deal architect

SAP Nation 3.0 excerpts: Chapter 7 Diversifier customers

My new book is now available to buy here in print version, and in the Kindle eBook version. As with my earlier books, I am excerpting roughly 10% of the 400 page book in a series of posts on my two blogs.

In this chapter, I covered the third category in the four customer types in the book - Risk-takers, Modernizers, Diversifiers and Bystanders. Diversifier customers. In the first volume of SAP Nation, we had described the early wave of Diversifiers. They were “ring-fencing” SAP with cloud solutions, trying out two-tier models, TPM and private-cloud infrastructure. This group continues to expand and experiment. The big difference we noticed this time around was in some cases they are diversifying back to SAP products.

Here are excerpts from 4 of the 12 case studies in the chapter

'In the hypercompetitive software vendor world, Unilever could be construed as giving up on SAP. Actually, like many CIOs, Moran is merely diversifying her portfolio. Moran told CIO UK, “Working with SAP, they helped us put together the internal business case to move forward with S4/HANA. We’ve found that having HANA on our databases has increased performance five to 10 times when we have HANA sidecars.”47 In that article, she also talked about her other strategic partners: Microsoft, AWS and increasingly Google. Unilever also has a Foundry that, since its launch in 2014, has facilitated 100 pilots between start-ups and Unilever brands — stimulating and facilitating experimentation across the global footprint. It’s all part of diversifying the portfolio, and SAP continues as a key component.'

Andre Blumberg at CLP Group in Asia Pacific.

'The more interesting project which is our focus now, is to look at global disruption, industry changes and technological innovation. When you look at the Apple iTunes store, the Google Play store, Amazon, Alibaba, etc. you see how the platform business model has disrupted many industries. We’ve been looking at what a platform business model could look like for our sector — so what is the “energy internet”? What is the Amazon equivalent for a utility company? We are working on that now and how we can bring ecosystem players together to provide added value for our customers. How can we establish that on a modern public cloud PaaS platform so that any third-party ecosystem player or start-up companies can join our platform and work with us? That way, we don’t limit ourselves when it comes to innovation. That’s a much more exciting discussion and we’re working primarily with proven public cloud companies, particularly Amazon Web Services. It will be interesting to see how the global public cloud providers play out in the Asia-Pacific region over the next two to three years.'

Bryan Bee at EBSCO

'We had a healthy skepticism when we started the process. It took us a while to get our head wrapped around the service provided, the risks, and interoperability issues. As we went through that journey, we became comfortable and we concluded going with Rimini was an acceptable risk. Once we did our initial due diligence, we engaged both our business stakeholders and our developers. We did multiple reference calls and each time it was like, man, this is too good to be true.'

Paul Wright at Accuride

'Functionally, there’s no doubt in my mind that with SAP, we’d be compliant anywhere we wanted to go in the world. In today’s world, that’s important. We had a choice when we were going to Russia. I had a choice. I could have said, ‘Let’s figure out how to do with this with Plex and Workday. Or, let’s do this inside SAP.’ I mean, at some point, unfortunately, the government regulations are going to drive what you can and cannot do as a business, and it was just too risky to do something else in Russia, even if we wanted to, so we stayed with SAP.'

The joys of book reviews

I saw an article aimed at authors and publishers on how to handle critical reviews. And I chuckled to myself  "I could have written that myself"

I took most heat for the first volume of SAP Nation - mostly from SAP fans and partners. It was actually a generous history of SAP as it grew from small German vendor to global powerhouse. What I drew attention to was its poor handling of partners and the massive costs and project failures in the ecosystem. Five years later, I can say with some pride that it had a significant impact. The strategies I highlighted in the book like ring fencing with cloud, two-tier ERP and third party maintenance have gone mainstream. Also, in writing volume 3.0 I saw customers have become cautious in their use of large SIs, they are minimizing change as they move to S/4 etc. That to me is gratifying. I was talking to the customer audience and many of them have benefited from the book.

I was criticized for not being alarmist enough with Silicon Collar. The book came out when prominent Oxford profs and Gartner analysts were screaming about catastrophic job losses from automation.  Mine was a tone of optimism - automation makes us safer, smarter, speedier workers. Machines typically impact repetitive tasks not complete jobs. Automation takes time to mature, it is not cheap. History has proved me right so far. Very few job losses from machines. We are pushing back dates for autonomous vehicles, for payback from machine learning. Two disappointments from the book- I had hoped SIs and outsourcers would automate their own operations - but they are mostly sticking to labor intensive models. The other was software vendors would reshape processes to reflect growing drones and telematics in logistics, sensors, 3D printing and wearables on the shop floor, robotics everywhere but it may take a wave of greenfield vendors to come along to do that.

