerable. Besides the runaway costs and massive project failures experienced by some customers, SAP appeared preoccupied with its HANA database and almost bored with enterprise applications. Much more concerning, a wide range of competitors were circling around. Indeed, right after S/4 was launched in early 2015, Dr. Plattner was quoted as saying, "If this doesn't work, we're dead. Flat-out dead. It's that simple.” As this book show's Dr. Plattner's worst worries have not materialized. S/4 has not been a runaway success but SAP's competition has not exactly gone for the jugular either. Instead, SAP's product portfolio and customer base has grown significantly.
2. I went back to 2000 when enterprise tech vendors—especially ERP/CRM vendors led by SAP, their systems integrators and other partners—were set to dominate the corporate technology landscape. They had emerged very strongly from the Y2K crisis, and the launch of the EU’s common currency promised another bonanza. Instead, their share of the enterprise steadily declined over the ensuing two decades. They missed out on the contract manufacturing of smart products, digital marketing, cloud infrastructure, industrial internet, process automation and several other trillion-dollar markets. Two decades ago, not many of us had heard of Accenture Interactive or Foxconn. Few of us considered Amazon or GE or Alibaba as tech vendors. Few of us would have speculated that Apple, near dead or Google, not born yet would today have many times SAP's annual revenue. The market is fragmented—waiting for fast followers who missed out on the first wave of opportunities. Could that be SAP?
3. I went back to the history of the North American continent in the 1800s and cataloged how a "start-up," the U.S., achieved its radical expansion. The setting today is similar to that of when the young U.S. nation acquired Louisiana from France in 1803. The real estate doubled but the population was mostly concentrated around the Atlantic Coast. SAP's product real estate has similarly grown, but the majority of its over 400,000 customers are clinging to their previous "homes." Migrating this customer base is SAP's first big opportunity. In addition, an even bigger opportunity awaits. The U.S., energized by a Manifest Destiny call, expanded all the way to the Pacific Ocean. Five years ago, it seemed improbable, but now SAP has a similar opportunity to lead the enterprise technology "continent." It is building momentum, and has been going through massive changes. Is it ready to issue a similar Manifest Destiny call?

The end result is a fatter book - about 400 pages - than I had planned. Some readers will find the customer profiles a bit long. Here's the reality – we only ended up using 15-20% of what was in the interview transcripts. Customers, in particular, like to hear from their peers - the executives who spoke to me at length did so for their benefit and I do not want to shortchange them.

But the history focus helps remind me that vendors often don't fact check against what they said or did even a few short months ago, whereas customers have long memories. This books shows customers being much more cautious about using SIs, many sticking to on-prem and SAPGUI deployments of S/4 to manage risk etc.

Karma, your past, often comes back to bite you. Those who ignore history are doomed to repeat it.

AI and the implementation consultant

I recently read an article which said "AI will not replace accountants and auditors, but accountants and auditors that use AI can replace those that don’t."

I predict that will also be true of implementation consultants in the next few years. SAP has invested in automation to analyze current ECC configurations, and to inspect custom mods at customers looking to move to S/4HANA. Oracle, as part of its SOAR initiative has other conversion tools. Plex has a project applying ML to examine parameter settings across their customer base. Incorrect settings lead to inefficiencies and errors. Extrapolate that and with AI, consultants should be able to configure parameters much quicker and more accurately. The toolbox keeps growing.

My premise was reinforced when I was talking to a roofer recently. If you look at how that industry has evolved and how it can routinely replace roofs in a day, you see similar opportunities to make implementation projects quicker, cheaper and importantly, much more predictable.

Before you laugh and think implementation projects are way more complex, review this video of EagleView which applies AI to imagery and allows roofers to better scope their jobs. No two roofs are alike, and EagleView has case studies where the proposals can be done at 60 to 70% less effort than before.  With drones, robotic crawlers and other automation the industry will become even more efficient.

The ERP, CRM etc SI market similarly has data on millions of projects. These projects mostly follow similar steps - parameter configuration, data conversion, end user training, testing etc. In 2001, Jim Holincheck (who then went on to Gartner and Workday), Brain Sommer and I were part of a startup which had built early project configurators and proposal engines. With today's CPQ, PSA and other technologies and data from projects from another 18 years, I am confident we can similarly apply machine learning and other automation to IT projects.

Let's continue the comparison. With EagleView you don't have to climb roofs to estimate jobs, Similarly with technology projects we can move to remote delivery models - saving on travel costs which often exceed the cost of the software being implemented. Offshore vendors have been doing that for decades. Modern roofers use automated conveyors to port shingles and other materials from truck to roof, and return debris back to recycle trucks. That's where we need much more automated enterprise class data conversion capabilities. With improving ETL and services architectures, IT projects should move to similar conveyor thinking.

Roofers tend to use specialty teams - one strips the old shingles, felt and other sealants, another inspects the plywood for rot and replaces pieces, others apply ice and water shields. Some use staple guns, others use magnetic rollers to tidy the work. Still others use digital cameras for their testing and documentation. The systems integration industry will likely move to similar specialization. Expecting a project team to do all the tasks is sub-optimal. We could have specialized training or testing teams as shared service centers.

The building blocks are in place. The toolbox keeps growing. It may take a disruptive set of new SIs or software vendors to bring them together. But safe to say "implementation consultants who use AI and other automation will replace those that don’t"

Time for more vertical integration in enterprise software

As SaaS vendors took off in the early 2000s, I was encouraged by their business model. They had collapsed software, hosting, application management and upgrades into one contract. But in recent years I have seen a reversal and a lot of fragmentation. So, vendors are leveraging AWS or Azure for their infrastructure. Is that showing up in lowered prices or more investment in functionality? Not that obvious. Application vendors are encouraging others to use their PaaS to develop apps with new functionality. If your PaaS is so good how come your own developers are not using to deliver more for what you are already being paid for? Vendors are bringing in "brand name" SIs into their ecosystem and risking the overruns and failures of old. What they need is more of their own services in small doses and a generation of "born in the cloud", open source, and ML and IoT savvy operational firms. I also see vendors brag about creating millions of jobs in their ecosystems - hold on - for what and who's paying for that?

I was pleased to see in my research for SAP Nation 3.0, SAP take the lead and offer various tools to help customers migrate to S/4HANA. Customers talk in the book about automation in the form of Simplification Lists and pre-checks for customizations, others talk about its Activate methodology. Still others talk of small doses of its Leonardo ML consulting support and Value Assurance teams. Others mention support from Innovation Centers around the world.

I know software vendors have hangups about growing services staffing. My attitude is provide them in small doses, but take accountability and deliver better outcomes.

Two conversations in the last few months with software CEOs - both serial entrepreneurs and savvy investors - have raised, for me, the bar for vertical integration.

Brad Keywell, founder and CEO of Uptake Technologies, an Industrial AI software is a founding investor in Tempus and co-founder of Groupon, Echo Global Logistics, MediaOcean, Drivin, and the venture capital firm Lightbank. He is also involved in a variety of philanthropic initiatives. He is many ways an "outsider" to enterprise software and his pov is

"Through learning how (and why) the enterprise software world got to where it is today, I very clearly see the foundational flaws that have led to incredibly low customer satisfaction scores for the legacy enterprise software leaders. There is a lack of accountability, given that there's been a divorcing of software from system integration, which is then decoupled from implementation. And, often, that's decoupled from optimization over time.

Most troubling, the customer is left taking all of the risk, outlaying all of the money, and then holding the bag if the implementation is a failure – the legacy risk-reward model is out of whack. Legacy software vendors ask for money but then avoid accountability for outcomes. The customer takes all of the risk, and too often is forced to write off huge investment.

Uptake believes in delivering applications that produce impactful outcomes. We deliver much more certain efficacy, therefore reducing the customer’s risk and greatly enhancing our customers’ return. We deliver impact, and that’s really what operators are thirsting for."

Sridhar Vembu, CEO of Zoho, is similarly a serial entrepreneur and investor and in many ways also an "outsider". During my recent visit for Zoho Day I was impressed in how many small and big ways, Zoho takes charge. As I wrote here, their R&D productivity is impressive and keeps improving. For the same price point, they keep delivering significantly more functionality to customers without involving expensive SIs or ISV partners. They run their data centers more efficiently than buying even from hyperscale IaaS providers.

But it doesn't end there. The creative team came to my attention because they created portraits of the visiting analysts. As Vijayan, the artist who drew some of the portraits pointed out here "Our primary work involves creating graphics/ illustrations for the marketing collateral including the website. We are one creative studio for the entire 40+ Zoho products!"

BTW, Infor had done similar with their captive Hook+Loop design agency.

I was also intrigued by the Zoho office space in Pleasanton and its use for hosting events. I was shown a plan Raju Vegensa, the Chief Evangelist wrote a few years ago. Here are some extracts which show Zoho taking charge in many areas most other companies would just hand over to someone else

"We started going down the 'standard' path of redesigning the space by hiring an architect and an interior designer. A few weeks into the process, I realized that there was a significant disconnect between what I wanted in the space and what the architect and interior designers have been showing me. We were going down the path that didn't reflect who we are. That was when the realization hit me - there is no way an external designer or an architect or any firm can know what you want, what your culture is, how people interact within your office etc. Unless they are part of the company, unless they deeply understand the culture of the company, they cannot design the space. So a building's design, the flow between spaces should reflect the way the company works. To do this well, the design should come from within the company. That was a light-bulb moment. So we took the design in-house and designed the space the way we wanted it. 

The colorful Zoho cubes were created by one of our customers - Pillow Goddess. The customized Zoho colored bikes in the office were created by one of our customers Mission Bicyles. Before converting our building into an event space, I did a basic calculation - how many events do we have to host at the building to break-even on our investment to convert the space into an event center. It came down to around 18 events. Few years into it, we hosted over 20 events in the space. We also opened it to the Pleasanton community where local events (like Hackathon for kids, Hack like a girl) are hosted and local catering company serving food for all our events ever since." 

That much vertical integration takes effort, but from a customer pov the outcomes are usually that much more pleasant. I hope we see software vendors take more accountability in a wide set of activities.  There is just too much fragmentation and finger-pointing today. 

Software Maintenance "Empty Calories"

At a conference in 2006, I presented a Top 10 list of technology expenses which to me represented "empty calories". Top of that list was Software Maintenance with the likes of Oracle, IBM and SAP 

Unbelievably, in the dozen years since, a vast majority of on-prem customers have not moved to the cloud and the value from on-prem maintenance delivered by the publisher has gotten even worse. Over the last few weeks, I have talked to executives at third party maintenance (3PM) vendors like Rimini and Spinnaker Support. Between them they are now supporting close to 2,500 customers worldwide. I will share more of those conversations in the next few weeks, but here are some macro trends:

a) 3PM often results in 70 to 90% savings. Beyond the half-off vendor maintenance cost, 3PM vendors allow customers to reduce their Level 2 and 3 outsourcing support or to redeploy those resources to new developments. The image vendors like to paint of the CIO who goes with 3PM is that of a procurement cheapskate who is trying to save a few bucks. Even 50% savings is not just a "few bucks"

Tom Grooms, CIO of CF Industries is far from a "cheap procurement" guy. He is a savvy change agent. He migrating from SAP ECC to S/4HANA in the cloud, one of the earliest customers to do so (many others are moving to S/4 on-prem). At the same time, as they migrate, he has moved his highly customized ECC environment to Rimini Street. As he told me "My decision (to go with 3PM) was shocking to SAP but my feedback to them was, ‘You know, don't try to get me to pay back support. You should treat us like a new customer and pitch me on what is new."

This is not Grooms's first 3PM rodeo. At, his previous job as CIO of Valspar, he had moved to 3PM around Oracle applications. Prior to that, he had done that with PeopleSoft support at Medtronic. Grooms knows value from technology spend.

To SAP's credit, I have seen it be mature and even match in many, but not all, cases when customers do decide to go with 3PM. Those customers continue to buy other products from it. Welcome to a world of heterogeneity. Here's a glimpse of the quantum more heterogeneous world we are moving toward. No point in pouting, threatening, ruining relationships.

b) Application vendors like to mock customizations around their software. Ironically, they are themselves encouraging a new wave of customizations using their PaaS. Many customizations are indeed frivolous but others reflect holes in delivered vendor functionality, especially when it comes to vertical or geographic coverage. A vendor recently bragged to me that one of their customers had retired thousands of customizations when they moved to a newer release. My question back was "when were the customizations written? Probably 10-15 years ago. Good that they could be replaced but if they are looking for the 2019 digital shop floor could they get that from you?" No response back. Most application software reflects business practices which is circa 2010, not 2019 - that is a major reason why customers write customizations. They don't write them because they have surplus budgets lying around.

Mock is one thing. Vendors outright refuse to even handle tickets if they touch a customization. 3PM vendors, in contrast, gladly handle them. As Grooms told me "Interestingly, the change management [with third party maintenance) that I didn't anticipate was with my own team. They would do all this legwork, do all this research and cut and paste everything themselves. The last thing they would attempt to do is to call the vendor. We had to retrain people to say, "Don't do the research. Don't worry about it. Just call right away. That's what they're good for and that's what they do.’ They probably thought, ‘Oh great, we're saving all this money but it's not going to be any better.’ Well, no, we save the money and it's real support. It's what support is supposed to be."

c) Vendors have been arguing they provide better security than 3PM vendors do. Lisa Morgan writes in Forbes "The cost of inadequate cybersecurity—lawsuits, regulatory fines, reputational damage, intellectual property theft—can be exponentially higher than the 18% to 22% annual maintenance fees software developers charge."

I wish she had taken the argument further - will Oracle indemnify a customer for those lawsuits, fines, damage etc if a root cause analysis shows their software is responsible for a breach or an intrusion? I highly doubt it - and few customers have the battery of lawyers Oracle has at its disposal. So, frankly her argument is weak without specific protection guarantees.

d) After paying maintenance for years if you decide to move to vendor cloud versions you are told to license new SKUs, to pay conversion fees and other charges. You have been a good citizen, paid maintenance at full list and that's your reward? More to my point the value from maintenance has declined in the last decade or so.

Look, I am fine with whatever allows you to sleep better at night. I understand why CIOs stay with the original publisher. They have bigger things to worry about. But I would encourage them to assign a direct report and take a fresh look at 3PM. The 2,500 3PM customers are sharing their experiences with each other. Bryan Bee at EBSCO told me with delight "We did multiple reference calls (about 3PM) and each time it was like, man, this is too good to be true."

In the meantime, I do shake my head at software publishers who continue to look back longingly at their past, when they should be peddling the joys of multitenancy, machine learning and other features in their next-gen products.  

Grooms said it best "Show us something that we would need to take our business forward, because what we had in (the on-prem version) was basically memorializing everything we had done in the past.’

A Change at Cognizant

I got this nice note from Francisco D'Souza, CEO at Cognizant this morning

"I hope this note finds you well. I wanted you to be one of the very first people with whom I share important news.  After 25 years at Cognizant, including 12 years as CEO, I’ll be stepping down in April. 

It’s been the privilege of my life to have had the opportunity to help build and grow Cognizant since its founding 25 years ago—a span that represents half my life. Yet, after much discussion with my family, I informed our Board of Directors last year of my desire to step down as CEO sometime in 2019. Today we announced that I will do so on April 1, after which I will remain on the Board as Cognizant’s Vice Chairman.

The Board has named Brian Humphries, who is the CEO of Vodafone Business, as my successor.  He's the right leader to take Cognizant forward, and I am excited to welcome him aboard.

I have never been more optimistic about the future of our company. Cognizant has a market-tested strategy for growth that is deeply aligned with our capabilities and our clients’ needs. The best days lie ahead for Cognizant, and I look forward to continuing to play a key role in the company’s many future successes as Vice Chairman of the Board.

I am truly grateful for your friendship and partnership over the years and extend my best wishes."

Thank you, Frank. It has been my privilege to profile you as a global polymath in my books and posts. You are still very young and I look forward to continuing to watch you as you guide our industry in different ways.

In the meantime, I look forward to hearing more from Brian who brings his own impressive global background from Vodafone, Dell, HP and other tech vendors. 

Signs of Spring in Enterprise Software

The country is seeing a welcome break from the polar vortex. Temperatures remind us of Spring. Well, may not quite - winter is not done, but there is clear hope.

It's easy when you look at Wall Street's reaction to Workday or ServiceNow results to forget reality.  The reality is that there are over a million SAP, Oracle, Infor, Unit4, IFS, ADP, qad and other enterprise customers who are stuck with 15-30 year old ECC, Siebel, Lawson, Agresso, MFG/PRO and other legacy implementations.  For all the success of Salesforce, NetSuite, other SaaS vendors, and new products like S/4 and Fusion, the vast majority of the enterprise is in the tundra. There are a variety of reasons as Holger Mueller, Cindy Jutras, Frank Scavo and others explain in my upcoming book, SAP Nation 3.0. I also have a section on what I call SAP's "unforced errors". Trust me, I also show plenty of mistakes made by SAP's competitors.

However, I found signs of spring as I finished editing my book manuscript. It has 50 case studies spread over 200+ pages describing how they are  trying out different strategies.