I am starting to hear criticism I am "too nice" to SAP in the latest, volume 3.0 of SAP Nation. I am actually pretty tough on SAP in a number of chapters. What I do point out is how little its competition has evolved in the last 5 years. So many missed opportunities. Some of the criticism is coming from them for highlighting their performance. To me, again, that is background noise. The book gave me a chance to highlight 200+ pages of case studies talking about a slew of new SAP products. Hopefully, the customer audience benefits from that and sees that this is not "your Dad's SAP". And the competitors realize the clock is reset and they can show much more progress by the time I start to write volume 4.0 in the series.

I tend to be a tough critic myself. The New Polymath was one of my best reviewed books and it was gratifying to get a number of comments about people wanting to expand their own skillsets. What I had hoped in addition was it would spur Polymath organizations like the GE Global Research Center I described in the book "Conversations in the cafeteria, in the hallways, and at the 40 - room lodge attached to the center effortlessly drift from pathology to holography, from one “ aha ” to another. The Global Research ethos is “ Innovation occurs at the intersection of disciplines. ” So, put chemists, mathematicians, engineers of all stripes, and biologists in close proximity and who knows where the conversations will lead."

The New Technology Elite was about smart products (analog products made digital with software, sensors and satellite support)  and covered design, IP issues, the application of Moore's Law, a need to plan multiple releases, product documentation and training and a number of other dimensions. I see so many smart products launched in the last decade which could have used that advice. You wonder, for example, how things would have worked out if Boeing had provided better documentation and training around the MCAS software and the Angle of Attack sensor on the 737 MAX.  

I write books to stay in touch with practitioners - my case study heavy style makes me reach out to over a hundred for each book. They provide me the reality checks and validations for the themes of each book. They also provide fodder for our advisory work. The ultimate compliments and criticism also comes from them, not from social media. Nothing is more pleasant than a note from a client which says "thank you from saving us from a $50 million mistake" or "you forced us to consider couple more scenarios we had not factored"

Having said all that, I happily sign my books, and enjoy presenting on themes from my books especially to audiences on campuses. See you at an event soon. 

The bad old days of consumer tech

Not a day passes without some harsh story about Facebook and data protection. How un-innovative Apple has become. Why Amazon should be broken up. Why Google should be regulated.

And I ask do these folks not remember the days when consumer only got technology dregs? It was not that long ago. Elite government agencies got the best in satellite, computing and other support. Then came corporations. Consumers, if they were lucky, came much later in the technology lifecycle.

Today, consumer tech leads enterprise tech in capability and design. Enterprise software repeatedly turns to consumer tech for innovation. Mobility, multi-tenancy, cloud infrastructure, machine learning - the leadership has not come from IBM or SAP. It has come from Apple and Google.

I think of this every time I hear Mark Hurd, co-CEO of Oracle, present in keynotes. He particularly likes to point out that consumer spend on technology has caught up to enterprise spend — annually about $1 trillion each — and is growing faster. Even more dramatically, over 80% of enterprise tech is spent on keeping the lights on, not innovation. In contrast, the consumer is getting almost pure innovation for her dollar.

Enterprise tech vendors — especially ERP/ CRM vendors, their systems integrators and other partners — were set to dominate the technology landscape in the late 90s. 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 market steadily declined over the ensuing two decades. They missed out on the contract manufacturing of smart products, digital advertising, cloud infrastructure and several other trillion-dollar markets. Two decades ago, not many of us had heard of Foxconn which has delivered billions of iPhones, iPads and smart products. Few of us considered Amazon or Alibaba as tech vendors. Few of us would have speculated that Apple, near dead, or Google, not born yet, would have many times Oracle or SAP’s annual revenue.

To me, that has worked out better for consumers. Enterprise vendors have delivered nowhere near the price/ performance improvements or innovation that consumer tech has seen. It should be no wonder then that the tech the consumer gets at home on Sunday night or in her car is so much better than what she finds at work on Monday morning.

So, let's ask for a vote - how many consumers would give up the advertiser funded or subscription models and sign up for enterprise licenses and audits? So, we can criticize consumer tech for data privacy issues, but honestly, it is a tradeoff consumers have been willing to make. Us smart folks making snide comments or worse forcing GDPR type regulations are not doing them many favors.

Talking about regulators, let's look at their track record with tech. They have not fixed spam email and phishing, robocalls with IRS or Microsoft scams, misleading or fraudulent TV ads. Honestly, those cause way more damage to consumers. Regulators have given immunity to telcos after they violate our privacy rights - why do we think they will do better with consumer tech? GDPR to me is "feel good" legislation like Sarbanes-Oxley was post-Enron. Lot of noise and expense but little in results.

Be careful what you clamor for. You may bring about the bad new days of consumer tech. And that is not what tens of millions of consumers, including me, want. Respect our ability to make choices.

ERP: Moving Fast and Yet So Slow

A guest post from Ton Dobbe, Chief Inspiration Officer, Value Inspiration

"Every week I interview entrepreneurs and experts from around the world to share their big idea about new forms of value creation and the potential we can unlock when technology augments the unique strengths of people to deliver remarkable impact.

I got inspired by the release of the book SAP Nation 3.0, hence I invited its author, Vinnie Mirchandani to my podcast. We explored the changes in the ERP landscape over the last 5 years, in particular amongst the big 3 – SAP, Oracle and Workday. We also explored why after 20 years of ERP in the cloud today there’s still not enough traction.

The thing that triggered me most from my interview with Vinnie : "Cloud ERP has been around for 20 years now. But after 20 years, both the customers and the vendors are just not moving quick enough. Something's not right."

Vinnie’s conclusion is so true. If you compare the transformation in the ERP industry with other enterprise software categories, it’s transforming fast, but too slow. He outlined a range of reasons for that:

1)         Lack of functional coverage: ‘If you plot functional coverage by global world region, by industry, by business process only about 20% is filled. So after +20 years, the vendor community hasn’t delivered enough.’

2)         Not enough shift in value: ‘Data is one of the biggest selling points of cloud, you know, we are gathering a lot of data. That should allow us to do some really unique things that we couldn't do before. That’s simply not happening yet’

3)        The partner community is holding things up: ‘Partners are selling mostly private cloud or on-premise solutions. Partners want to continue to do what they always did: implementations, upgrades, application management.’

4)         Buyer fear. ‘The memory of the last implementation is still holding back a large number of buyers. Many of them just customized the heck out of their old ERP system and they're worried that they will lose the customizations if the functionality in the new product isn’t rich enough.’

So, it’s a chicken and egg dilemma that’s needs a breakthrough. And the breakthrough won’t come from continuing to move traditional solutions to the cloud to continue to do their traditional thing. From my perspective, there’s a large-scale opportunity in the market for any of the vendors – established or new – to shake things up but taking a fresh perspective on ERP.

We discussed a number of opportunities to unlock the status quo, here’s a summary:

1)         ‘Don't just modernize the technology, modernize the business processes.’

2)         Verticalize – what is wrong with offering claims processing or retail merchandising, or insurance billing, or utility asset management and so on. Those industries are screaming for cloud and in memory solutions for that.

3)         Get systems integrators to apply machine learning and automation to their own business. It's amazing how many systems integrators still sell bodies, when over the last 30 years they've done millions of ERP projects and millions of CRM projects. Why aren't we training machines to do configuration. Why aren't we doing automated data conversion.

In all three examples it’s data that’s the magic ingredient to unlock a large-scale and untapped opportunity to create a shift in value. As Vinnie quoted: ‘Up to now a lot of the machine learning that is showing up in the ERP space has come from the work vendors like Amazon and Google have done with image recognition, and voice recognition and so on. To me, the big, big, big payback will come when we can take enterprise data. Our own productivity, our process productivity needs to dramatically improve. It's not about it's not about replacing humans; it's making them into super workers. ‘

Listen to our interview about the evolution of the ERP space, and the large scale opportunity this leaves to creates shifts in value in a world that’s progressing, but not quite fast enough."

Groan - yet another TLA

Every good analyst is entitled to coin a couple of TLAs in their career. It is a badge of honor. So, I certainly understand why my friend Phil Fersht and his team at HfS have coined a new one IAP - Integrated Automation Platforms to evolve today's RPA or Robotic Process Automation.

"RPA provides a terrific band-aid to fix current solutions; it helps to extend the life of legacy. But does not provide long-term answers." they say

I groan because I am sore from TLAs. In my new book, SAP has so many new product names and TLAs that my editors recommended a glossary at the front of the book. Imagine what my poor transcriptionist had to go through to interpret all those TLAs in 20+ accents of the interviewees in the book.

But back to IAP. I hope Phil and team consider a couple of things

a) putting systems integrators on top of their graph sends the wrong signal. We should be highlighting automation - not more expensive labor and "change management". Besides, it would be nice to see SIs showcase automation in their own operations.

b) automation is about way more than white collar processes. In my book Silicon Collar, I had case studies of BP using drones and autonomous vehicles in remote, harsh parts of the globe. UPS with telematics guiding its trucks, factories with wearables and sensors, hospitals with tow bots, wineries with automated irrigation, waste management with robotic arms on garbage trucks, CGI at digital agencies, Exari (which Coupa announced today it is acquiring) which helps mine complex contract data, and many other examples including RPA.

So, hope Phil and team plan to start covering a broader range of automation, especially in operational areas.

Drama in enterprise computing

Ray Lane, a top-notch tech executive and investor over decades, said this about my new book

"Don't be fooled by the title—the book is not just about SAP. It's about drama in enterprise computing."

I then used "drama" in the title of my recent ZDNet guest column.

Drama? That's what you get in Augusta in April. Isn't enterprise tech boring and glacially slow?

You be the judge.