Here is a sampling of strategies:

• Trying out Leonardo ML and IoT at Costco and GEBHARDT.
• Ring-fencing ECC with many of SAP's cloud properties, as with SuccessFactors at Terumo BCT and components of C/4 at Pregis, or Workday at Sanofi and Salesforce at Unilever.
• Two-tier deployments with SAP ByD and S/4 in their subsidiaries.
• Migration from ECC to S/4 on-premise at Johnsonville Sausage.
• New implementations in the S/4 Public Cloud like at MOD Pizza
• Trying out relatively new on-premise, but impactful, SAP functionality like IBP at Louisiana-Pacific.
• Leverage of mobile, wearable, satellite and sensory data at variety of customers    
• Developing new ISV functionality on SCP as Vertex has done with their indirect tax app.
• Next-gen data using the SAP Analytics Cloud like at the Executive Huddle at the San Francisco 49ers statdium
• Moving to new licensing and hosting models like Bombardier with IBM.

We also are seeing blends from this growing toolbox of strategies. So, CF Industries is moving to S/4 in the cloud, and at the same time has shifted to TPM from Rimini for its ECC support while it gradually migrates. GEBHARDT has been implementing a variety of SAP cloud products around its ECC on-prem implementation. Additionally, it has developed a customer portal and set of predictive maintenance services using Leonardo IoT and AIN capabilities.  

In addition, I cover burgeoning developer and startup communities around ML in China, Industrie 4.0 in Germany, in Silicon Valley, in India and open source around the world.

The case studies are spread across 30+ industries and 10 countries. I did that to show diversity and to show that we are just getting started. So many process areas around the world and in most industries are waiting to be modernized.

In fact, I present such a dizzying arraying of SAP product acronyms and industry TLAs that my editors and early reviewers all recommended a section at the front of the book which is titled "Do you speak SAPese?". I expect we will gradually start to see similar groundswell of activity around other vendors.

Secondly, my firm, Deal Architect, is gearing up for intense 2-3 day offsite sessions to help clients take a look at the changing market. That confab should cover the fit of many of the strategies above, while also evaluating internal and external talent and fit with emerging technology trends.

Of course, winter is not done. What we have seen is just a glimpse of what is to come. Time to celebrate with Camus: In the midst of winter, I found there was, within me, an invincible summer.

The book is expected to be out in April, in time to celebrate Spring. In the meantime, I will post periodic blogs to remind us all the enterprise is finally starting to thaw.

Zoho Day: The long shadow of Amazon

When I visit a vendor after a couple of years I measure how they have changed along 4 vectors – product growth, geographic expansion, change in customer base (going after larger or smaller customers) and vertical capability expansion. At Zoho Day last week, I picked up another vector – the Amazon vector. More about that later.

You knew it would be a different couple of days because CEO Sridhar Vembu was not hobnobbing, unlike many of peers, in Davos. He was greeting us in jeans and untucked shirt. 

Product Vector

The product portfolio continues to grow at a remarkable rate. Raju Vegesna presented under NDA an update on the upcoming Commerce offering. On each planned feature he spent maybe 30 seconds on would take 10 minutes in other vendor briefings. As Sridhar said “The cloud app development has become objectively easier. I mean we've been in the software business for 32 years, so I know. There are a lot of infrastructure pieces that have been figured out more and more and more. And it is becoming easier and easier and easier. I saw a figure for 30,000+ VC funded cloud startups in the world now. In December, it's even harder to pin down because it's global and there are integrators everywhere.”

The image below shows some of Zoho applications. It does not include coverage of two sister companies, ManageEngine which focuses on IT Management and WebNMS which started off with a network management focus and now has an IoT, smart city infrastructure focus.  The latter two also shows in Zoho’s comfort in running its own data centers which it claims are more efficient than procuring from hyperscale providers like Google. The registered user growth has averaged 37% over the last 5 years, and is now over 40 million worldwide. 

Couple of analysts said Zoho seems to only deliver “minimum viable product” – if that’s good enough for its customer base what’s wrong with that? Besides, it reflects an agility as Zoho can bundle a variety of services it has been growing over the last decade.  The prime weak areas, to me, today are in HCM and in Asset Management. 

Geography Vector

Zoho is experiencing strong growth across most major economies and has 7 data centers to mirror them, and shows up at over 170 trade shows around the world. It is unafraid, unlike so many US cloud vendors who are reluctant to expand globally.  Indeed, only 42% of total revenues now comes from the US (down from 53% in 2012).  Sridhar said “We opened Amsterdam, Singapore, Dubai, Mexico, and Australia last year and some more are coming this year.”  It wasn’t just talk.  He had flown many of the employees for the couple of days. I met several from Pleasanton (the HQ) and Austin (fast growing US campus), from Chennai (still the development hub) and Delhi in India, from Utrecht in Holland, Kanazawa in Japan and New Zealand. 

Customer Size vector

Zoho keeps moving up market in terms of customer size – to the extent it can do so without a direct sales, and SI ecosystem model. Two customer executives presented at the event. Julie Doris leads Customer Service at Rain for Rent (drainage pumps, water tanks and services for farming, fracking and other markets). Tarun Raisoni is co-founder and CEO of Rahi Systems (solutions for data centers and corporate campuses). Both are private but Rain has over $500 b in revenues and Rahi has over $150 b. Neither is a CIO but both were impressively knowledgeable of product features and relentlessly focused on value from software. As Julie said “I don’t let Gartner Magic Quadrant placement influence my decisions too much”. Tarun, in response to a question, said “we have not done an ROI analysis – yet”. Honestly, at Zoho’s price points, he may not need to.  Certainly, those two customers are a far cry from the Small Office, Home Office (SOHO) segment that ZOHO was originally named after. Zoho is grappling with whether it needs a Toyota/Lexus type branding fork. 

Vertical vector

The one area they have not grown is around verticals. I later had a one on one conversation with Sridhar about “white spaces” to consider. The big difference – when I talk to other software CEOs they either tell me they don’t have bandwidth to verticalize, or others are content with the few features they do have. They appear convinced these features can satisfy the need for vertical operational “books of record” like insurance claims processing or clinical systems. My concern with Sridhar is he will rush off and commit to multiple industries. He is completely unafraid!

Amazon vector

There is a fifth vector that Zoho has also been executing along. It’s the Amazon vector. The Zoho team is preparing for the day when Amazon decides to become an enterprise software, not just an infrastructure, player. The Bezos motto of “your margin is my opportunity” puts the margin rich software industry at risk. Software margins remain very high but the industry is not efficient.  Sridhar: 

            You can see that the enterprise cloud vendors are even more sales and marketing intensive    than traditional information software companies and those were already quite sales and marketing intensive to begin with. This is something that is unexpected because, if you look at the whole SaaS cloud revolution, it was supposed to deliver us from this exact problem: focus more on software and not so much on the facility of it.  50% of their revenue is spent on sales and marketing; 50% is now considered just normal. And 70% is not uncommon at all now.    

            We are spending tens of millions of dollars in cloud infrastructure, all of these storage servers. We know how the costs have come down. In fact, something like those are not even possible if not for this development.

            Yet, ask yourself, why is it that somehow enterprise software prices only go up? Why don't all these prices keep coming down? There are also substantial … software in all of these. I mean look at networking. That is mostly software now. Somehow, all of those industries are subject to one kind of economics. But when you come to enterprise software, the economics seems to change.

An example of that thinking comes from Zoho One , the bundle priced at $30 a month an employee, or $75 a month on per-user basis. It was launched in 2017 with 35 applications, it now has over 40.  And from the presentations we heard more apps will join the bundle. A dollar a day per employee is a compelling value proposition, when the functionality keeps growing exponentially.

I have known Sridhar for nearly 15 years, and this awakening did not happen overnight. In 2006, he wrote a guest column for this blog which explained his pov:

“Personal computers made computing ubiquitous in the developed world.  Mobile revolution has swept the globe, with hundreds of millions in developing countries making their first phone call in the last decade….Yet, in the world of corporate IT, the low-cost revolution is very much unfinished business….most of what enterprises pay for software goes towards funding the marketing budgets of vendors. This seems like an universal law that is applicable regardless of whether the vendors have open source or proprietary models, and even extends to on-demand business models.”

He has long avoided the VC funded model, following instead the cash flow funded growth at companies he admires like Microsoft. He says the prevailing wisdom in Silicon Valley is "Just raise the most, spend the most, and just conquer a particular market segment." He has studied Ikea and Trader’s Joe, not just in how they have thrived even as Amazon decimates other retailers. “They provide a human-provided customer experience. Right? If you go to Trader Joe's, people are smiling. You can tell it's a fun place to shop.” He has also looked into how they have stayed private or adapted unique structures like Ikea's and preserved their DNA. His philosophy:

 “We'll stay true to ourselves. Stay hungry. Stay foolish. But we can only stay hungry and stay foolish if we are staying private. If you go public, a lot of those things just go out the window.”

He has a unique recruiting model which again goes against the grain of the industry and yet generates unbelievable employee loyalty. As I wrote in 2016

“Average tenure of employee is 10 years. 146 out of 150 managers have never worked anywhere else. Most executives we met wear several hats. None of their business cards have titles. They waste very little time in team meetings. 20% of their engineers do not have degrees. Focus on promise more than formal education helps Zoho recruit in India against the giant outsourcing firms where the majority of his development is done. “

Besides preparing for the Amazon onslaught, Zoho has adopted some of its business practices. The more I heard of Zoho One and the growing apps coverage for the same price, I thought of how Amazon Prime has grown in coverage. It started off a free 2 day shipping, then added free movies and since then countless new features. AWS delivered 60+ price cuts in its first decade - almost as if they were listening to Sridhar. 

Amazon may never enter enterprise software, but Zoho wants to be ready. Sridhar is too modest to say Zoho is disrupting the industry, but in my eyes, he already has. He has given me another vector to measure software vendors against.

SAP Nation 3.0 - cover input, please

Would like reader input on some cover concepts I am being shown as we approach the end of the book edit cycle and move into the design phase.

Do you like the one on top or bottom? Below is the context for the US wagon trail, westward expansion metaphor.

Thanks for your input.

"Welcome to the third volume of the continually unfolding saga at the world’s largest application software company. When I wrote the first volume of SAP Nation, five years ago, SAP looked vulnerable. Besides runaway costs and massive project failures at some customers, SAP appeared preoccupied with its HANA database and almost bored with enterprise applications. Much more concerning, a wide range of competitors was circling around. Indeed, right after S/4HANA was launched in early 2015, co-founder Hasso Plattner was quoted as saying, "If this doesn't work, we're dead. Flat-out dead. It's that simple.”

As this book will show, Dr. Plattner's worst worries have not materialized. S/4 has not been a runaway success but SAP's competition has not exactly gone for the jugular either. SAP's product portfolio and customer base has grown significantly and the stage is set for the next few phases.

The setting today is similar to that when the young nation of the United States acquired Louisiana from France in 1803. Real estate area instantly doubled, but the population was still mostly concentrated along and around the Atlantic Coast. SAP's product real estate has similarly grown, but the majority of its over 400,000 customers are clinging to their previous "homes." Migrating this customer base is SAP's first big opportunity.

In addition, even bigger opportunities await. The U.S., energized by a Manifest Destiny call, expanded all the way to the Pacific Ocean. SAP has missed out on many markets in the last two decades. With its own version of a Manifest Destiny call, it can dream much bigger. New vistas await from sea to shining sea across the continent of enterprise computing."

Update: I am glad I asked for feedback. Couple of you suggested I continue with the design of the previous 2 books in this series. There is something soothing about continuity, and the neutral tone does not distract from the words on the cover. So, I have another choice to consider.

 

“You don't get a PaaS just because you're SaaS."

Apologies to Frank Scavo for twisting his quote  “You don't get a pass just because you're SaaS." but this is a reaction to the trend that every cloud application vendor is offering a platform and actively recruiting developer communities.

I get the central principle  – configure in SaaS, but customize in PaaS. Keep the SaaS core clean. I also get the need to give business users productivity extensions, better analytics, low-code capabilities.  What I don’t get is why we are encouraging another generation of major customizations.

Here are several angles to consider:

Several cloud vendors are pointing to retirement of on-prem customizations as justification to move to their apps. Don’t new cloud based customizations take away from that ROI? SaaS is about the efficiency of multi-tenancy. By definition, customizations are single-tenant. They dilute the SaaS value proposition.

Customers don’t generally customize for the fun of it. Customizations are a result of holes in delivered application functionality. After two decades of SaaS, 80% of the corporate applications across global markets and industries still do not have much choice in the cloud. Maybe vendors should be investing more in SaaS, not PaaS? If your platform is so darned good, how come your developers are not 3x or 4x more productive and you multiply that productivity by coding that functionality once for thousands of customers?

The last generation of customizations was treated leper-like by software publishers. Vendors refuse to handle tickets which touch on customizations. This is one of the main reasons so many customers have moved to third party maintenance providers like Rimini and Spinnaker. Even more so than better economics, it is for their support of customizations. Will we see similar around PaaS?

Vendors argue that their ecosystems deliver lots of application functionality using their platforms. The reality in enterprise world is that lots of noise, not enough result. SAP must launch one of those stores every year – around HANA, around mobile apps, now in its AppCenter. Many folks will point to Force.com as a huge success. Huge success? It was launched around the same time as the Apple iOS store. There are now 20 million Apple developers creating apps and importantly Apple has paid out US$100 billion in revenue to these developers. How much have Salesforce partners made selling new apps in the same time period? Or compare to Fulfillment by Amazon. As much as 90% of certain product categories such as patio furniture sold on Amazon come from third parties. That’s validation customers are buying from platform partners. I don’t see enough of that around enterprise platforms.  

Much of the excitement in developer communities these days is around cloud infrastructure, open source, and machine learning. Most PaaS from SaaS vendors provide ML gateways to Tensorflow or the PyTorch community. While these higher level services are useful, you have to be a bit wary what future licensing complications they are exposing customers to. Besides, shouldn’t PaaS bring its own value for the pricing vendors expect?

The  enterprise software industry has been blessed with brilliant technology architects – Larry Ellison and Thomas Kurian at Oracle (Thomas now at Google), Dr. Plattner at SAP, Parker Harris at Salesforce, Stan Swete at Workday among others.

In contrast, it has not had enough of what I call business process visionaries. So, Jeff Bezos of Amazon does not look to them for leadership when it comes to next-gen distribution centers. Manufacturers look up to what McKinsey calls Lighthouse examples. I cannot remember the last time a customer exec told me he/she found inspiration for the hospital or retail store or lab of the future from a application software vendor. Perhaps we need a rebalancing in vendor R&D. More of a functional focus.

Let me pull in an analogy from the food sector. You go to a restaurant you really like and the chef says we have changed our business model. We are only serving semi-cooked meals now. Enjoy the meal at home. Or come on in, but be aware we are now offering grills. You bring your own ingredients and cook your own. That’s a bit of SaaS vendors are doing with PaaS. 

My 2c - we need better SaaS, not more PaaS - at least not PaaS from SaaS vendors!

Infor: a fork in the road

Congratulations to Infor for the new funding and potentially more when they go IPO. Here is today’s announcement:

“Infor, a global leader in business cloud software specialized by industry, today announced an agreement to receive a $1.5 billion investment from shareholders Koch Equity Development, LLC (KED) and Golden Gate Capital.

This investment builds on KED’s investment of more than $2 billion in early 2017, and it represents an important milestone as Infor considers a potential IPO in 2019 or 2020, subject to market conditions.”

My question is will Infor truly deliver on the “specialized by industry” promise it makes above. It has been making that promise since Charles Phillips and team took over in 2010.

As I write in my (unfinished draft) of SAP Nation 3.0

“Infor had once been called an "ERP graveyard," as it had accumulated a wide portfolio of ERP brands including Baan, Lawson, MAPICS, SSA Global Technologies and Systems Union. Those in turn had made acquisitions of their own (such as Lawson buying Intentia). Since they arrived in late 2010, Infor CEO Charles Phillips and his team have been reinvigorating the company. Phillips called Infor the “world's largest start-up". The differentiation Infor promised was "CloudSuites" for 15 verticals (such as automotive, retail/fashion and food & beverage) and three horizontal ones (including corporate and human capital management).

Of SAP's competitors, Infor looked promising as it leveraged Amazon's cloud infrastructure and invested the savings into vertical solutions for healthcare, hospitality and other industries. A decade later it can boast improved look and the integration across its large portfolio of products , but it has not delivered “books of record” for industry sectors.

Larry Ellison famously derided dot com startups as “features, not products” in the early 2000s. Infor, similarly has features for a number of industries but has not delivered “books of record” such as electronic patient records for healthcare. In fairness, neither has Ellison's Oracle delivered cloud-based vertical functionality.”

With vertical functionality, Infor will have a much better shot at migrating its 70,000 customers to contemporary solutions. It has tried, with limited success, with initiatives like UpgradeX. Customers who stay with legacy systems are showing more interest in going back to best of breed strategies and looking at cloud vendors like Workday and Salesforce in HCM, accounting and CRM silos.