My book catalogs the product launch machine SAP has become and the fact that its customer base has grown 50% in the last five years. It was on the ropes, the competition could have delivered a knockout punch but it has bounced back impressively. 

Of course,  SAP is also generating a lot of interest and emotion with its recent layoffs and executive moves. From an investor point of view, CEO Bill McDermott has created excitement by promising to double its market cap in four years

Marc Benioff of Salesforce told Jim Cramer of CNBC a few weeks ago " I see $30 billion right around the corner. In fact, we initiated a 4-year guidance today, Jim, of $26 [billion] to $28 billion."

How can that not make your heart beat faster?

Last week, in his coming-out party since he joined Google several months ago, Thomas Kurian made quite an impression.

Also last week, at a SAP Analytics event, mostly under NDA, I expected to hear plenty about coopetition with Google, Oracle and IBM. Instead I kept hearing about Microsoft with its Power BI, Surface, Azure ML, Office 365 and other products.

Oracle and IBM were similarly snubbed by the DoD as it shortlisted vendors for its $ 10 billion JEDI cloud contract. One contract should not mean that much but the twists and protests in that one certainly count as drama.

When a case ends up at the Supreme Court of the US, it usually makes for some some oohs and aahs. When all 9 justices vote unanimously on something, it certainly perks you up. That's what recently happened to Oracle in its long running litigation with Rimini Street.

One of the nice things about the Amazon Kindle is a feature called "Popular Highlights". Amazon combines the highlights marked by all Kindle customers and identifies the passages with the most highlights. For my book, this statement by Mark Hurd has already qualified for that honor. "In October 2018, Oracle co-CEO Hurd predicted that 80% of business applications would be in the cloud by 2025."

That para goes on to say "Today, even after two decades of cloud computing, industry and geographic coverage is spotty — by my estimate, less than 20%. For Hurd’s prediction to prove accurate, it will take massive new investments in upgrading industry functionality." Will Hurd's own products grow rapidly and get a lion share of his projected 80%? In January 2006, Oracle had confidently declared they were "Halfway to Fusion". 13 years later, Oracle still mostly talks finance, HCM and CRM. NetSuite, even after 20 years, has limited global coverage as Phil Wainewright points out here or industry coverage as I point out here.   

In the meantime, in China, Kai-Fu Lee, who has been called the “Oracle of AI” has funded nearly 150 AI start-ups. At Davos earlier this year, the theme was Globalization 4.0 which shows that Industrie 4.0/IoT concepts are spreading worldwide. Holger Mueller of Constellation opines about platforms "Why Open Source has won and will keep … winning.”

Augusta generates drama for 4 days. Enterprise tech takes a bit longer. But it has its share of comebacks and black horses. I will have a front row seat as I start planning for SAP Nation 4.0.

Or may be it will be titled Oracle Nation 1.0 or Workday Nation 1.0. That right there is plenty of drama.

SuiteWorld Redux

Oracle sent me the video of the product session at SuiteWorld which could not be webcast live when I wrote the post Unfair to NetSuite?

Of the 7 webcast keynotes I watched at Oracle MBX/MCX and at SuiteWorld this was the most relevant to me as an analyst. Gary Wiessinger,  EVP Products did a nice job covering a wide range of product topics.

Here are some thoughts after watching this session

- Oracle has a nice early testbed for its OCI and autonomous database. 3 years from now NetSuite will look unique in a market where most other application vendors are being platformed on Amazon, Microsoft, Google, Alibaba and other clouds. Time will tell whether that flavor of "unique" is something to celebrate.

- Oracle is also helping NetSuite become more global. However, I found the global metrics NetSuite shared a bit confusing. At last year's SuiteWorld they said they had users in 199 countries, this year is was up to 212 countries. Their web site still says 110 countries. Much more important is how many countries they support with functionality, languages and local presence. They said they added 21 new countries with local functionality. Their web site says they support 20 languages. All good progress but would be nice to see how many two-tier implementations they have sold with Oracle apps at HQ. How deep is the local functionality - most countries have provinces,  unique nuances.

- Where Oracle does not appear to be helping NetSuite is in verticalization. I saw a slide from SuiteWorld which showed NetSuite supporting 7 verticals - Retail, Wholesale Distribution, Manufacturing, Software, Services, Agencies and Nonpofits. At the last SuiteWorld, Paul Farrell shared with me they were moving into micro-verticals. What Gary showed this year went the other way. They would qualify as two "macro-verticals" - Products and Services. At that level of abstraction, the functionality is largely horizontal. To me, commitment to verticals means showing 2-3 unique operational systems of record in an industry - claims processing in insurance, clinical systems in healthcare etc. -  not just a couple of features.

One thing I definitely appreciated - even though it was a bit corny, the beginning of the session had a nice tribute to founder Evan Goldberg, one of the original cloud pioneers who continues to be a nice, approachable executive.