So, I will be interested to see if with the new funding, Infor goes back to an industry focus. In addition, I wonder if it will start to look at wave 2 of projects in many markets most ERP and CRM vendors  have missed out on in the last two decades. As I write in the book:

“In 2000, enterprise tech vendors led by SAP, other ERP/CRM vendors and their SI and other partners were set to dominate the corporate technology landscape. Instead their share of the enterprise has steadily declined. They have missed out on contract manufacturing of smart products, digital marketing, cloud infrastructure, industrial internet, process automation and several vertical niches. Two decades ago, few of us had heard of Accenture Interactive, Foxconn or Google. Few of us considered Amazon or GE as tech vendors.” 

Oracle's stretch goal for its applications?

Mark Hurd tells Bloomberg

 “In fact, the highest application percentage of any company in any segment is sort of mid-20s. This generation will see a leader that’s much more material than that, and I volunteer us to do it.”

I would love to see that. Listening to Mark Hurd at Oracle OpenWorld I wrote

“After two decades of cloud applications, we have lots of choices in horizontal apps, very little in industry books of record. As a result, by my estimate, only 20% of enterprise apps have moved to the cloud. That’s in the US, the ratio is even lower in Europe and Asia. Unless Oracle and other vendors start investing in cloud versions of industry apps, Mark’s prediction that 80% will be in the cloud by 2025 looks very ambitious.”

I have studied the last two decades of enterprise software trends for my upcoming SAP Nation 3.0 book, and the best that can be said about Oracle application performance is it has been erratic. Here’s some of what my unfinished book describes about Oracle applications

“By many measures, Oracle should by now be the undisputed leader in enterprise applications. When Computer Associates was on a buying spree in the 90s, Oracle founder Larry Ellison had commented something along the lines of "every ecosystem needs a scavenger". Starting with the PeopleSoft acquisition in 2004, Oracle went on its own binge and claimed it was time for an "industry consolidation". They made significant acquisitions - PeopleSoft for US$10.3 billion, NetSuite for US$9.3 billion, Siebel for US$5.6 billion, Micros for US$5.3 billion, Hyperion for US$3.3 billion. Others like i-Flex, Portal and Retek brought them banking, telecom and retail applications. By 2006, they were loudly celebrating that they were "half way there" in developing their own next-gen Fusion cloud applications.

For all that, Oracle has done just ok. It has appeared more interested in going after Amazon for the cloud infrastructure and platform markets. That has yet to pay off - the top 4 cloud infrastructure players Amazon, Microsoft, Google and Alibaba have nearly 3/4 of that segment sown up. Around business applications, it has focused more on Workday and Salesforce with HCM and CRM functionality and not so much in manufacturing or other verticals where SAP has greater presence. Its NetSuite acquisition, while helping it increase traction with SMEs, has also led to some brand confusion around its own Fusion product line. While, it has launched an exciting autonomous version of its database - it calls it "self-driving", it has not brought a similar level of automation to enterprise applications.”

 As the book says, the market is getting more fragmented by the day

“In 2000, enterprise tech vendors led by SAP, other ERP/CRM vendors and their SI and other partners were set to dominate the corporate technology landscape. Instead their share of the enterprise has steadily declined. They have missed out on contract manufacturing of smart products, digital marketing, cloud infrastructure, industrial internet, process automation and several vertical niches. Two decades ago, few of us had heard of Accenture Interactive, Foxconn or Google. Few of us considered Amazon or GE as tech vendors.”

and

“The next decade will allow SAP to further reinvent itself and take advantage of wave 2 in many of the markets it ignored in the last two decades. Can it? Will it have its own Manifest Destiny call to go from ‘sea to shining sea’?”

I would similarly welcome an Oracle more focused on business applications. The Western front is waiting to be tamed.

Done Right - a book review

I was in Shanghai, China recently. As I have told my friends, I ended paying a “tourist tax” everywhere. Moneychangers, gypsy taxi drivers, tour guides who took me to pearl and silk stores where I am sure they got a cut. Part of me was irritated, part of me glowed – it is so nice to see young men and women hustling and bustling. It feels so alive.

Coming home, I saw protests, I saw whining on TV. Felt like a different world where work ethic is dying. Of  course it is not, but the contrast was striking.

When I wrote Silicon Collar two years ago, I got an exciting view of how drones and wearables and 3d printers and machine learning are reshaping every business process in every industry. I also got the flip side –academics and analysts using the fear of machines to unnecessarily scare workers. I saw how the economy has ended up with 6 million unfilled blue collar and trade jobs and in contrast, graduates with soft white collar skills for which they should never have racked up $ 1.5 trillion in student debt. 

With that backdrop, I am so glad to be reading Done Right by Workfront CEO, Alex Shootman. He cites various leaders who have motivated employees and cite terms like Commander’s Intent. Like Tom Watson Sr, founder of IBM. When an executive resigned after a $ 10 million error. Watson told him “You cannot be serious. We have just spent 1o million dollars educating you!” Or the encouraging note he got while at BMC when a quarter cratered as a result of the US –Iraq war in 2003.

He profiles workers who love their work. Examples like the 300 Call Syndrome. 911 call handlers tell about being alert to detect that one different call which invariably comes after hundreds of routine ones. And he recognizes Millennials like Jen Gilligan, who at the drop of a hat will head across the world seeking a more meaningful life. Reminded me of my daughter Rita as she crisscrosses SE Asia.

It is impressively short – only 135 pages if you leave out the footnotes and credits. Each chapter does have an exercise including one which pulls it together – the Done Right Value Pyramid. 

It is a smooth, easy read. No fear of machines. No snarkiness.  Not much bragging about himself or his company. He has half a page at the end about Workfront. How rare is that in today’s hyped up vendor marketing world? That right there, makes me want to learn more about Workfront.

Get yourself a copy. And when you read scaremongers talk about jobless societies and encouraging our young workers to seek out the utopia of Universal Basic Income when the economy is screaming for their talent, crack it open

The book is a pure celebration of the joys of work and work ethic.  For eons humans have found dignity through our work. Many of our family names continue to honor our occupational legacy. 

The book is about the future of work - enjoyable and rewarding work.

A brief history of the 21st century: The Enterprise Tech chapter

People in our industry like to call themselves futurists. My glasses don’t allow me to look that far out. My books have, however, forced me to become a pretty fair historian. In The New Polymath I looked at Renaissance Men and Women like Leonardo da Vinci over the centuries. In Silicon Collar, I looked at automation and impact on jobs over the last 100 century – how UPC scanners, bank ATMs, cruise control in cars and other automation was gradually absorbed by society.  From the bread crumbs I lay out, I think my readers are smart enough to plot their own future journeys. My clients get a bit more guidance in the form of advisory support.  

For SAP Nation 3.0 I studied and bring out in the book, 3 periods of history

a) SAP and its competitors in last 5 years since the first volume of SAP Nation

b) The broader enterprise tech industry in the last two decades

c) The US westward expansion in the 1800s. I use that to contrast missed opportunities by SAP and others in this century

Over the next 3 months as the editors and designers finalize my book for release, I will be sharing perspectives from my research.

In the meantime, here are some pre-edit extracts for each of the phases

a) “Partly because its competitors did not target it aggressively enough, and partly because SAP’s own cloud acquisitions and developed products allowed it a shield, SAP has come through the threat of the last five years relatively unscathed. In fact, when you look at the mob of strong competitors that it had to fend off, and the many unforced errors it has made, it has done remarkably well. In those 5 years, SAP’s customer count has actually increased by 50%. Wall Street has not been as generous to SAP, as it has to cloud vendors, but the existential threat that SAP faced has passed.”

“Watching Bill McDemott stay so calm can be misleading. This is not your Dad's SAP - not by a long shot. In this chapter, we saw some of the changes in the SAP field, in their marketing, business operations, development and partner management. And these executives are just a small handful of the 90,000 worldwide SAP employees. The pivot at SAP in the last five years has truly been massive.”

b) “In the year 2000, enterprise tech vendors, especially ERP/CRM vendors led by SAP , their SI and other partners were set to dominate the corporate technology landscape. They had emerged very strongly from the Y2K crisis and the launch of the EU common currency promised another bonanza. Instead, their share of the enterprise has steadily declined over the next two decades. They have missed out on the contract manufacturing of smart products, digital marketing, cloud infrastructure, industrial internet, process automation, vertical niches like Fintech and several other trillion dollar markets. Two decades ago, not many of us had heard of Accenture Interactive, Foxconn or Google. Few of us considered Amazon or GE as tech vendors. The market is fragmented - waiting for a leader.”

c) “In Chapter 1, we described the Louisiana Purchase. It was a major risk for President Jefferson but it doubled the real estate of the young U.S. What if the population had just yawned and clung to the Atlantic Coast and not moved to the new territories? That's a good analogy to what SAP faces. It has new real estate in the form of S/4, Leonardo, SCP, HANA and its cloud properties and yet the majority of its 400,000 customers are clinging to the "coast" of legacy products. Helping them migrate is SAP's major short term opportunity.

Lewis and Clark then opened the country's eyes to real estate way past the new boundaries created by the Louisiana Purchase. Successive Presidents arranged to grow the country's real estate all the way to the Pacific. That's the even bigger, second opportunity for SAP and other enterprise vendors - become a Fast Follower in many markets they missed out in the last two decades. “

Over the next 3 months as the editors and designers finalize my book for release, I will be sharing perspectives from the research. The majority of the book is in the voice of SAP’s customers, executives, competitors and analysts.

It is an exciting and a turbulent time for enterprise tech. From SAP GUI to digital assistants, from ABAP to Python, from on-prem to Kubernetes, deprecating old customizations and creating new ones with platform and open source capabilities, new vertical and global functionality. New generation of developers, outcome based business models, new challenges. 

As usual, I am just the historian. From the bread crumbs I lay out, I think my readers are smart enough to plot their own future journeys. My clients are already starting to get richer guidance.  

A key word for 2019 - authenticity

Happy New Year to all my readers!

I have spent the last month extracting from hundreds of pages of transcripts of my interviews for SAP Nation 3.0. I am struck by the frank comments from so many customers about SAP, its partners and its competitors. They realize these will be read by their peers at other customers and I appreciate their willingness to share. I know some of the comments will be used for competitive advantage. Fair warning to folks in the field – if you use it that way, bear in mind I have similar access to your customers and information about your products :)

Similarly, reading my notes from meetings with Franck Cohen, Rob Enslin, Nick Tzitzon and others at SAP, I see an openness which is refreshing. I give credit to Stacey Fish, my contact at SAP. She sets up calls/meetings and mostly observes even when we may be ganging up on her execs. She may ask me what I thought afterwards, but rarely does she push an overt agenda.

So, here is my request of other vendors – converse more with us, don’t just pitch. Don’t just outbound communicate to us,  invite our inbound requests. Open up more access to your customers. I love how Plex invites us to join their Customer Advisory Board once a year. If not,  not to worry, we can access customers through many other channels.

But do encourage your execs to be authentic. On that point, I see a trend for executives to talk about corporate “purpose”. I admire executive commitment to diversity and social good, but in the end as an analyst I am expected to focus on  functionality, architecture and economics. When I talk to customers rarely do they say “corporate purpose” was the reason they selected a vendor. It may have been a tie breaker, rarely a item which counts for more than 10% in their scoring matrix.  

On the other hand on functionality, architecture and economics I expect many more detailed conversations. As you will read in the book, SAP is in far better shape than people give it credit for. But SAP, its partners and its competitors have all missed out on many, many market opportunities in the last decade.

It’s a new year, and a very new market. Look forward to many more conversations.

Merry Enterprise Season!

Mark Hurd reported yesterday, Oracle’s two cloud ERP businesses, Fusion ERP and NetSuite ERP, delivered a combined revenue growth rate of 32% in Q2. Workday similarly reported 30+% growth in its latest quarter, and Salesforce in the high 20%. In most meetings I have had with SAP executives as I write Nation 3.0, the results are similarly impressive. I had an introductory call yesterday with Bill Berutti, new CEO of Plex and he was very upbeat.

It is so nice to see the whole sector do so well. It should make for nice holiday parties. As an analyst, I want them to spread their wings and will raise the bar for them again, but that can wait for the New Year.

In the meantime, I want to thank Stacey Fish, Angela Barbato, Susie Johnston Foran, Sharon Sulc and many others in the industry who have to put up with my pesky and plentiful questions all year round.

Happy holidays, all!

SAP's evolving partner economy

Ask about who has had a successful platform strategy, and most people will point to Salesforce. I beg to disagree – compared to revenues Apple has generated for its partners and itself from its iOS store and Amazon with its fulfillment engine over the last decade, Salesforce is a distant laggard. While customers have built plenty of custom objects, the revenues generated by ISVs on the platform is relatively small. Still as enterprise software goes, Salesforce stands out.

Ask who has had a good reseller channel and people will point to Microsoft and HP. I cannot disagree with that. They do not not get much recognition but SAP’s reseller channels around its BusinessOne and BYD products would get more recognition if they were independent units. Instead, they are dwarfed by SAP’s powerhouse direct sales engine which is the envy of most enterprise competitors.

That SAP direct sales focus has also meant association with a vast ecosystem of systems integrators and outsourcers. Again, that is the envy of many competitors, but if you read the first volume of SAP Nation this ecosystem has also been a burden on the customer base. And for the ecosystem cost (which ranks alongside GDP of largest 50 countries around the world), the failure rates have been unacceptably high.

So, with all these conflicting thoughts running through my mind, I went to SAP’s Partner Summit in NYC this week. They did a good job bringing together a mix of ISVs like Hrizons (a SuccessFactors implementer which also offers complementary software), resellers, small/midsized SIs like Beyond Technologies and large ones like Deloitte. And customers like Cintas and Pregis talk about their use of old and new SAP products and the partners who helped them in their journeys.

My feedback:

It was nice to spend some time listening to Diane Fanelli, SVP describe how SAP is showcasing in its App Center a growing number of ISV offerings using tools in its Cloud Platform and Leonardo offerings. In previous attempts, SAP has tried to do similar around NetWeaver and HANA. The customer access is much more digital this time around, the Cloud Platform leverages lot more open source and the barriers to partner participation appear much lower. It is fledgling at this point in terms of revenues for the ISVs and SAP (Fanelli says focus is adoption prior to monetization). I hope they continue with her statement “the future is small, simple applications that snap into existing landscapes. You go shopping [for them] on your phone." Which also means the onus for vertical and other books of record will stay with SAP. Too many vendors abdicate heavy lifting to their platform partners.  

In my research for Volume 3 of SAP Nation, I have seen many customers use smaller SIs for their S/4HANA projects, SuccessFactors and newer SAP projects. So, it was good to spend time with Blue Marble and Nimbl at the event. I do worry that SAP continues to seek bragging rights by talking about 18,000 partners. That’s way too many. It would do better for itself and its smaller partners by ruthlessly culling the number.

SAP also continues to be enamored with its bigger SI partners. I understand their view that such partners are a channel or at least an access path to influential client executives. I don’t understand the continued lack of certification or controls. SAP’s brand suffered considerably from the overruns and failures in the first wave of ERP.

The issue is less about SAP, more about the slow evolution of SIs and outsourcers. There is little automation in their service delivery, and still way too much consultant travel. The CTO of Deloitte, Darwin Deano responded to my question with "We're 20,000 people. It's not going to completely change overnight. But I can assure you that every SAP project is benefiting from things like automation and other new ways of working”.  I would love to see much more remote delivery,  more use of automation in data conversion and testing, more use of machine learning in parameter configuration. I would also like to see much more proactive commitment to multi-tenancy and public clouds.  

Way too many SAP partners are proposing private cloud or on-prem deployment of S/4 (and possibly C/4 going forward). Not only will that continue the previous cycle of expensive ECC implementations, hosting, upgrades and application management, it will also complicate SAP’s efforts to have sufficient data in the cloud across customers to train its machines. So, this is definitely an area SAP needs to step up and guide, and if necessary, control the ecosystem. Seeding the ecosystem with more “born in the cloud” SIs who were raised with Google, Amazon, Salesforce and Workday technologies and agile methods would also be a smart move.  

Overall, it is nice to see a partner ecosystem in transition around SAP. I, for one, would like the pace of change to accelerate. And the SAP focus be on customer success and economics not just on channel revenues. Many analysts are also hoping there is a role for the recent acquisition, Qualtrix in measuring the partner experience going forward – it may go a ways to help justify the large purchase price.

SAP Nation 3.0 - early concept design

I have not finished writing the book, but my design partners are already rolling out cover and back copy ideas

Feedback welcome, thanks!

‘In 1800, the US, then the original thirteen colonies, was a young, skinny country. 2/3rd of the population lived within 50 miles of the Atlantic Ocean. You could have put bets on the Americans, but also the British, the French, the Spanish, even the Russians on who would take over North America. Over the next few decades the Americans had won out handily. It had taken leadership, incredible grit and a Manifest Destiny call to energize its citizens to expand westwards.

In contrast in 2000, enterprise tech vendors led by SAP,  other ERP/CRM vendors and their SI and other partners were set to dominate the corporate technology landscape. Instead their share of the enterprise has steadily declined. They have missed out on contract manufacturing of smart products, digital marketing, cloud infrastructure, industrial internet, process automation and several vertical niches. Two decades ago, few of us had heard of Accenture Interactive, Foxconn or Google. Few of us considered Amazon or GE as tech vendors. 

SAP has started to turn the corner with a series of new products and acquisitions which gives it a fighting chance against cloud competitors like Salesforce and Workday. The next decade will allow SAP to further reinvent itself and take advantage of wave 2 in many of the markets it ignored in the last two decades. Can it? Will it have its own Manifest Destiny call to go from ‘sea to shining sea’?

The book is optimistic about SAP’s prospects but also catalogs the many ‘unforced errors’ it has made since the turn of the century.’

 

 

Mark Twain and Hasso Plattner

As an analyst, I tend to be a bit dry and focus on product details and vendor economics. As an author, I become as Led Zeppelin says a “traveler in both time and space”.  In writing SAP Nation 3.0, I am making time for the human dimension of the executives at SAP, its customers, its competitors, so there are plenty of episodes like this one.

“I had expected Hasso Plattner to be exhausted. In fact, I suggested we postpone the meeting, but in 25 years of similar meetings I knew he looks forward to banter with analysts. For me, the payback usually came from watching SAP PR jaws drop at something he says during such meetings. Usually there would be an admonition after the session “Don’t you dare use that”

This meeting was safe enough - talk of multi tenancy, quantum computing, blockchain, microservices. But then he was talking about Tom Sawyer and Peter Pan, two characters who have brought him much joy throughout life.

He was doing his best Mark Twain describing how young Tom Sawyer had turned whitewashing a picket fence - a punishment for skipping school - into a group activity. He had conned his friends into thinking it was fun and required a unique skill - 'only one in a thousand, maybe two thousand can do it'. So much so that his friends paid him for the privilege of doing that tedious task in the hot sun.

The tale has clearly helped Hasso motivate customers and employees over the decades even when he is proposing something radical. As he told us in that meeting

Ten years ago, I had an idea which really worked: streamline ERP applications to basically record only transactions. And, everything else is then an algorithm to exploit the data. Facebook doesn't know what aggregates are. Why do we have aggregates?

That worked. Many people didn't believe that this can work, especially inside SAP. This freed us completely. Today, (with S/4HANA) it's all on demand. On-demand is much quicker because people are not permanently rolling up and looking at rolled up data. If they want to change it, it's instant.

That is really gratifying.

I had expected him to be exhausted during this meeting. We had been told to hurry up as he was about to pack up. 8 hours prior he had led a 2 hour keynote on the main stage. Anyone who has done public speaking knows how much energy that drains. He had then done a media q&a for an hour. Already sensing his fatigue, I had asked him a softball question on sports technology. And he had joked about how I always asked him tough questions.

But here was the old warrior now talking about more people to cajole, to win over. Even if it takes a decade. And even when there is still pretty of cynicism about HANA.

That's when it hit me. Don’t write off Hasso or SAP yet. There's plenty of fight left in this old dog.

Someday soon, I hope to ask him about Peter Pan. “

The Future of Work: a Rural Sourcing perspective

There are lots of trends converging to influence the workforce and workplace of tomorrow. I have written about new job titles as automation influences every profession, new co-working sites, the demography in booming small towns.

I thought it would be nice time to get a periodic update from Monty Hamilton, Chief Executive Office of Rural Sourcing Inc. (RSI) whose plans include “the launch of 10 new development centers with 2,000 colleagues across low cost of living, high quality of life locations in the United States.” I have previously profiled Monty in several books and blogs.

How his location sourcing has evolved

Our first two centers were in Jonesboro, Arkansas and in Augusta, Georgia, and the third one was down in the Gulf Coast in the Mobile, Pensacola area.

Since then, we've now opened up our fourth one, which is in Albuquerque, New Mexico. And last month we announced opening up in Oklahoma City. One of the things I can say that having gone through the process now four times and doing the site selection work is that we refined that process a great deal. In fact, we've built out our own little artificial intelligence engine to be able to feed a bunch of the data and attributes that we're looking for into that tool and make sure that we're not missing anything, as we canvass the U.S. for our next locations.

One of the things that I finally come to grips with is terminology; I finally found a good term that adequately describes what we look for. I used to use Tier 2 cities or Tier 3 cities, and that was offensive, as was smaller cities. Now we say midsize metros. I think that does encapsulate kind of what we're looking at today.

If you look at Albuquerque, it's right at a million people population-wise, Oklahoma City is about 1.4 million. In terms of the size of the markets where we set up our development centers where our colleagues comes from, that has grown in terms of the population size. I think that's come with some understanding where we fit in the ecosystems of these systems from a technology landscape point of view, the talent pool that we're competing for in those cities and then how we go out and attract the best people within those cities.

Other things that have been added to the list, as we've gone along now is a real focus on the quality of life attributes that we're looking for and are these places attractive to both recruiting and retaining millennial talent. We look for things like, how many craft brewhouses do they have in town, how many coffee shops do they have in the downtown location, is there housing in the downtown location? Some of those things have been added as, I'll say, secondary and tertiary determinants of where we're going to locate.

How his business has evolved

When we started out early, early days, we were doing a lot of .NET development and longer term SAP support work. Today, 80% of our work evolved into leading edge custom app development, either in the Java open source stack or in the .NET world.

Even beyond that or below that, we're looking at doing probably at least half of our work these days in public cloud platforms, either Azure or AWS platforms. And so, I think the evolution of our work has been driven by companies embracing the digital transformation or digital adaptation view of the world, as they've got to be able to compete on that front. Most of the time, they're not staffed to develop in some of the newer technologies, or at least not at a scale they want to be or need to be or at a speed they need to be. That has driven a lot of the tailwind we’ve had in the growth of the business.

I would say it's what I would refer to as recurring work where clients are buying an Agile Scrum team of a dozen people, right? A Scrum master and QA folks and developers, UI/UX and business analysts all packaged within that team. Then, that team will work with them on a project for 6 or 12 months. Then they want to keep that team in place, and so then they come along with the next piece of work. Most of the times, our clients are signing 12-month engagements and then renewing that contract for another 12 months. The clients see the value of keeping that team in place, and now we're going to move them from developing a digital platform for consumers to automating more of what they are doing with their backend suppliers.

The customer base today kind of breaks down into two major categories. On the one hand, we have the large enterprise organizations from a billion dollars up to $25 billion who are trying to get things done and do them faster. A lot of their drive is coming to us to find additional teams of people who can move faster and assimilate quickly, get something done, and then move on to the next thing. That's on the enterprise side.

For the longest time, we didn't do a whole lot of work with software companies, but that's changed dramatically over the last two years dramatically.  They make up a significant portion today of our annual revenue. These are typically either private equity-backed software companies or large, fairly successful, independent software companies. Especially if they're private equity backed, they're looking to do things in a compressed timeframe. And so, that has been a big driver over the last 24 months, for sure, to see those companies coming to us as opposed to going offshore and looking for solutions there.

The talent he is attracting now

I usually get a Monday morning report of the number of colleagues that we have. Last week, it was 470. We've got about 70 job openings on our website today, and so I anticipate by the end of the year we'll be at 500 plus folks, and most likely looking at center number six in the first quarter of next year. In fact, when we went through the site selection process last time, our code name was Project 5-6, knowing that we would pull the trigger on number five and have number six ready to go in early 2019. I do admit we do not get the kind of attention Amazon got in its 2nd HQ search :)

I would say the profile of who we attract is still largely the same. A lot of really great, talented software development folks who have made lifestyle choices not to be in one of the major coastal metropolitan areas. We're seeing a lot of people who are coming back to these great resurgent cities.

We hired our first ex-Googler earlier this year, back in the summertime, who went off, very successfully, had a career at Google for about ten years and then decided he needed to be back where he grew up. Looked around, started looking for work, and found us. And so, I think that's one of the neat things about where we fit in the ecosystem in these cities and the social impact we bring is that we offer those people truly challenging, very leading edge kind of software development work in a place where they probably didn't think that was going to happen. And so, it's neat to be able to attract that kind of talent that have those skillsets, that exposure, and that experience back into our organization and back to their roots.

Also, I think we've done a really great job of opening up additional pathways to get into the tech industry. This idea of integrating in bootcamp hires into our system has become more of an intentional part of our recruiting program. We partnered up with a couple really successful groups to be able to take those folks who don't have a lot of experience working in tech, but they've got the raw talent to be able to be molded into that. And so, they go to these 12-week or 14-week bootcamp, and then they come to us.

We love the idea of giving people their first chance at a second career. Those have worked out extremely well for us. I think, for the people that come out of those programs, they are truly grateful and appreciative. They get to work with some really, as I said before, seasoned, talented people. And so, their learning curve is just on a rocket ship.

Impact of President's America-first, hire more, make more in the U.S. policy

It's probably still too early to tell. There are certainly some growing concern about especially the H1B requirements and what's going on there, and will there be changes? But, there have been no changes to date to that program, or minimal changes I should say.

I don't think there's any direct correlation there, but I think people are beginning to question their workforce strategy. Honestly, CIOs and workforce people are looking at what does my workforce portfolio look like today. How much of that is insourced versus outsourced? If it's outsourced, where is that going on? And, do I have the right balance in my overall workforce portfolio?

We have had a lot of conversations and work around that specifically for people just realizing that they may have leaned too heavily to one side and they're trying to make some course corrections in that portfolio. But, I would say to date still the bigger drive is just that need for good, strong, agile software developers who can get things done, do them quickly, and understand the business problems that they're trying to solve and write code to solve that problem. That's, to me, the biggest thing that allows our folks to really produce quality code quickly is they understand what that end user is expecting and trying to get done. The ability to understand the business problem and then translate that into lines of code makes them super productive, super-efficient.

What his competitors are doing

We're still seeing the traditional either large, India-based offshore firms or the U.S.-based consulting firms. Some of them are making inroads. Some of them have set up in places like Columbus, Ohio or Nashville but those places as it turned out were not that inexpensive But, I still think we're somewhat unique in being able to locate and scale these midsized metros in the fly-over states, frankly, that have just been underutilized and the talent pool there is available. They're just waiting and looking for somebody to give them the opportunity to step up and do some great stuff.

I feel really good about our model and where we are today. The growth over last year, which was 30+%, was awesome but, as we look forward, we think it'll be 50+% in the coming year just based on the demand so far. It's a unique, fun, fun time to be here. That's for sure.

Not your Dad's SAP

It’s been the longest research phase of any of my 7 books but I hope to deliver the first draft of the manuscript for SAP Nation 3.0 to my editor in early January.  As I work my way through over a thousand pages of  transcripts of conversations with customers, executives, fellow analysts, competitors and my notes from several events, the diversity of SAP’s acquisitions and newly developed products and related customer bases is starting to sink in.

The customers can roughly be classified into four categories

Innovators and Transformers

Brand name companies and startups using some SAP tool like HANA or Data Hub as they leverage wearables,  satellites, sensors, machine learning and blockchains. Wide range of industries from retail to sports, wide range of countries, wide range of business processes in my sample. Others are attempting large transformations with S/4HANA as a backbone, but phasing operational areas out several years to time with S/4’s gradual evolution. With my innovation focus, this has been the most fun part of the book. Many of these projects are one-off and it is still too early to tell if SAP will be able to broadly commercialize these experiences.

Modernizers

I am profiling several customers who are implementing portions of S/4, components of C/4 and other cloud products like SuccessFactors. They are moving to more contemporary technology but not always rethinking business processes or business models. What’s striking is the variety of technologies and architectures in this tapestry. The acquisitions have been difficult to homogenize.  SAP’s SI partners are contributing to the diversity by proposing a wide range of private cloud, application management and other services. This group gave me a bit of déjà vu of the out-of-control ecosystem I wrote about in volume one of SAP Nation

Diversifiers

These are customers who have implemented Salesforce, Workday, Plex and other cloud solutions in certain business processes, or NetSuite or Microsoft in two tier mode, and others who have moved to third party maintenance to vendors like Rimini. From SAP’s POV, the really good news is this group has not grown dramatically since I wrote volume 1. Couple of reasons for that. The functional footprint of the cloud vendors has grown only at snail’s pace so customers cannot lift and shift much more to them. If Rimini or other 3PM providers supported Industry Solutions you would see a lot more movement to them. Today they mostly support the horizontal ECC modules and some of the core platform. In reverse, SAP continues to make headway in some of these vendor’s customers as they look to expand in countries where SAP offers better compliance and presence . To me this is a major missed opportunity for the cloud vendors – they could have delivered a knock out punch to SAP if they had verticalized and expanded globally in the last few years. Now SAP may turn the tables on them. Cloud vendors have also tarnished what used to be a significant economic value proposition with their own aggressive behavior during renewals.  

Prudent

This is a group I still have not decided what to label. Some of my friends call them laggards or sleeping dogs but I see them as pragmatic customers who continue to see payback from their previous investment in ECC, IS, Business Objects, BYD and other earlier products. They are in no hurry to move to more modern products. This is especially true of SAP’s customer base in Europe which is  just not that sold on the cloud model and wants assurances against SAP’s Indirect Access charges. The cloud vendors have been successful mostly in N America – another missed opportunity. BTW Oracle and Infor are finding similar resistance in their on-prem customer bases. They have tried with migration packages called SOAR and Upgrade X with limited success. I have interviewed several analysts about this lack of movement. Some feel the muscle memory of the last ERP project is still unpleasant. And the same set of SIs are still hanging around.  One compared ERP to email – as un-sexy and as unattractive to replace. Another talked about lack of functional equivalence in the new generation of products, especially when it comes to industry processes. This group continues to write maintenance checks to SAP but there is not much passion for the company and many could still tilt into the diversifier category.  

In volume 2 of SAP I had pointed out “SAP's runaway success in the '90s came about because its R/3 product dramatically reduced enterprise sprawl.”. Then I asked “Can history repeat itself? Will S/4 replace today's sprawl, this time caused by SAP itself?”

The answer 3 years later is No, the sprawl is actually much worse. If you look at databases, cloud flavors, programming languages, UX, application code bases in SAP World there is no shortage of choices in each segment.  That’s a clear reason to be concerned.

But after talking to customers in Category 1 and 2, seeing a new set of executives rise within SAP, and the relative lethargy in the competition I feel better about the company than I did when I wrote Volume 1.

An SAP executive asked me “how do we work more with innovative customers?” I told him “You already have the most innovative customer base in the world. You don’t always associate with the most innovative segments of those customers.”

Most vendors would happily trade places with SAP.

SAP and Qualtrics: Experiences matter, but how much?

My daughter, Rita is about to embark on what she calls a Gap Quarter. I don’t want to steal her thunder as she plans to blog about it but it is a play on a Gap Year and what us old fogies call sabbaticals, even though few of us have experienced that concept either. It fits in with her view and that of many Millennials that experiences matter - they matter even more than physical assets and wealth accumulation.  And increasingly I hear middle aged folks say let’s try things out while we are physically able to and not wait till it may be too late. So when I heard of SAP’s decision to acquire “experience management” vendor Qualtrics for a whopping $ 8 billion (in cash no less), I was not immediately dismissive.

My reaction to most big enterprise M&A is that of coming to a fork in the road – what are you forgoing by making such a large investment at such an inflated valuation? How is this positioning you in the race to tame the Enterprise Wild West? I had similar questions when Microsoft acquired LinkedIn, when Workday acquired Adaptive and when IBM announced plans to acquire RedHat.

My questions tend to be

Have you run out of development ideas? Are there vertical white spaces you should be investing in? Are you foregoing a better series of small acquisitions? Will the integration distract you? Would your customers instead prefer better value from what they are paying you for today?

I have an advantage in understanding SAP a bit better than other vendors as I am sitting on over a thousand pages of interview transcripts and event notes from my year of research for the next volume of  SAP Nation. I have to chisel than down to a 250 page manuscript due to the editor by early January.

Thanks in particular to my tour guide, Stacey Fish I have seen a remarkably different SAP than I used to know. I have seen a lot of smart, small acquisitions. But I also see how difficult they have been to integrate and homogenize. I see a number of enthusiastic customers who are pushing the envelope. I also see many who find it difficult to navigate this diverse SAP and want to be left alone and not nickel and dimed. I see a new breed of global partners unafraid to make large investments. I see plenty of others who have not evolved much and that SAP will not nudge forward

In balance, I am much more optimistic about SAP that I was when I wrote the first volume of SAP Nation. But every once in a while I will react like Dennis Howlett did this morning

“This is tragic. Empty calories. Zero content. Year old stories. Missed opportunity to address indirect access in a meaningful way. #UKISUGConnect”

Looking at it from my daughter’s lens, SAP has been creating an amazing set of experiences for its stakeholders. As an observer, I am enthralled. Not every customer or investor looks at them like I do.

Now SAP will have a platform to measure all these disparate experiences. Experiences matter - now help us quantify them!