SAP Nation 3.0 excerpts: Chapter 4 A Massive Pivot

My new book is now available to buy here in print version, and in the Kindle eBook version. As with my earlier books, I am excerpting roughly 10% of the 400 page book in a series of posts on my two blogs.

In this chapter, I summarized a wide range of conversations I had with SAP execs and watchers from trends in developer communities, to UX to CX to SAP openness. I saw so much change that I am not that surprised with recent layoffs and executive moves. 

"Cohen’s argument about retiring customizations makes a lot of sense, but bear in mind many of those modifications were written a decade ago or even further back. Will standard SAP software reflect 2009 practices or that of 2019? In the last decade, the shop floor has seen automation in the form of robotics, wearables, 3D printers, etc. As we will see later, global companies are moving plants across borders at startling rates and need agility they did not a decade ago. In fairness to SAP, Oracle and Infor have the same challenge. Also, many customers don’t want to make big moves in ECC and then make a second transition to S/4. They would prefer a single move.

Cohen talked about a multinational customer who asked, “We love your public cloud but you have to offer us 189 countries localization out of the box.” “I told him, ‘I have only 64 today.’”

Customers don’t want to regress from functionality in ECC and other current products. And they don’t want multiple projects and change initiatives. As fast as he and SAP are moving, many of his customers want him to move faster."

"Atzberger is fighting plenty of cynicism. Reaction from a couple of customers to the C/4 announcement: “five years too late” and “CEO McDermott arrived at SAP from Siebel 15 years ago … what took him so long?” Several analysts reacted to my post, “Salesforce is Vulnerable” by adding “Yes, but not by SAP.” One snarkily wondered if SAP’s branding team had vetted the fact that C4 is a plastic explosive.

SAP is going after the CX market differently this time. It has lots of differentiated features, especially through its acquisitions of CallidusCloud, Coresystems, Gigya and hybris. The sales function is being redefined with Callidus’s revenue recognition and sales commission functionality. Meanwhile, hybris Commerce, CPQ and NBA functionalities are much more relevant for newer outcome-based business models and a world where digital and physical are merging. The Coresystems acquisition offers customers an Uber-like plat- form to find available field service technicians in real time. So a customer like Siemens can use SAP functionality on a per-user basis for its own techs and pay for a marketplace for crowdsourced techs on an occurrence basis. Leonardo IoT capabilities allow for new service models as industrial assets get smarter and allow for more predictive versus scheduled maintenance. The Gigya acquisition, with its customer identity and access management capabilities, is more relevant for a world which is moving past email blasts and overused cook- ies. SAP CEO McDermott stood shoulder to shoulder with Shantanu Narayen, CEO of Adobe, and Satya Nadella, CEO of Microsoft, to announce their Open Data Initiative. It was also a vivid display of “coopetition”: Adobe and Microsoft compete with SAP on many a CX opportunity."

" The world of designing the user experience is mind-blowingly complex — mobile trends on iOS and Android; social/ collaboration trends driven by Facebook Workplace, Slack and others; digital assistants like Alexa, Siri and SAP’s own CoPilot.

Listening to Cabahug, you see that expectations change dramatically as you move within an enterprise. Customer-facing marketers are far more UX-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."

” Grassl agrees:

“When I talk to my peers at developer relations in other companies, I get the same feedback. It’s a very tough market to get and keep developers interested in your products.”

He then countered with the following:

“Let’s start with who do we target. Does it make sense for us to go after a broad, less-professional developer? It doesn’t help us to get a developer who knows HTML and can create a small app for a web page. We drive programs to show them the [enterprise] career path — but it also requires work on their side, to learn and build up the skills.

At SAP, we accelerated our focus on developer relations about five years back. There are a lot more things available from SAP than in the past. Also, we use the term “developer” very broadly at SAP. It includes sys admins, technical people and business user-type developers. We have focused on three main activities."

" Matthias Steiner, Head of SCP Evangelism, explained the move to me:

“We are articulating that this is not your grandfather’s ABAP. It still uses a lot of the common technologies that have been floating around within the SAP ecosystem for a while, like HANA core data services. Of course, we recommend using UI5 and Fiori, so it’s just a stepping stone. It’s just making it a little bit easier for our one million ABAP developers as they up-skill.

We still believe that for all those hesitant customers, the best way to get started with cloud is this whole topic of user experience, because the elephant in the room is data, security and information privacy. If you leave the data where it is and just use the cloud as the catalyst to expose this data to the outside world, make it accessible to the end users, and typically this is what we do with Fiori-type applications, then you can familiarize with the technologies. For these things, pick something which is not mission-critical, so you have a little bit of time and no pressure to familiarize with cloud.”

"Klein is now using that experience to help market S/4 and SAP cloud properties to other global companies seeking similar transformations. He is on a quest to help them become what SAP calls “intelligent enterprises.”