Plex: The Past, Present and Future of Manufacturing

Plex hosted its annual Future of Manufacturing Roundtable in Michigan last week. I was actually as excited about the past and present of manufacturing I saw during the visit. They hosted a dinner at a Birmingham restaurant which used to be a train depot for the Grand Trunk & Western Railroad. In 1931, when the depot was opened it was at the epicenter of a transformation where the nearby automobile industry was starting to herald the end of golden age of the railroad. The city, a century prior, had dreamed of being an industrial powerhouse like its namesake in England – and along with its neighbors did even better.

The present came in 3 parts. Plex’s Customer Advisory Board meeting was co-mingled with the event. It was invigorating to be with 15 customer executives. They represent a microcosm of the strong economy we are living in:  healthy top lines and optimism about US manufacturing, and related PE driven M&A under President Trump, balanced by fretting about confusion caused by his tariffs and a heated labor economy.

Next up was a plant visit at Coastal Automotive in Rochester Hills. Plex has done a nice job over the last few years taking us to plant tours around Michigan. Coastal is a maker of safety, acoustic and energy management solutions (it uses the moniker of “Safe and Sound” ) for automobiles and to a lesser extent to aerospace and sports markets (think NASCAR and high performance helmets). It CNC precision cuts IMPAXX foam and Betafoam AFI – unlike other tours we have taken this one was amazingly quiet and clean. It was quite an education on the material science which results in lightweight, but remarkably strong, energy absorbing composites. In reverse, we found out thanks to an analyst mishap, the densification of the scrap results in a blue rock-like brick you could mistake for an asteroid from planet Pandora. 

It was nice to get an update on Plex’s product progress, operations and new executive hires. There are not too many vendor updates these days where you hear of operational features and 5 9s uptime which makes them hesitate to deploy on hyperscale cloud infrastructure providers whose SLAs guarantee 3. I have heard too many vendors and customers say they don’t believe they can deploy manufacturing in the cloud. This was a resounding – oh yeah?

The future also came in three parts. Plex provided more details on its Platform play and IOT efforts. Every SaaS vendor these days has a platform strategy. And everyone glibly talks about how successful the Salesforce strategy has been. After a decade if you look at the function points and vertical extensions its platform partners have delivered, it is actually underwhelming. So, it will be interesting to see how Plex grows the orange portion of this chart.

Same with IOT which builds on their acquisition this summer of Dattus. They acknowledged “it is a crowded landscape with many well-funded niche players”, but “no winners yet”. Jerry Foster, CTO provided an update of work in the labs. They continue to work on wearables (and related noise cancellation) on the shop floor. He also shared details on a machine learning project. Interestingly, it is something they believe they can be used to examine parameter settings across their customer base. Incorrect settings lead to inefficiencies and errors. 

I am really pleased to see Ben Stewart has joined Plex as VP of Product Strategy. He has been a Plex customer and partner and should balance out Plex product plans with his field perspective. Also, I hope Chris Bishop who heads services at Plex will find ways to use the ML project to streamline implementation projects and service tickets.

Now about the third part - as we headed back to the airport we drove by Ford facilities and I was reminded of their new commercial “Let the other guys keep dreaming of the future. We’ll be over here building it.”  

Another invigorating visit with Plex and its customers.  

Vertical Software: One Industry which has bucked the trend

Readers know I have been hounding software vendors on why they are not investing in vertical functionality. After two decades of cloud computing we have very few choices in books of record for industry after industry – utility billing,  retail merchandising, insurance claims processing, electronic medical records. I could go on and on.

One industry has, on the other hand, seen lots of investment from literally hundreds of vendors. It is the professional services sector in the form of PSA functionality. I reached out to Dave Hofferberth of Service Performance Insight to get nuggets on why this market has bucked the trend. I call him the “Godfather of PSA” – the image below is from a pioneering white paper he wrote on the market as far back as 1999 

Describe the evolution of PSA over the last two decades.

I have seen wave after wave of vendors address this market. In the first wave there were pioneers like Niku, Evolve and Changepoint. Today the names are  OpenAir (part of NetSuite), FinancialForce, Kimble and broader vendors like Deltek, Microsoft and Workday, just to name a few.

The vendors 20 years ago had a concept, but not too many buyers. In theory, PSA made sense. In reality, most professional services providers work their employees hard, so concepts like billable utilization were not something a tool needed to track, as they just worked their employees 60 hours each week. However, as organizations expanded and resources became more scarce, PS executives realized they needed a tool to manage the delivery of services so they could track all of the time and costs against tasks, or at least projects to more accurately calculate revenues and margins. PSA has become a necessary solution, just like CRM and financials. Nowadays, organizations in other industries also use PSA to manage the services component of their product-based business. Many of the PSA vendors took a break a little over a decade ago to concentrate on project portfolio management. PPM was to be the next wave, but most of the vendors realized that PSA was where they should be. There are plenty of good PPM vendors, and that market is strong as well, but PSA is a market unto itself, with different needs.

Describe your personal journey and how you came to be so closely aligned with PSA

At Aberdeen Research, I carved out a niche for myself in the PSA market because I was the analyst who brought PSA out to the market, the vendors knew for the market to thrive, it needed a lot of thought leadership, which Aberdeen could provide. Other analyst firms, Gartner, Forrester, Meta, Giga, AMR and others, continued to change the name from PSA to something else. Unfortunately, those analyst firms didn't give the time and effort to the market the way I did. In the end, I just concentrated on PSA, where other analysts might have had many other markets or technologies to work on, with PSA just being one of them. I would love to say how when I joined Oracle, professional services was Oracle’s fourth largest market, but I had nothing to do with it. It's just the company sold a lot to those organizations. Unfortunately, it was not an area they concentrated on, preferring to go head to head with SAP in all of the manufacturing, retail, and financial services markets.

But as you say you have helped hundreds of vendors look at the PSA market.  Do vendors not have the competitive intelligence to see this market is somewhat crowded compared to other verticals? Is there safety in numbers?

The world is moving to a services-based economy, and there are so many companies that do not fully utilize business solutions to run professional services. I estimate that less than 15% of PSOs use a PSA solution. Our survey shows something like 60%, however, many organizations surveyed I have worked with over the past 20 years, and are focused on improvement. All of the PSA players I know are growing in excess of 20% annually, so it is obviously a good market for them. That is why the ERP players got in a few years ago. to sell a complete suite of solutions, including PSA, to their installed base and future customers.

Why does the professional services sector get the vertical investment when other much larger industries do not?

I am not sure why other industries don't get the software investment. All I know is that I have tried to demonstrate the financial value of PSA over the past 20 years, and it hasn't been too difficult , as you can imagine increasing billable utilization by 5% annually yields an additional 100 billable hours per consultant. It's pretty easy math. I think for the other markets and submarkets to get funding, they must do similar things to justify the value of their investment. I have long considered moving some of my research into other markets, however, the professional services market keeps me plenty busy.

BTW, I am headed up to Detroit to spend a day with Plex - a vendor which is bucking the trend by continuing to invest in another vertical - the manufacturing one. 

 

Tech Marathoners: Rob Enslin - Part 2

We ran Part 1 of the interview with Rob Enslin yesterday. Part 2 below continues with how he sees tech and its impact today compared to his perspective in past decades. He also talks about his leadership style and his mentors who have helped him grow over his career.

“I look at the tech industry in a couple of interesting ways.  First, I think there's never been a time in the last 50 or 60 years where whatever you describe as information technology -  the Internet, software – it’s really important for nations, and really important for global business in a significant way. I don't think we've ever seen the amount of regulators, the amount of time regulators in multiple countries around the world are spending on these topics today, whether it's Russia, China, the U.S., the European Union, the U.K.  It's becoming a very, very important subject and obviously it's going to have a huge economic impact on the world as we move forward.  So, it's a fascinating time in massive ways to be in the industry. 

Secondly, the thing I think is really amazing is what we can do today with technology and with software, and the speed at which we can do it. You can't even look at the past five years without thinking about how software altered and changed business processes or how we can use technology to move things forward at a rapid pace. I think we will see more and more technology doing just incredible things, whether it's AI or ML, big data, and so on. These things existed in some form or shape in previous times, but they were really slow-moving areas, or we rarely used them. The pace of change in the 2000s was incredibly slow compared to the pace of change today.

Why is the pace of change and speed so important? Because, when you think about how companies are quickly moving all of the infrastructure into these cloud-based environments and then focusing all of their efforts on things that they could innovate for their company, it's almost impossible for one company to do what it did 20 years ago, 10 years ago. 

There's a whole model of operation and collaboration that's taking place today in massive ways. I think that is really, really exciting for companies like SAP who have a big stake in the business applications market. I think that's true for multiple areas.

If I look at infrastructure and what's happened to infrastructure platforms, you start to see these mega cloud providers, what they're trying to do in the market, and the combination of services they provide. Why are they providing these services? One is, it's a lower cost. It's faster access. You get to use the latest and greatest innovations with its face recognition or natural language, which previously you had to go buy software to do so. It's at incredible speed and I think that's going to continue to move, so that makes it even more important. 

You also see this at the security layer. There are four or five large security companies in the software industry, but there are thousands of innovators in the security industry. And so, platforms become really important in different layers: in the network layer, in the security layer, in the infrastructure layer. 

I think the same is true in the business application layer. You know the companies that provide a platform with which you can build innovative solutions on top, and not only yourself, your partners, your customers. The world can create value on top of value – it’s the way that our industry is moving and moving at a rapid pace.

I think the winners in all of these aspects are going to be the ones that understand how to operate with competition, how to participate in frameworks with companies that you would perceive to have similar functionality to you, companies that you might be able to share different data models, different data environments, which in previous times, you wouldn't – all for the benefit of driving massive customer value faster and cheaper. I think that's the way the world is going in our industry.

Those that stand by themselves, stand alone. I don't think they will survive. I think they will be out-innovated. They will not be able to deliver at the speed at which the marketplace expects you to.

Now, having said all that, we also have to deal with regulation on top of all of these pieces. I think regulation is going to be part and parcel of our industry for many, many years to come, and we will have to deal with how we operate in these different marketplaces and how we meet the requirements for different governments and the European Union and different departments, if we really want to operate around the world.  It's going to be a fascinating time to be in our industry.” 

You are almost like a colleague to the Ariba leadership, the SuccessFactors leadership and so on. Talk a little bit about where you learned your leadership style and also about your own mentors within SAP and outside.

'My very first mentors that I had in South Africa were folks who I'd grown up with who had gone to work at IBM and had become really successful at IBM - my family. They helped me develop a strong work ethic. From a very early age, I was always taught that you have to work for everything. You put the hours in.  So, that was kind of instilled in me.  You have to know the details of everything.  When you have details, you can make wiser decisions.  And when you want to be really smart, you just have to learn, learn, and learn harder than the next. So, that's kind of how I approached pretty much everything. 

The biggest learning experience for me in a massive way was when I came to the U.S.  There was a gentleman at Coca-Cola who I worked with and I spent an inordinate amount of time designing how the system can function, how Coke should design it, and how I would do it. I had written basically written a white paper on this. It took me about three weeks to write this document. And then, when I handed it to him, and I started to explain it, he looked at it and said, "Can you take this document and put it on one page?"  We went back and forth, and he took the document, and he read it. He came back, and he did a drawing of a house for me.  He put the drawing in front of me and said, "Is this what you're trying to say?" I remember the drawing very clearly.  And, I'm like, "That's exactly what I'm trying to say." 

That diagram became the motto for everything we did, and I always remember the lesson I learned from him was to take things and simplify it so that everybody else can understand it because no one will ever understand your 28 pages, but they will understand the concept. I learned that lesson very early and I live it every day. I must say, "This is too complex," 100 times. Or, I'll say, you know, "The details are missing." It's kind of an oxymoron in a lot of ways, but that was one of the biggest lessons.

I learned a lot from people like Léo [Apotheker] in terms of how to deal with customers and from the founders of SAP on customer focus. I always remember Hasso Plattner in South Africa. I was amazed because it didn't seem like any other company had board members who visited customers. They would take us with into these meetings, so I learned a lot from them in terms of why it was important from customers, why the innovation came from customers, and how you connected with them.  

Léo taught me quite a few things early on around being close to customers.  SAP North America was structured in an industry model in the early 2000s. Léo wanted to go to a regional model because we were too far away from customers. And it really was true. Customers are local, and we had these industry reps flying all around North America spending very little time with their customers. I always remembered to put a focus on your customer and be local to customers. When you think about local, you think about the football teams, the churches they go to, the communities they share, the charities that they belong to, the volunteerism. Those are things that make you closer to your customer, not that you have necessarily the knowledge of the industry. It always stuck with me in a big way that you create a closeness and engagement with customers at that level.

And then, I learned from Bill [McDermott] really how to be bold, how to be brave, how to take on things that are much, much bigger than you, and to just keep stretching for it. When he came into SAP North America, he came with the idea that were going to double the revenue of SAP North America. And, I was like, "Oh, you've got to be kidding me. Who would have a strategy like that?" And, yet, we did it in a year. Always be bold, always go for it, always stretch for the moon.

I learned the most about managing from Japan. When you move into a marketplace, and you have zero understanding of the language, the culture is brand new for you, you don't know who in your team has been failing, you have to learn quickly.  I removed a significant amount of my management team very early on, and I did that simply because I didn't know who was with me and who was against me. I felt that I needed a fresh team to tackle this, so I did something very unnatural. But then, also, I understood that you really have to understand the culture and work with the culture and help and respect their culture first before you try to make changes and live the way that the Japanese live.

I got to really understand how you can benefit from diversity in Japan. In this case, the diversity was me and the Japanese. And, rather than try to make the Japanese like me or the Japanese try to make me like them, we got to understand how both of our cultures could benefit Japan and how to motivate them.

I hired a Japanese woman to run communications and PR for me and everything I did in the first 18 months, she would critique me. After I finished speaking, she would say, "You said that. That means this. You did this. That's how they would perceive that." And so, I learned quickly how to communicate with Japanese media, with press, with customers, and how to respect certain things, what not to respect, where I could stretch the line, and so on. 

I had a lot of guidance from her – she was an amazing part of my success in Japan.  And, I remember all those management principles from Japan. This is where I learned that to be successful, I needed to make certain my management team was successful. 

In a public forum, you'll very seldom see me chew out any of my management team. You will see me take a leadership position if I think the discussion or dialog is going in the wrong direction. I'll step out in front. But, if I think it's going phenomenally, I'll give them all of the bandwidth that they need to be successful, to be the star in the room, to show that they can lead because my belief is that the more leaders that you have, the more opportunities you have to grow your business, the more things you can do with your company and the greater that your company will be. 

It’s a case of, if they've got the talent and they know how to thrive, give them the opportunities to flourish, and they'll go on and do great things. If not, your responsibility is to make the change quickly and put the right people in place. If you are constantly trying to be the leader, forget it. You'll never have a great company because no company, no business can survive on one leader. Everybody has to play a role. For me, that leadership is about seeing how great other people can create their careers."

Tech Marathoners: Rob Enslin

This continues a series of interviews with tech executives who have seen the industry evolve over a minimum of two decades. They have helped analyze, envision, develop and take to market some of the most influential technology the world has seen. And they have done it well mile after mile as elite athletes do. I am honored they spend the time with me reminiscing and star-gazing.

This time it is Rob Enslin, President, Cloud Business Group and member of the Executive Board at SAP. He has had a fascinating global career that spans multiple countries and generations of computing.

In Part 1 below,, he talks about his global experiences. In part 2 tomorrow, he will talk about the pace of change in tech and about his leadership style.

“I was on a fast track program to become a banking executive when I was very young. But I was never excited about what I was doing so I left the banking world and went on to study computer science. I was really engaged in information technology. First in the whole operations function and then writing assembler code in the '80s for loading and balancing ships' logistics vessels.

As time progressed, I became a systems engineer. In those days, it was configuring VM, VSE and MVS systems. I was good at building quadruple VSE systems on one virtual machine and then I became pretty much a specialist in CICS or "kicks," as many people call it, and databases. 

Of the early databases, IMS DB was my forte. In the late '80s, I served as the expert that companies relied on to read dumps. When a computer system crashed, you created dumps. Some of the dumps were important to study because you had to put in patches, fixes and rebuild systems.

As time went on, I decided it was time for me to do something really big. I looked at three companies. One of them was Swiss Re who was looking for someone to run their local IT shop in South Africa. The other two were IBM and SAP. I went through the interview process really, really liking and feeling that there was something that would be exciting at SAP.

The attraction for SAP was my background as an expert in CICS and mainframe operating systems. Especially because the big oil and gas companies and many R/2 systems needed Assembler, CICS, MVS, and even IMS Db systems. Personally, what sold me on selecting SAP was that they were about to take R/3 to market and I would have the opportunity to work in Germany. My career got off to a fantastic start working in the SAP South Africa office with 11 other people. I was two weeks into the job, working in the office pretty much alone (as everyone else was with customers) and a call came in from Dr. Hasso Plattner's office. He said there's a customer who needs an R/2 expert onsite right away. So here I am driving to the customer thinking that this would be the end of my career. I thought, I've never seen an R/2 system and there’s no way on this planet that I would ever be able to fix the system. 