“We are tackling the whole value chain at SAP. We are looking end to end, looking at marketing, sales, finance, service and support, cloud operations and the cloud infra- structure. That’s the first aspect of our transformation. Next, we are infusing machine learning, IoT, predictive analytics and these new technologies to bring the intelligence into play.

It’s about adapting business processes to the new digital age. It’s about fixing the data architecture. Last but not least, it’s about change management, and taking the people with you. In the end, everything that we do in the cloud impacts our 90,000 employees and our 400,000 customers.""

" Fanelli says she has the opportunity to move partners from a historic focus on reselling and implementations towards a broader role in helping customers become Intelligent Enterprises. Partner performance will be measured on customer lifetime value and their success.

SAP has a long history of building similar apps ecosystems around Fiori apps, HANA apps, mobile apps, etc. This time around, the customer access is much more digital. SCP leverages a lot more open source, and the barriers to partner participation appear lower.

At this point, it is a fledgling in terms of revenues for both the ISVs and for SAP (Fanelli says focus is adoption prior to monetization), but there is significant promise.

This time, she has new platforms to benchmark against. In the last decade, Apple has generated tens of billions of dollars in revenues for its partners and for itself from its iOS store. Amazon with its fulfillment engine has done the same. She can help SAP dream much bigger in this round."

" A few months earlier, I had seen him next to Jon Bon Jovi at another event. The hugely popular musician opened up about going through a very dark, personal phase. He was openly vulnerable. McDermott, in contrast, was positive as ever, quoting from Teddy Kennedy’s “the Dream shall never die” speech. There was no mention of his own personal tragedy.

It’s not just this accident; the man has also navigated being a cross-border CEO."

" I am only describing the tip of the spear — these executives are just a small handful of the 95,000 worldwide SAP employees. The pivot at SAP in the last five years has truly been massive. And the pivot will accelerate, as SAP announced in January

2019 a restructuring where it “will reassign some employees and offer early retirement to others, but still expects its overall head count to exceed 100,000 by the end of 2019.”

Tom Bogan – The Importance of Being Agile

Tom Bogan is CEO of Adaptive Insights, a Workday company whose business planning cloud automates previously manual planning tasks—for finance, sales, and workforce planning—and supplements those capabilities with enterprise-scale reporting and analytics. Tom joined Adaptive Insights when it was at $40 million in revenue. Under his leadership, in 2017 Adaptive Insights topped $100 million in annual recurring revenue (ARR), a watershed milestone that only 1% of cloud software companies ever reach. Then, in June of 2018, three days before the company was to go public, Bogan and his team struck a deal with Workday, a leader in cloud corporate performance management, to acquire Adaptive Insights for $1.55 billion.

Now a Workday company, Adaptive Insights continues to cook up ways to help businesses see planning as a competitive advantage. Most recently, Adaptive Insights commissioned Plan to Win: Achieving business agility in the age of urgency. The new book seemed like a good reason to sit down with Tom and get his thoughts on the origins of Plan to Win, the state of cloud software tools, and how businesses will plan years from now.

Let’s start with the book. What prompted it?

We’re always talking to customers. In doing so we learned that many felt there simply wasn’t much written about why modern planning was critical to the success of a business. They’d gone through the transformation themselves—from slow, manual, siloed static planning to automated, collaborative, and continuous active planning—so they knew what it had done for their business agility. They wanted something they could share with others, a book they could pass along to colleagues in their organization who may still be stuck doing static planning, or might be considering a change but not sure how to map their journey.

The book isn’t just a reflection of our world view on planning. That’s in there, but it’s also a researched exploration of how businesses have used planning over time, and how the digital age made those old planning processes obsolete. And it’s filled with lessons we’ve learned from our customers, including a few whose experiences are profiled in the book. It’s a helpful tool for both companies new to a cloud planning process and for our customers who continue to expand their vision for business planning in their organizations.

We’ve known for a while that static planning doesn’t work. But for many companies, budgeting remains a painful annual ritual. Why haven’t they been able to break out of it?

A big reason is the tools they’re using.  Most organizations still use spreadsheets. And unless you’re a very small company, spreadsheets quickly hinder your ability to plan across a wide population in your company.

Business and market conditions don’t change just once a year—they change constantly. So if you plan annually, you’re creating a plan that’s obsolete almost as soon as it’s done. So to operate with agility, you need to be able to update plans, budgets, and forecasts continuously, not just once a year.  Many of our customers update their plans quarterly and some do it monthly, or at least as often as conditions change.  

And as businesses grow, they realize that spreadsheet planning is cumbersome because they make it hard to coordinate all resources across the organization. Cloud-based planning enables a more agile process because everybody is using the same cloud system—not dozens of individual spreadsheets traded by email. They all work from the same data. There’s a single source of truth.

Putting planning into the cloud, having a flexible modeling platform, and deploying capabilities that allow you to engage in both financial and operational planning—this is what is helping break people out of static planning.

It seems like we've seen a mass proliferation of data analytics tools, data visualization tools, and so on.  Companies seem to have one of each. Does that help planning or does it actually make it more fragmented?

I think it helps.  When companies have a good understanding of their operations and the operating data, it inspires them to do richer planning. 

For example, when I started doing planning in companies, we'd look at a revenue forecast.  It would be more trend-based: What percentage are we going to increase this year? Today when we do our sales planning, we're looking at the number of reps we have and the number of leads we're generating.  What are those conversion rates from marketing leads to sales opportunities? How many sales opportunities can our reps execute against?  What are the expected win rates?  All that rich operating data is now part of the plan.

Now apply that to agility. If our actuals are either better or worse than the assumptions in the plan, we can change and update that plan. Those regular updates allow you to course-correct when needed. Visualization systems, the tendency to collect metrics and KPIs and the ability to see those through the various analytics tools—all this provides a strong foundation because the operating metrics become the drivers or the assumptions in the plan. We built the plan and the models on top of that analytical data. They fit together beautifully. So the proliferation of analytics tools, together with the planning model, is very synergistic.

Workday's focus is primarily finance and HR.  Does that constrain what you get from customers and does that kind of make it competitively disadvantaged for you because you don't have access to too much operational data?

That’s a great question. In the Adaptive Insights Business Planning Cloud, we certainly integrate with Workday solutions, but we also integrate with all other systems as well: General ledger systems from Oracle, SAP, NetSuite, and others; CRM systems like Salesforce; marketing automation platforms like Marketo, HubSpot or Eloqua—we integrate with all of these systems so that data is feeding our assumptions.

We describe the Business Planning Cloud as “best in class, better in suite.” This means if you’re using Adaptive Insights on its own or with a non-Workday ERP system, you’re still getting the best, most highly-rated planning solution in the industry. But it gets even better if you choose to implement solutions from Workday. We have not only HR and financial data from Workday business systems, but we can add information from other GL systems, from sub-ledgers, and from operating analytical data. We can either bring that natively into Adaptive Insights through our interfaces or we can bring it in through Workday’s Prism Analytics.

SAP has something called Integrated Business Planning, and they go into all kinds of manufacturing and transportation and distribution planning. Does that put you at a disadvantage?

Not at all, because we place no limitations on the amount of information or the number of dimensions you can build into a model. And it’s important to remember that Adaptive Insights is a broad-based modeling platform. You can model any business scenario in Adaptive Insights, just as you could in a spreadsheet.

For operational planning, we pre-build some functionality. For example, in sales planning, we know that most organizations will want to plan around the number of reps they have, by market segments, and possibly by vertical industry. They'll want to do territory planning and to measure key aspects or dimensions. We provide the framework that allows them to do that. Our customers use that framework to build models and solutions that are specific to their business needs.

One customer, an airline, uses Adaptive Insights to run route profitability analysis for their routes all over the world so they know which are the most profitable. Another is P.F. Chang’s, who is featured in the book. They model the operations at a restaurant level.  Again, customers and users model any aspect of their business on the platform. 

You mentioned how cloud has evolved planning; made it much more collaborative, much more available to a broader audience, etc.  What is machine learning going to do to planning?

Great question.  It's going to change everything. We think that planning is one of the areas that will be more impacted by ML than almost any other space.  In the short term, we'll be able to leverage machine learning to do things like anomaly detection and to determine when information in a plan looks aberrant relative to what we'd expect based on analysis of history and trends.  We'll be able to flag exceptions.  The user will be able to decide whether they're appropriate exceptions or whether it's something that has to be looked at further.

Then we'll learn from that.  We'll be able to better anticipate and predict what the data should look like.  That's the short term. 

Going forward, I think we'll be able to leverage machine learning to create additional planned scenarios automatically. We’ll identify the most critical assumptions or drivers in the plan. We’ll take the heavy lifting out of scenario planning. 

We want to shift where people are spending their time, from creating the plan and crunching numbers to running analyses and really understanding what’s in the plan.   What are the critical assumptions? What kind of scenarios can I run? Then I believe we'll also be able to assess confidence.  A CFO can go to the board that this is a 75% probability plan or maybe it's a 25% probability plan. They can know where they stand before going in. 

Improvement will be gradual, and then it will accelerate once it hits critical mass. I’m sure years from now, we’ll do planning in a completely different way. But I’m hopeful that five years from now, we’ll do planning in a completely different way. 

Five to 10 years sounds realistic. But many people make it sound like it will happen tomorrow.

It depends on what we're talking about.  Anomaly detection will happen sooner but that’s only the tip of the iceberg for machine learning.  I think about the world in which we can automatically create plans and do a first pass.  That’s a little further out. 

Do you think planners are preparing for that?  I talk to some companies where they have literally hundreds of planners, category planners, assortment planners in the CPG industry and so on.  It just seems like there is a lot of labor in planning.  Are you helping planners look forward to the day where machines will be their assistants?