Waiting for me at the front of this manufacturing facility is a big German named Gunter. He was the managing director in South Africa, and he meets me at the door and says, " I was promised that you're the expert that's going to come up, and you'll fix it for us." I was so nervous.

I got into the computer room which at that time had one main terminal, that everything ran off, and a bunch of folks around it who had been working on trying to figure it out. I sat down and was able to restore their system within a couple of minutes as just two months prior, I had the exact same situation at my previous job. So, I got to keep my job and do believe that experience got me my lucky break at SAP. Sometimes you just need a little luck because it could have easily gone the other way. 

 My next path was becoming a Basis consultant, which was mainly for R/2, but I spent the better part of early 1993 in Germany working with Uwe Hummel on R/3 release 1.1D learning UNIX networks and starting to build out the R/3 system. We spent time with people from around the world, coming together to test that system and make certain that it was ready for production. It was a fantastic opportunity to be in Germany and meet all my German colleagues, while at the same time work in South Africa.  

I tell people that the early days (in late ’93, early ’94) were interesting because I still had some R/2 customers and yet here was all this amazing amount of interest in R/3. I always remember thinking to myself, these UNIX systems are really going to run these business systems and those mainframes are really going to struggle. People don't believe it, but I can see this happening again now with the cloud model.

During these years, you had to do everything from consulting to training to presales to even selling. Everybody -  all 11 of us - had to chip in. I would not only do the full implementation, the folding up of these systems on different databases but I also went out in the morning to consult with the customers, do some presales, and then go on to do training. In some cases, I had to learn how to demo financials because we didn't have a financial expert, or the person wasn't arriving in the country until a week later. It was fascinating how quickly we all learned to grow with the full R/3 system. 

Then, in 1994, I came to the U.S. to implement the first Windows NT system in Huntsville, Alabama. A South African boy who'd never been to the United States gets to go to Huntsville, Alabama, to implement R/3 on the first Windows NT system in the world on a Compaq machine. That's how scarce the resources were in the early days. When I came to the U.S., I really enjoyed being here and I waited for the opportunity to come back.

In late '96, I'd moved into sales in South Africa. I started selling simply because my view was if I was going to do presales and training and consulting, I might as well just do sales as well. In January of '97 I was asked to come back to the United States to help in the Coca-Cola account in Atlanta, Georgia.  We helped rebuild the project scope, together with some amazing new leadership that Coca-Cola brought in, and in a very short period, just over a year, we went live.

We went live in a manufacturing facility in Ireland, in a financial region in Europe, and with corporate in Atlanta with over 5,500 users in 12 to 14 months. We descaled the project down from hundreds of people to less than 250 people.  The lesson you learn is, less is more.  You can be much more effective with a smaller, streamlined team. You get more done. You can do it faster. Decisions are quicker, and it makes a huge, enormous difference.

I stayed building out the Coca-Cola team through 1999. With that work, we founded SAP's Platinum accounts program. It was a program focused on the top 50 accounts in the world, how to manage them, what kind of resources you needed for them, how you move past the implementation and continue to manage the account across all aspects of the business. That was the start of a global management program for large accounts. I did that for two years with the top 50 accounts. 

And then, there were changes in the North American markets. I had just been promoted to the executive management team in North America. Leo Apotheker became the acting president of North America, living in Europe, and we ran North America as an office of the CEO committee. With those changes, I ended up taking on all the manufacturing sales organization for North America, which was by far the largest sales organization. The first thing I did was align the right people behind me and made certain people knew I was kind of learning on the job but, at the same time, I was not afraid to take the job on.

At that point in time, they were looking for a president of North America, and that person came from outside. His name was Bill McDermott, and I was the first person to meet him as he was walking in the office, and it was unmistakable that he was the CEO. I remember the third floor of Newtown Square, Friday evening, I think it was about 8 o'clock at night and, for whatever reason, I walked out of my office, and I looked downstairs. 

The place was empty, and I just saw this swashbuckling man walk, and I said, "That's the CEO of SAP North America." You just knew it.  You could feel it. And, he came up, introduced himself exactly like he does today, with just tons of energy. He asked me a couple of questions and we hit it off. I continued to drive and help North America, running the northeast region from a sales perspective.

And then, in 2005, Leo asked me, "Hey, would you go to Japan for me?" I very clearly remember looking at him and saying, "I don't speak Japanese." And, he said to me, "I know that." And, so, yeah, so -- it was a Thursday night, and I was like, "Oh, shit.  How do I tell my wife this?"

So, I called her and said, "You know, Leo has asked me to go to Japan to run Japan."  I ended up buying every book possible at Borders, and every book on Japan and living in Tokyo.  Sunday night, my wife said to me, "Okay, you've read every book possible.  Are you going to say no?" I said, "Um--" and she says, "You're not going to say no."  She said, "We're going to go, so just pick up the phone and tell him we're coming."

We spent three years there. My daughter graduated from high school and my son had a blast there. We turned the Japanese business around in a massive way. I learned a lot about the culture, and together we changed it into a real growth business for SAP - it was very, very successful. After three years, I came back to the U.S. as the chief operating officer, running Latin America and building out a fast growth markets plan. If you remember 2008, all companies had development and fast growth market plans.

And then, February the 1st of 2009, I had the great fortune of becoming the president of North America. The previous president resigned, and it was just after the markets collapsed, so this was an interesting time to become the president of the number one market for SAP in the world, and probably the most important market for SAP as everybody had stopped purchasing software. 

There were a lot of concerns, not only by the people at SAP, but obviously when you read the news or the media or CNN. It was just negative. The banks were in trouble. The markets were in trouble, and so on. It was just a really, tough time.

I had this opportunity to figure out how to change this environment, how to turn it around from being a market that was going negative into a market that would stabilize and then start to grow again. 

With that, we rebuilt our go-to-market strategy and we turned everything into selling to LOBs, building packages that were smaller, and changing the way we went to market. It took another six months before we saw the fruits of that. But, once it turned, it turned strongly, and I don't think SAP has ever looked back after that financial market meltdown. 

We took the North American model and we drove it worldwide. That's why today, you see LOBs and SAP in multiple areas because the model allowed us not only to concentrate on the large, big deals or the big ERP deals, but really to drive a LOB-centric model because it was the only way to ensure that we had a baseline that we could grow the company.

In 2011, I took on global sales for SAP, and then I joined the management board in 2012. We've had a pretty good run in the last seven years, seeing the company grow from a market perspective. I spent a lot of time in those years building things that hopefully will continue to sustain SAP for many years. We built the sales academy, which now has over 2,500 graduates in the last 7 years and generated a whole new generation in the sales organization.

I think one of the things that really helped me was having had the breadth growing up and working in Africa, understanding Europe, living in Japan, running Latin America, being the president and, obviously, living in North America. It really helped me understand how to grow SAP at a global scale for many years. And so, we've always had a great balance between regions in terms of our growth strategies and what markets grow faster than others.

In 2017, I stepped down from the head of global sales and two wonderful candidates who one had run North America for me, one had run Asia, stepped up to the board and are doing a phenomenal job continuing to drive SAP's sales organization and customer focus while I moved to build out our cloud strategy and all of our cloud business efforts.

The past, present and future of Work

I was at a Cognizant event last week where they introduced 21 jobs they are predicting for the next decade. Last year, they had announced their first batch of 21 jobs. See here for details. The day before, Mark Hurd went even further at Oracle OpenWorld – he projected a set of new technology-related job titles would be created and sooner – by 2025. See below for the slide he used.

Laugh at them if you want but I liked the confidence in both projections. As I told a couple of folks at the Cognizant event, it is nice to see people be optimistic about new types of work, not be gloomy that machines will largely take it over. That was the mood when I started to write Silicon Collar just 3 years ago.

But why look into crystal balls? The Bureau of Labor Statistics which keeps a very close eye on skills and titles for over 800 occupations reported many changes in its Standard Occupational Classification (SOC) in just the last 8 years

“Of the 867 occupations in the 2018 structure, 391 remained completely unchanged from the 2010 SOC, 355 had at least a definition change, 131 had at least a title change, and 115 had at least a code change.”

Work continues to evolve before our very eyes. Why are we surprised?

This year I have studied a lot of US history in the 1800s. In doing so, I kept an eye for how occupations appeared and evolved. Consumer tastes, technology impact on work, labor migrations all led to significant ebbs and flows in jobs.

If you have watched the TV show Mountain Men you may think these are modern day studs. Actually their ancestors were fighting the Beaver Wars centuries earlier and their glory days came after mapping improved with the Lewis and Clark western expedition of 1804-6.  Their fortunes subsided as European demand (in particular) for fur changed and technology allowed for development of synthetic clothing materials.   

If you have read Melville’s Moby Dick which was set in 1851, you wonder what happened to whaling, once a lucrative occupation. Improved refining technology and logistics brought kerosene cans to much of the country thanks to Rockefeller (Standard Oil branding was meant to assure consumers the quality was standard everywhere) and that reduced some of the demand for whale oil. Then Edison’s bulb and his and Tesla’s electric currents delivered a fatal blow to whaling. But just as important was that unlike Ishmael who found "nothing particular to interest me on shore," young workers increasingly found new occupations the Industrial Revolution was creating onshore.

I went to school at TCU in Ft. Worth and kept hearing of the Chisholm Trail. Much later in life I learned a technology - the railroad - had helped create the cowboy who did his famous cattle drives on that trail to railheads in Arkansas and Kansas.  From there, the herds would be be shipped by rail to eastern markets. Just as quickly, another technology – barbed wire – affected the occupation by restricting their routes and forced cowboys to turn from nomads to settled ranchers.

These days we marvel about UPS and Fedex logistics. 150 years ago, the supply chain pioneers were Russell, Majors and Waddell. They provided wagons and supplies to countless families who trekked west. Their single most prominent innovation was the Pony Express which could deliver a letter cross-country in 10 days. That was lightning fast in 1860! But the service only lasted about a year. A new technology – the telegraph – made the service look painfully slow and unreliable.

Mark Twain would likely have never become a famous  author. The Civil War interfered with a job he really enjoyed – as a steamboat pilot. His real name was Sam Clemens and his adopted moniker was a river term for 12 feet, a safe depth for boats then navigating the Mississippi. 

The Civil War, horrible as it was, similarly changed the lives of millions of other young workers. It gave a generation of American males on horses and trains their first taste of wanderlust. That along with immigrants created a mobile workforce which has become a hallmark of the US economy.  The war allowed young ladies to become nurses, tailors, farmers, even spies. Technology in the form of sewing machines, typewriters and telephones created millions of jobs over the next few decades for these ladies who had seen life outside their homes.

The railroad also led to all kinds of job related immigration. Chinese workers helped in the construction of the Transcontinental railroad. Scandinavian workers helped with the logging industry as the country’s population spread west. E. European workers helped create our giant wheat and other farms in the Great Plains.

I could go on. The 1800s are a fascinating study of countless occupations which were born, blossomed and transformed in the US.

Just a few generations later we would do well to remember that labor tends to be mobile and that occupations evolve all the time. We can fret about machines, push for regulation, and keep ignoring the signals the labor economy consistently sends out. We have been not paying close attention to those signals and have ended up with a job economy with millions of unfilled blue collar and trade jobs. In contrast, we have way too many white collar graduates with backbreaking student debt. Worse, our immigration has for the last few decades not been aligned with these labor market realities.

Time to go back to listening to the labor economy. It is an amazing ecosystem which supports 800+ occupations and keeps making workers smarter, speedier and safer while absorbing ever new forms of robotics, drones, wearables, sensors, AI and other automation.     

IBM Red Hat: Reading the tea leaves

I have certain core IT values. I like customers to buy versus build systems . Have long been a buy cheerleader. But in return, I expect vendors to build not buy.  So, I have never been a fan of big acquisitions. Certainly not at massive multiples.

So my initial reaction to IBM’s $ 34 billion play for Red Hat is that of distaste.

But the opinions of bankers and investors matter more than mine so not going to comment more on that front.

Reading the tea leaves, though I wonder if this signals

a) The end of another hype cycle for AI?

I saw a recent Fortune issue which was all about AI and I wondered if that is a signal of the peak of the current AI hype cycle. BTW, we are going through the 4th or 5th hype cycle around AI. They appear and disappear every decade or so. As I wrote in Silicon Collar

“Since the 1950s! That is when Alan Turing defined his famous test to measure a machine's ability to exhibit intelligent behavior equivalent to that of a human. In 1959, we got excited when Allen Newell and his colleagues coded the General Problem Solver. In 1968, Stanley Kubrick sent our minds into overdrive with HAL in his movie, 2001: A Space Odyssey. We applauded when IBM’s Deep Blue supercomputer beat Grandmaster Garry Kasparov at chess in 1997. We were impressed in 2011 when IBM’s Watson beat human champions at Jeopardy! and again in 2016 when Google's AlphaGo showed it had mastered Go, the ancient board game. Currently, we are so excited about Amazon's Echo digital assistant/home automation hub and its ability to recognize the human voice, that we are saying a machine has finally passed the Turing Test. Almost.”

Is IBM’s pivot from the attention it has given Watson the last several years more of a confirmation of the peak?

b) A great disturbance in the Force?

I wrote earlier about The End of Cloud History I concluded

“Yes, we are approaching a pivot in the cloud apps market. This is where the geopolitics were in 1989. The next decade and beyond will be tumultuous – exciting for some, disrupting to others.

It is the end of cloud apps 1.0.”

Last week, Larry Ellison announced a more secure Gen 2 cloud. IBM’s play for Red Hat is about “multi-clouds” and given its traditional hardware and hosting strengths, I read more of a pivot towards private clouds.  

My fellow analysts who watch hawk-like for multi-tenant, public cloud architectural purity will be having conniptions with the cloud washing we will see in the next few years. 

I have a feeling J.J. Abrams could make a next career cataloging the cloud pure and evil that are about to unfold.   

Oracle OpenWorld: Thoughts from afar

I was not at OOW this week, but glad I got a sneak preview from Steve Miranda. I also got to watch several of the keynotes on my iPad – from the home office, from a café in NYC, from my hotel room in NYC and from LaGuardia airport. So, I was productive on other matters while getting most of the executive messages from the conference.

Here’s what I liked

• Larry Ellison introducing the Gen 2 cloud platform. He acknowledged Oracle was late to the cloud infrastructure game but that this had given it a chance to design a more secure architecture with a separate ring of cloud control computers.
• Mark Hurd interviewing Ian Bremmer about global trends and even better his security panel with General Mike Hayden, Jeh Johnson and Lord John Scarlett with their considerable experiences at the DoD, NSA, Homeland Security and the British Secret Intelligence Service. I especially enjoyed General Hayden’s comments and wanted to stand and applaud when he talked about balancing privacy, security, freedom and liberty.
• Mark’s humor in his “analyst” predictions and Larry making fun of Oracle’s T&E policy as he demoed the new T&E bot and the "violations" (see image below) it found in his restaurant line item. Larry joked – “this would never have happened when I was CEO!”
• Steve had promised customers on stage and he delivered and so did Mark. Even Larry mentioned a few customers in his slides.
• I am glad Steve and Larry touched on the SOAR  on-prem to cloud application migration offering.

What I would have liked to have seen in addition

More Differentiated customers: Most of the customers on stage talked about HCM, finance or CRM implementations . 3 years ago that would have been unique.  Now, you hear similar from SAP, Workday, Infor, Microsoft and Salesforce. I would have loved to hear from Rob Carter, CIO at Fedex if Oracle has helped them with their highly automated distribution centers and the telematics and route planning for their delivery trucks. Or if Sherry Aaholm, CIO of Cummins had described if Oracle manufacturing has helped them with MES in the modern shop floor of sensors and robotics. Rather than just announcements of SOAR and the Gen 2.0 cloud, it would have been nice to hear from customers about their experiences with each. We likely will in a few years but I suspect by then the competition will likely have caught up.

More on vertical apps: I have been asking this of all the vendors. After two decades of cloud applications, we have lots of choices in horizontal apps, very little in industry books of record. As a result, by my estimate, only 20% of enterprise apps have moved to the cloud. That’s in the US, the ratio is even lower in Europe and Asia. Unless Oracle and other vendors start investing in cloud versions of industry apps, Mark’s prediction that 80% will be in the cloud by 2025 looks very ambitious.

More on conversions to OCI: Mark similarly projected the number of corporate data centers would be down 80% by 2025. Data center consolidations and moves to the cloud have been accelerating since Mark was CEO at HP and his-then CIO Randy Mott had tried an ambitious consolidation project. It would have been nice to see what percent of customers with a sizable Oracle footprint like EBS, PeopleSoft, JDE applications etc has moved from corporate data centers or hosting partners to Oracle infrastructure. That is a relatively “captive” customer base to showcase the progress towards the 2025 prediction.

More on remedies: With so much focus on security and privacy during the event, Oracle should have shared more on remedies it offers customers when there are breaches and other malicious intrusions. Just talking remedies that come with traditional SLAs is not going to be sufficient going forward

More on Gen 2 and impact on Machine learning : One of the statements I heard (and read) was “Oracle cannot see customer data” with the new architecture. That will be assuring to many customers but it made me wonder how it will impact machine learning. ML works well when we have gobs of data and scenarios to train machines. Not having data across customers will dramatically lower the number of scenarios you can train machines with. I would like to understand how Oracle will overcome this hurdle, a customer opt-in process to allow access to their data etc. 

Less focus on Amazon: Larry spent most of his first keynote benchmarking OCI against AWS. He spent some of the second using Alexa for a demo and baiting Jeff Bezos. He has done this now, two OOWs in a row. This opens up Oracle to other benchmarking against Amazon – capex investment comparisons, frequent price cuts which matches AWS’s run (or at least market perception). I am not sure it wants that scrutiny.

In balance, I liked several of the things Oracle showcased. The quality of the live streams was excellent. I may continue to watch OOW from afar in future years. I better batten the hatches - Mark seems to covet an analyst job with his annual stream of predictions :)

Applications at Oracle Open World: a conversation with Steve Miranda

Oracle OpenWorld kicks off this morning. I am not going this year but I checked in last week with Steve Miranda, Executive Vice President, Oracle Applications Product Development about what we can expect to hear about applications.

I did not go this year because applications often get very little play in a conference where infrastructure and database dominate. After talking to him, I think I should have gone.

Steve:  There will be three main themes. The first, we're going to try to showcase and highlight just a ton of customer success in our cloud. In every keynote, apps keynote/general session--mine, Chris Leone, Rondy Ngs, Rick Jewell, Rob Tarkoff--we have at least two customers on stage with us, live customers, talking about their business benefits.

When we say customers, I've tried the best we could to actually mix it up with big customers, small customers, global customers, domestic, etc., different industries. Frankly, this time, we've got a lot of name brand customers. On stage with me will be Cummins talking about their HR cloud implementation and the business benefits they have achieved. We have Juniper Networks using our marketing and configure-price-quote talking about their benefits and transformations there. I have Federal Express on stage with me talking about their financials conversion to cloud and, now that they've done some acquisitions, talking about expanding that to their newly acquired product and really moving to a single instance cloud financials. Hopefully, the biggest part that you'll get is name brand, very successful customers running all parts of the suite in the cloud.

What we're going to make a particular point to emphasize is the readiness for really the vast majority of our installed base in a couple different dimensions. Number one is, we're at the stage now where, with few exceptions, but just about anybody you are, were we have a customer who has gone live from the cloud, so that's whether you're global or domestic, whether you're HR, CRM, or ERP, whether you're a back office Siebel, PeopleSoft, or E-Business Suite, whether you're a telco, a bank, or a manufacturer. Then you put that matrix together so it's almost impossible to have everything but, just about every matrix, we have a referenceable customer who has already done it, part one.

Part two, over the summer, as you know, we introduced our Soar program together with Oracle Consulting, which is an automated set of utilities, which help customers take the risk and cost away from the conversion and the move to our cloud.

Then the final part. This has been a long effort of not just introducing financials, but then adding supply chain, adding manufacturing, adding globalization, adding HR, payroll, adding globalizations, etc. But, at this stage, again, for the vast, vast, vast majority of our customers, we think that the completeness of our suite is there.

Part one is going to be all about customer success and how we think more customers are taking advantage of the success. Part two is going to be about brand-new products that further expand the suite. We're introducing a new public sector product around permitting and licensing to supplement public sector, state and local, in their traditional finance area. We also introduced a brand new customer data platform in CRM, so a centralized customer data store and repository to sit right in the middle of our CX product suite.

Then, of course, we've expanded our higher education offering. Earlier in the year, we did an acquisition of a company called Vocado, which is a student financial aid system. Added that to brand new offerings we have in our student system that we've built organically here, which tightly integrates with financials and other parts.

Then in financials, we added another product called Subscription Management. More and more customers are offering services, so we added subscription management for the billing, collections, AR part, which is supports organizations across industries.

The third area we're focused on is the technology innovation and that's all going to spiral around machine learning. Machine learning, you'll see it take part in three different flavors.

The first is kind is brand new apps, if you will, or mini-apps or features. Next best offer, we have customers live on, next best action and service, things you would expect, but also things we've talked about in the past: auditing capability in finance, payment optimization for payments, suppliers, kind of a cash management, machine learning application, and then HR candidate matching, so better candidate matching, candidate sorting for candidate ranking, not candidate selection because the potential with bias there, but using machine learning towards that as well. That's one area, again, across all three pillars.

The second area that you're going to see improvements in is what I'll call our traditional HCM UI. Using machine learning to improve defaulting of parameters, to improve general usability and predictiveness of how the UI works. Think of it as your phone. You do text messaging, and it uses machine learning to do autocorrect and suggest next words. That machine learning gets better and better over time.

Probably the final part, and this is where you're going to see most of the demonstrations, is we've added a number of bots that take advantage of our bot platform, machine learning, which are front-end agnostic.

The key here is not just the voice to text, the bot capability to process transactions, but it's the machine learning to allow you to have some intelligence with the transactions. In other words, when you're submitting the expense reports, you can take a picture and send it. Of course, there is character recognition, the machine learning on the character recognition but, also, it's things like policy enforcement or policy suggestions, so not just a bot that processes a transaction, but actually gives you suggestions either on the approval side, what you should approve or not approve, warning signs to say, "Hey, you're submitting this expense report, but it's out of policy." A little bit more using configuration and algorithms of the machine learning to do more than just process a transaction but, actually, give input to the end user.

In summary, it’s all about customer success, new traditional apps coming out, and then machine learning across the board and across channels via bots.

Let me pause there until I get into some commentary to see if that makes sense, but that's the 9 minutes and 42 seconds version of OpenWorld.

Steve, that's excellent. A couple of questions. You mentioned a few verticals. Is there another forum where utilities and telecoms, all the other industries that you guys have strength in, not necessarily in apps, is that going to be covered at Oracle OpenWorld, or is that a different event?

Steve: No, we have different sections within OpenWorld that focus on the GBU apps. Like you said, it's more of a broader look than just ERP apps because that wouldn't be enough to cover a vertical.

Steve, one final comment. You have so much in the apps area. You should think about an apps focused event. You have so much that is not known to the world.

Steve: Historically, we've had HCM World, Modern CX, the Supply Chain Summit here, and Modern Finance In 2019, we will be bringing finance, HR, and supply chain management together under one roof in Las Vegas at the Mandalay Bay on March 19-21 in a conference called Limitless, Presented by Oracle. At the same time and in the same place we will co-locate our Modern CX conference. We are making things very easy and very convenient for our applications customers and prospects.

Great. Send me that information closer to the time.

Steve: Hey, Vinnie. One more thing, if I may. You have been covering us for a long, long time, on this path to the cloud. I think what gets lost in the individual conferences and what we're extremely proud of is this has not been an overnight journey, but the maturity and the time cycle and the readiness of the solution is all now there, I just hope it doesn't get lost because of one conference. This is not an overnight thing.

As much as people get hung up on things Oracle did, said in the past, we've been at this for a long time. Hopefully, that credibility gets recognized because it certainly seems to be coming through with our customers and we're quite happy with it.

Steve, I'm extremely pleased to see you say application customers are going to be on stage. With Oracle, often the messages come through in different ways. I'm glad you're bringing varied customers on stage. It makes your point "Look. We're not Johnny Come Lately. We've been at this for a long time, and we have broad coverage."

You can watch here Steve’s keynote today at 9 am and Larry Ellison’s at 145 pm and his second one on Wednesday 2 pm, all times Pacific.

The 90s called–they want their ERP back

Eric Kimberling shared with me his post Top ERP Systems for 2019. His top 5 are Microsoft Dynamics 365, SAP S/4HANA, NetSuite, Workday and Salesforce (more its partners like FinancialForce).

The post made me wonder what my application analyst colleagues at Gartner in the 90s would say about the state of ERP today. These were studs like Erik Keller, Chris Jones, Art Mesher, Bruce Bond and others. You can credit us or blame us for a large percent of ERP decisions in the runup to Y2K. Without sounding too boastful, we helped tens of thousands of enterprises with their ERP selections, many of which are still running.

In turn, we were also demanding on vendors. Yes we argued architecture – thin v fat client, 2 v 3 tier deployments, but we also demanded functional depth. We challenged their claim of “best practices” and reengineering platforms.  We saw vendors were not doing enough on the shop floor, in logistics, customer facing areas and created new categories of markets like MES, SCM and CRM. We pointed out that ERP vendors had little in way of books of record for insurance, oil and gas, retail, utilities and many other sectors. As a result, vendors like SAP introduced their Industry Solutions, most after the Y2K deadline had passed.

We also pointed out that the payback from ERP was showing low because customers were implementing financials, hr and other back office modules but not operational or customer facing ones. Many were so guided by SIs, especially those with accounting heritages who had never set foot in a factory or warehouse or R&D lab.

Since then, there has been plenty of moronic talk about how manufacturing is dead and supply chains were optimized long ago. The US is still the second largest manufacturer in the world and the modern shop floor is dotted with wearables, 3D printers and robots. Supply chains are being redefined with modern distribution centers and last mile delivery options. Utilities are into net metering and predictive maintenance. Insurance companies are being challenged to rethink business models. Banking is being reshaped by a swarm of fintech vendors. Every process in every industry is being reimagined with automation – drones, AI, autonomous vehicles, kiosks, RPA. There is no industry whose books of records have not been reshaped. It’s time for ERP vendors to wake up from their Rip Van Winkle 20-year slumber and show they have customer citations with these modern capabilities.

Looking at Eric’s list I get deja vu. Most on his list are fine in the back office but not do not have robust capabilities (as yet) in operational areas. They certainly do not have industry functionality (most do around services and PSA, but not in other big chunks of the economy) . Those are the areas that need modernization. Instead we risk making the same mistakes we did in the 90s, helped by a younger generation of the same SIs.

Don’t get me wrong – I was trained as a CPA. I understand the need for robust financials and analytics

But let’s call them that – accounting and hcm in the cloud. Let’s not call them ERP. And like my colleagues did in the 90s let’s push vendors to deliver contemporary and deep functionality, not just talk “cloud” architectures.

And let’s challenge SIs when they talk digital transformation around these narrow footprints. That is today’s codeword for reengineering. The biggest bang comes from smart products, omni-channel commerce and related logistics, modern shop floors not just from modernizing the back office as we did the last time.

AI in the enterprise: a reality check with John Sumser

John Sumser, aka HR Examiner, has been focusing on "intelligent technology" including AI and machine learning as it morphs the HCM function. Trends in that function are a forerunner of what we will see across the enterprise. I recently caught with him on his latest report and what he learned at the recent HR Tech event in Las Vegas

John, what are you excited about when you look at "intelligent technology"?

In the HCM world, it's pretty clear to me that data is becoming infrastructure rather than the stuff that passes through the software. Everybody I have talked to said, in one way or another, that first you have the data and then you have the software, so the software sits on top of the data . Getting the data right is the key to allowing the software to do its thing.

The second thing that was pretty uniform, although I had to prompt it sometimes, is that what now comes out of a machine is an opinion. It used to be what came out of a machine was the facts that you put into it. But, it is decreasingly the case that what the machine gives you is the facts that you gave it. It is almost always, at some level, providing an improvement on those facts, some benchmarking, forecast, context or some insight.

Rather than software being a re-packager of the data that you give it, it's now an interpreter of the data that you give it. That's a big change. That's a really big change. And so, people are starting to talk about that. People are starting to try to figure out how you deal with that.

I ran a session a called "How to Evaluate an AI Vendor," The gist of it was how do you understand data quality and what does it mean? Does the vendor understand their data models at scale? If you've got 5,000 people in your company, you're going to have a million data models.

How do you monitor their health? And, how do you make sense out of the variable quality of the overall data farm when you're making decisions?

When you say it's more opinion and less fact, is that surprising to the audiences? How did they react to that?

It was a lightbulb. It was actually a surprise. Nobody -- I've worked a long time to get that idea that simple, and the notion that machines are now not as reliable from a pure fact perspective causes lots of heads to bounce up and down. "Oh, that's what intelligence means."

One of the things that I've been probing a lot of the bigger enterprise vendors is, you don't have enough enterprise class data. Most of your data is locked up in customer, on-premise systems. You don't have permissions to access that. A lot of what they're talking about is stuff that consumer tech is doing, the image recognition, the voice recognition, and so on. There's very little enterprise data that is really being used for AI use cases.

You're right. The notion that enterprise technology is going to resemble consumer technology is one of the most damaging ideas that we've entertained in enterprise technology. I was looking the other day. I made a reservation on OpenTable for some restaurant in Las Vegas. OpenTable has handled 820 million reservations. With 820 million reservations in your database, you could do things like predict what the menu ought to be and where you ought to locate the restaurant if you want to have a successful restaurant in Western Sonoma County, California. It's a huge database of consumer interest and preference.

If you've got 10,000 people in your organization, you're never going to have that. You can't get to a trillion data points like OpenTable can in a 10,000-person organization.

What happens in those smaller settings is latency becomes a primary problem. Fidelity becomes a primary problem. You don't have those when you have a ton of data points.

We're about to see some expectations being reset in the enterprise space. That doesn't mean that there isn't cool stuff being done. It just means that you will not see what Cornerstone is busy suggesting that they're going to have a recommendation engine for learning videos. You can't do that with little tiny clients.

If you took all the clients in the world, you wouldn't have enough data to make sense out of it. If you had all of the employee data, employees don't handle their interactions with the company in the same way that they do with a consumer product. They don't have daily interactions in their learning system.

I don't have a clear picture of how it shakes out. But, the difference between consumer technology and enterprise technology is going to become increasingly apparent.

Well, tell me where it is promising in HCM AI

First of all, if you wanted to find where a technology rooted in statistics was going to take hold, you'd look at insurance and banking, maybe pharma

So, Allstate Insurance is a really good example. At Allstate, they have built by integrating - it is a patchwork quilt of vendors integrated into a single system that can go from identifying names of people who might be good employees all the way out through the entire acquisition and development process to identifying the kinds of skills that you'll need in the future and the sorts of places where you're going to need to open offices. And, if you get to the place where you're opening offices up, it can help you navigate all the way through the staff problem. That's pretty interesting.

What's even more interesting there is that team is run by librarians. The team that built that structure are the librarians they hired. There are five librarians, five Masters of Library Science on the team.

The reason that's interesting is because, in order to use the next technology, you have to be better at asking questions than having answers. This is what it means when you say that the machine gives you an opinion. But, if you have a boss or a very upset spouse, these are the times when you only need one opinion to make a decision. Every other time, you need multiple opinions when you make a decision.

The worker of the future is going to be better at gathering opinions in order to make decisions. Places where it's easier to have ambiguity be the center of the equation are the places where this stuff is going to tick.

There is a vendor called Bridge that has an integrated LMS and performance management system. The idea of performance management stops being, "Here's how you screwed up and missed your objectives last year," and starts being, "Here's how we're developing you." The manager gets coached through the available material in order to bring the employee along as a developing expert in something.

There's a great one that's for interview scheduling - Ascendify. Their interviewing system identifies the interviewing team by expertise, gives that interviewing team a set of questions to ask individually, and evaluates the results of the interview to see if the information that was asked for was obtained and then revises the question set for the people down the road. It does this while doing all of the coordination necessary to keep hiring interviews scheduled.

Ascendify only works in the Fortune 100. If you're a big company, that process is cumbersome and expensive and often has ten interviews as a part of the overall process. It takes all the administrative load out of that. That's significant. The estimate for Microsoft's interview coordination budget, so just scheduling and rescheduling the interviews, is $20 million. They can zero that out and give you a faster process.

The first wave of things look like those sorts of incremental improvements to existing processes. Over time, what's going to happen is the silos, which look to me like things that are held in place by existing enterprise technology, will start to collapse. It doesn't take very long, if you stand far enough away, to see that employment branding, recruitment marketing, onboarding and orientation training- are all the same task. Because they are understood to take a different point in a workflow or done by a different expert, you have the same task performed multiple times by five different people for different reasons. You can consolidate that under a goal that looks like, how do we shorten the time to productivity for a new employee?

If that's the goal of the entire talent acquisition process, including the training and admin functions that wrap around it, then what you do in the initial moments of contact with somebody who might come to work for you are different than what people are doing today. That becomes easier and more intelligible when you've got data as infrastructure underneath it all

I heard you say some customers are doing interesting stuff. Some startups are doing some cool stuff. Where do the mainstream vendors fit in?

The emerging battle is for the replacement generation for enterprise software. The people who are in that battle are IBM, Google, Amazon, Microsoft and -- maybe Facebook.

In that group, the name of the game is selling commodity processing and storage. And so, they all -- IBM and Google being the first into the market, they all have an idea of an overlay of technology that expresses as functionality. They all already have applicant tracking systems. They all, for the most part, believe that the world is better if you have a taxonomy as the fundamental structure for HCM.

IBM and Google are very quietly duking it out over which is the better taxonomy, but it's pretty clear that, in this particular game, taxonomy is going to be the key because you can organize everything around the taxonomy. If you go taxonomy plus competencies in the places where people want to use competencies, you start to have a magic formula. That's the initial data structure.

If you start with the initial data structure, then you can lay workflow on top of that pretty easily. The next generation of large-scale enterprise providers looks like it's coming out of that area, and they all have recognizable teams.

If you look at what they're doing, it's really interesting. The Microsoft people analytics team, which is both in HR and product development, has 140 people in it. People analytics, the HR analytics team, 140 people at Microsoft. At Facebook, it's 60, and that's 60 people doing HR analytics for 30,000 employees. These are environments where budget doesn't mean the same thing as it does in the customers you and I understand, but partly because both companies are using their internal processes as a way to accelerate product development. There's real interesting stuff up there in the sort of serious cloud providers area.

The next tier down, if you look at Workday, even Kronos -- Workday, Kronos, or Ultimate Software, the ones that pop up on my radar as the best of the bunch, it looks to me like one of those situations where you lift the house up and install a new foundation underneath it. At Workday, it's a planning and data management system. And, at Kronos, it's a layer of intelligence that uses 40 years' worth of time clock data to predict some interesting stuff.

I don't expect to see anything resembling innovation out of Oracle or SAP. They won't go out of business because of it. They have a long, long, long tail on their cash cow, but people are going to have to innovate around them in order to get real intelligence in their enterprises.

Then the rest of it is small point solutions and data manicuring plays.

That's another fairly prophetic statement that it is the infrastructure-oriented Microsoft, Amazon, Google, IBM that are leading the way on big machine learning. Are HR executives willing to accept them as their HCM providers?

Well, I think it's interesting. If you look at Google and IBM's strategy, and they're really out in the market right now, they are largely going for a sort of a Trojan horse play. IBM is inside of Workday and inside of Cornerstone. Google gets their foot in the door by being the frontend of employment websites for 3,000 companies.

I don't think that the way that it happens is these companies come out of the gate on day one selling a comprehensive enterprise solution. They come out of the gate on day one solving actual, significant problems with a meaty difference so that they have the relationships in place that they can build on. They will ankle bite their way into taking accounts. It's not going to be an RFP level competition for a long time but, by the time it becomes an RFP level competition, the game will be over.

SAP CX Live – better afternoons than mornings

I was asked about the couple of days I spent at the SAP CX event in Barcelona this week, and my response was “afternoons were better than mornings”. True enough, given the body was jet lagged.

But even in content, the morning keynotes and press conferences were subdued. In contrast, the small group analyst meetings with execs and customers in the afternoons were much more animated and informative.

Subdued? Well, SAP did raise expectations for this event by giving C/4HANA plenty of attention at Sapphire this summer. It raised expectations even more when CEO Bill McDermott stood shoulder to shoulder with Shantanu Narayen, CEO, Adobe and Satya Nadella, CEO of Microsoft to announce the Open Data Initiative last month. Salesforce raised expectations for SAP with its blowout Dreamforce event a couple of weeks ago. When you use the same venue as the Mobile World Congress, you beg comparisons to the over 100,000 that event attracts – CX attendees, only 4,000 strong were in comparison rattling around in the giant setting. 

There were few customers on stage compared to many SAP executives. In fairness, Christian Klein, COO of SAP  joined Alex Atzberger, President of SAP’s CX unit and described SAP’s own impressive digital transformation. And there was Robotech, a fictional company which reminded me of the Adidas Speedfactory. It was used to describe a company which is moving to agile development and outcome based business models. Both were relevant but would have been so much more powerful if SAP had used live, external customers.

Two overriding themes pervaded the event. The consistent ethos at SAP is “the suite always wins” so there was lot of conversation about the 5 clouds it is bundling in C/4 and the 7 common attributes like common UX and extensibility it is striving to deliver across these clouds. And of course, this led it to the mandatory comparison to competing CRM suites. The second theme was about trust. In the privacy backlash against social media (and what SAP calls “digital natives”) and in the GDPR influenced world, SAP believes customer-centric activities will have to behave far differently than they have in the past. Indeed a guest speaker, Nir Eyal, author of Hooked, went about discussing how modern technology can be used to influence consumer behavior, and ended with a plea for using the power to design healthy habits.

To me, the second theme may have some marketing legs – though there is always tension between the compliance and creative side of an enterprise, and in a revenue and growth hungry world, I would personally bet more on the creative side.  But SAP is not going to easily convince customers to buy the complete C/4 suite, or even many of the components just because it has incumbent ERP relationships. It has tried in the past and not sure why it will do so this time.

On the other hand, it has lots of new features, especially through its acquisitions of CallidusCloud, CoreSystems, Gigya and hybris.  And this is where the afternoon sessions really helped in the drill down.

Moritz Zimmermann, Chief Technology Officer (and co-founder of hybris) described how SAP is re-invigorating the sales function with revenue recognition and sales commission functionality. How CPQ functionality is much more relevant for newer outcome-based business models and a world where digital and physical are merging. How marketing is evolving beyond a traditional world of too many emails and cookies. Volker Hildebrand, GVP, Strategy & Solution Management, SAP Service Cloud described how SAP is redefining field service. The CoreSystems acquisition offers customers an Uber-like platform to find available field service technicians in real-time.  So, a customer like Siemens can use SAP functionality on a per user bases for its own techs and this marketplace for crowdsourced techs and pay on an occurrence basis. Leonardo IOT capabilities allow for a new service  models as industrial assets get smarter and allow for more predictive versus scheduled maintenance.   Jackie Palmer, Global VP Strategy described SAP capabilities in a world of consent based marketing including the role of Gigya, with its customer identity and access management capabilities and in the world of open data that SAP is pushing with Microsoft and Adobe.

It was nice to spend some time with Lorenz Gan, CIO of New Era who uses hybris and Concur functionality, and is still on the on-prem Apparel Footwear version of R/3. It was a refreshing conversation about how he makes decisions on individual applications in his portfolio. He is not a “suite” buyer (he uses PLM software from Centric and may have his outsourcing partner, EPAM custom develop revenue recognition functionality). He does not automatically plan to upgrade to S/4HANA till he is comfortable with quality (the AFS version has had a checkered history) and economics. (BTW, Gen was also on stage but just did a cameo, and went into very little detail compared to what he shared in our breakout) Similarly, it was good to spend some time with Hans Lui of the US sub of Bandai Namco, the Japanese gaming company. They use RevSym from CallidusCloud for revenue recognition and ASC 605, ASC 606, and IFRS 15 compliance. The Japanese parent uses plenty of other SAP software the US sub has not been required to adopt. 

The elephant in the room was the market leader, Salesforce. SAP wisely chose to not publicly take potshots but clearly would like that market leadership. I think it needs to follow a different path. Before it pushes extensibility too hard, it should take a hard look at what the platform around Salesforce has delivered. The reality after a decade is lots of features, very little vertical functionality. Salesforce is also being cavalier hyping up its Trailblazer and services ecosystem forgetting that adds to customer costs. It is pushing values that many of its customers wish it would low-key. Those values play better with younger consumers and workers, less so with corporate executives who buy enterprise software.  SAP runs the same risk if it pushes trust and other value statements too hard. Also, SAP itself is under pressure to change its own customer facing posture. It said the right words like “It’s our customer’s data, we don’t own it. It’s not ours” but it needs to become much more comfortable answering questions about Indirect Access and why customers will allow it to come close to even more of their data.

SAP will continue to talk about how the “suite always wins”, but to me it is specific, differentiating features which will allow it to win in the trenches, bottoms up, cloud by cloud. And there it is building a formidable portfolio of features. My hope is it continues to invest heavily at that layer not just in bringing consistency across the clouds. And that it starts to mine its vast customer base for digital transformation stories, particularly across industries it has dominant presence in.

Circling back - now that I have returned to the US, mornings should be better or certainly more productive than afternoons, especially with my new found recipe from Barcelona. I was impressed at the many fruit markets that dot the city. And the plentiful sangria!

SAP’s Rainbow Coalition

I spent a day at SAP TechEd this week. I was there primarily to meet some customers and execs for interviews for SAP Nation. I knew the theme of “open” would be prominent during the event, but I was not prepared for the extremely wide range of tools and technologies that now define SAP Nation.

SAP had a series of bins with pins for developers to vote for their language of choice. I walked around the show floor with Brian Dennett, a SAP Mentor and now co-founder of Enable.ai. He proudly showed off his Python pin. I expected most at the event would similarly be showing off their machine learning chops or Java pins. I was blown away the ABAP bin was empty. As ABAP migrates to SAP’s Cloud Platform, the 35 year old language continues to flourish. 

We had a meeting with Maricel Cabahug, Chief Design Officer at SAP. The world of UX is mind-blowingly complex. Mobile trends on iOS and Android. Social/collaboration trends driven by Facebook Workplace, Slack and others. Digital assistants like SAP’s CoPilot and many others.  Listening to her, you see expectations change dramatically as you move within an enterprise. Customer facing marketers are far more UX savvy and demanding than workers on the shop floor. As you move around the world, you have to reflect expectations of chat and emojis common in China. And yet, you step back and many customers migrating to S/4 are asking for the old keyboard and mouse driven SAP GUI interface that SAP has been maligned for! It makes the user transition easier they say.

AWS, Azure and Google had big booths at TechEd. In Asia, the Alibaba cloud is gaining steam. Many customers are choosing to deploy on SAP’s own data centers. Many of SAP’s outsourcing partners deliver private cloud proposals with their own hosting partners. The matrix of on-prem/private/public single/multi tenant deployments continues to morph. 

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HANA was front and center at TechEd, as it has been for several years. Yet, SAP’s own cloud acquisitions like SuccessFactors have been slow to move to HANA. S/4HANA today only covers a small part of the enterprise -  most SAP customers continue to live with Oracle, SQLServer, Sybase and DB2 in surround applications. It is an open database world in that sense.

There are two ways to look at this variety. You can cringe at the complexity of so much heterogeneity. Or you can admire SAP’s multiculturalism and its “wide open tent” philosophy. The tapestry of different shapes and colors does make for a striking piece of art.

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A different Vegas. A very different Workday.

This was my sixth trip to Vegas this year. Coming from humid Florida, I have a routine for that city. Gallons of water and lotion to compensate for the heat and dryness. Gear to protect against the excess of artificial light and sound. But this time in town for Workday Rising, Vegas felt a bit different. The remnants of Hurricane Rosa cooled it down to pleasant levels. The ceremonies honoring the anniversary of last year's mass shooting gave the city a bit of humility.

Rising also felt different. CEO Aneel Bhusri justifiably missed the event due to a family emergency. While his executives made up in energy, I missed the annual comedy routine he and co-founder Dave Duffield put on. In many other ways, Rising was different.

Analytics as the third “pillar”

There was palpable excitement about Prism Analytics launched in the last year. Many customers see it as democratizing complex analytics and bringing the wizardry of teams of expensive data scientists and complex platforms like Hadoop to the average user.

Prism was spawned from the Workday acquisition of Platfora. Its collaborative Worksheets grew from the acquisition of Gridcraft. Many other small acquisitions other the last few years have helped built Workday's machine learning chops. It is safe to say Workday has been building a third pillar of intelligent apps beyond its first two transactional ones in HCM and Finance.

The Adaptive Insights acquisition, Workday’s largest so far, was an resounding endorsement of that third pillar and got plenty of play at Rising. Releases 32 and 33 due next year will heavily feature planning functionality, improve Adaptive look and feel, and importantly expand it significantly beyond its financial planning roots.

For a few years now, I have felt HCM world has been out of touch with the realities of the labor economy. As a result, we have ended up with gross mismatches where 6m blue collar and trade jobs are unfilled, and on the other hand we have too many white collar graduates with $ 1.5 trillion in student debt.  Less than 10% of the civilian workforce is on the payroll of F500 companies. The rest are not in the so called gig economy. They are in Tier 1 and 2 suppliers. They are in accounting, advertising, attorney and other service providers. They are on platforms of companies like amazon, eBay and Apple. They are in franchises of companies like UPS and Ace Hardware. Talent management software has missed this transition to a clover-leaf  labor model . You have an economy with rapidly changing occupations and skills (the Bureau of Labor Statistics recently expanded their list of occupations). Every occupation is being re shaped by a wide range of automation like robotics, drones, wearables. HR seems vaguely interested in automation trends. Given all this, I was pleased to see Workday announce their Skills cloud - a taxonomy of 55,000 skills based of winnowing down using ML from over a million user defined skills. That is a start to bring rigor to HCM, and hopefully to start to correlate it better to the macro job economy. 

The relative de-emphasis of industry verticals

If Analytics is getting plenty of attention at Workday, something else may have to give. In my view, that is investment in vertical functionality.

As I wrote recently I have been disappointed with the pace of verticalization in cloud solutions. Way too many vendors spray paint an industry specific feature or two on top of their horizontal financial, HCM or CRM modules and call that verticalization. My expectations for verticalization are more demanding from two angles

- I want to see a significant industry “book of record” offering. If you say you are committed to retail, I want to see a robust offering and a sizable customer base in the merchandising area. If it is insurance, show me similar around claims processing. If it is utilities, I want to see a billing engine, and one for complex asset management and maintenance.  If it is healthcare, show me electronic patient records. If it is oil and gas, show me functionality their geologists consider critical.

- I also want to see contemporary functionality. Show me something customers can plan a serious digital transformation around. So, for example, if you say you are committed to manufacturing markets show me execution support for a modern shop floor with robotics, sensors and wearables.  For utilities, show me support for net metering and for plants fired by renewable fuel.

From my more demanding definition, Workday has truly verticalized only in higher education. While it has features which are aimed at specific industries, it does not have books of record. It is increasingly clear it sees a much better path to keep investing in its three pillars. I cannot fault Workday for that focus, just worry its horizontal sandbox is attracting too many other players even as much of the white space in industry functionality gets little attention.

The emergence of Workday Ventures and the Workday platform

At Rising, I was invited to a breakout with 12 portfolio companies in the new $250M Workday Ventures fund. The billing was “The companies in our portfolio solve problems that we don't solve natively in our Workday applications. Our portfolio companies leverage the latest technologies and have proven that they are ready to serve our enterprise customer. All Workday Ventures portfolio companies are now official Cloud Connect Partners and are using our APIs to build integrations.”

I meet with 3 portfolio companies.  Voicera offers Eva, an in-meeting AI assistant. Eva will take notes for you in meetings, or conference calls, or interviews. Indeed as I was taking notes, I noticed Eva was live-transcribing our conversation. I quit writing and asked Omar Takawol, CEO to send me a transcript. I had previously met Omar when he sold BlueKai to Oracle. I have a feeling Eva may play a big role when I write my next book.

Next up was Pymetrics which develops  neuroscience games to help companies rethink their talent management strategies. I had previously profiled CEO Frida Polli on New Florence. Suplari provides unified insight into indirect expense spend - contracts, spend across AP, P-card, T&E, POs, and invoices, as well as usage and consumption data. CEO Nikesh Parekh joked the company name has roots in consigliore from the Godfather books and movies.  Each of the portfolio companies I met was impressive and I wish I could have spent time with the other 9.

Leighanne Levensaler, SVP of corporate strategy and co-head of Ventures explained their investment philosophy. Their biggest KPIs, beyond a fund’s expectation of investment returns, are Workday customer adoption and embrace of emerging Workday platform technologies. On the first point, she said they had arranged for over 150 meetings between existing customers and portfolio companies at Rising.

I went over to SAP’ TechEd a mile away in Vegas after the Rising event. It gave me a glimpse to a parallel universe we may similarly see emerge around Workday as its own platform evolves. A world of Mentors and geeks who are way more comfortable talking Kubernetes than about building blocks of organization hierarchies in Workday. 

Workday organized an analyst dinner at a restaurant with a large balcony. The temperature was pleasant but the noise and neon signs of Vegas bombarded your senses. I looked up and saw the desert sky. It took me to many pleasant memories of shooting stars and the haunting silence my wife and I have enjoyed a short distance from Vegas in Death Valley in CA, Antelope Canyon in AZ and Zion National Park in UT. It reminded me Vegas is a gateway to a whole different world.

Workday is becoming a similar gateway to the rest of the enterprise. While they are moving away from a transaction focus, their analytical and ML chops will open up new insights, and their platform will introduce a new set of developers and startups to the rest of the enterprise. It's their way of transitioning from a system of record to a system of insight. 

Two HCM institutions

As Workday Rising kicks off in Vegas, it is time to also recognize two other HCM resources which allow us to keep annual tabs on the changing face of HR

HR Executive magazine announces their annual list of top products

“This year’s winning products represent the full gamut of priorities facing HR leaders: from employee financial wellbeing to learning and development to talent analytics. As was the case in the last few years, a number of leading solutions are in the area of talent acquisition and screening. The 2018 winners also illustrate the increasing prominence of artificial intelligence and machine learning in emerging HR technologies.”

The Sierra-Cedar 2018–2019 HR Systems Survey White Paper, 21st Annual Edition focuses on strategies, processes and vendors in six primary categories and 54 individual application areas.