Yes. Whenever you talk about automation, everybody assumes we’re going to eliminate jobs. That’s not the goal. It’s to reduce the number of labor hours on preparing a plan so you have more time for strategic analysis. That’s part of the return companies and organizations will experience.

I think the point you're making applies just about everywhere.  Automation takes over the more mundane, routine tasks, and humans move up to a higher value in the workstream. What else did you learn from preparing this book?

Two things.  One is that there was strong affirmation of the need for active planning—planning that’s continuous, with monthly or at least quarterly updates to the plan, and with the best practice of rolling forecasts, where you’re not bound by this artificial annual time boundary. The book confirms that this is an important trend for companies. 

The other is the importance of machine learning.  The leading thinkers, and some are featured in the book, really believe there's a huge opportunity to leverage machine learning in the planning process, to make it more agile. We agree and believe that the tomorrow’s winners will be the most agile.

Rob Enslin, turnaround artist

SAP briefed me, under NDA, on Friday night about Rob Enslin leaving. At that time, I was also staring at a fairly hostile email from another vendor exec in response to a request they become more open in their analyst relations. The stark contrast made me appreciate even more how Rob and others at SAP have dramatically reshaped vendor -analyst conversations.

While Bill McDermott and others are the public face of SAP, Rob became that to many analysts. That was not his job, but in his doing so I came to appreciate his role as turnaround artist with his stints in Japan, post-recession US and elsewhere in world and then running the cloud properties the last few years. Having done several years of overseas assignments and traveled to over 70 countries myself, I admire even more what Rob did at SAP.

I have personally seen his role in making SAP more "open"

A) My latest book, SAP Nation 3.0 would not have been written without the countless conversations with executives and customers SAP introduced me to. The book is tough on SAP in several places. It took a lot of courage for them to have faith that I would present the good along with the bad. I think I succeeded - early feedback to the book is that of surprise how balanced my coverage is. It also shows a SAP going through a massive turnaround which is catching the competition flat footed. They will need to quickly expand their product and geography reach to keep up.

B) I saw Rob along with Nick Tzitzon play master of ceremonies to two of the most vibrant analyst summits I have ever been part of. Conducted under NDA I saw one SAP after exec come in with only a handful of slides and spend time getting input from analysts. Sure it was painful for some of them but Rob and Nick set the tone for openness.

C) I have conducted hundreds of interviews for my books and blogs. I cannot remember one with as much heart as the one Rob brought. I ran it in a two part post here and here and it will forever for me be a benchmark for other impactful interviews.

Next up - I look forward to seeing Jen Morgan continue the trajectory Rob started. And I will continue to exhort other vendors to try and emulate the openness I have seen at SAP.

In the next phase of what he described in the SAP statement as  his "new journey", I hope to cross paths with Rob again. I admired the reverence with which he described to me the mentors he has had along the way, and I am confident he will be the same himself. 

Making features/functions sexy again

I got excited this week when Workday sent analysts a hour-long video (sorry - don't have permission to share the video) which summarizes 500+ new features and 300+ new brainstorms in release 32.  That release was delivered on March 9. Workday used to do this on a regular basis - indeed I wrote last year "I miss Stan Swete’s updates every time Workday had a new release (they are up to release 31). He would crisply march through new features and also give a quick update on the state of the company." So, glad to see them start doing this again.

Excited about features and functions? I must lead a really boring life, eh?

No, if you look at what application vendors have talking about last few years - its been mostly about their technology - UX this, ML that. Often it's not even their technology - they are leveraging what Apple. Amazon, Google, Microsoft are pioneering and scaling. Business process and functionality have taken a back seat.

No wonder enterprise applications are evolving at snail's pace - in business process, in industry and geographic coverage. We desperately need a refocus and reinvestment in application functionality.

Here is what I told M.R. Rangaswami of Sand Hill in an interview about SAP Nation 3.0

"While enterprise vendors have superb technology visionaries like Larry Ellison and Satya Nadella, they have not groomed a similar breed of business process visionaries. If you want inspiration for the factory, warehouse, store or hospital of the future customers don’t turn to Oracle or Infor. That has to change. Application software has, in the end, to continually evolve business processes and enterprise data. Instead of inspiring customers to look to them, too many vendors are offering platforms and expecting someone else – their partners, their customers – to build applications. It’s the equivalent of your favorite restaurant saying our renowned chef is gone, however, we will open up our kitchen. Come use our appliances. No, customers continue to want tasty, healthy, affordable cooked meals."

Thanks, Workday -  I want to see starting with release 33 you talking about verticals beyond higher education and about more geographical coverage beyond the 34 countries you are supporting today:)

Bruce Cleveland - Part 2 - thoughts on current enterprise market

In Part 1, Bruce Cleveland talked about the framework in his new book, Traversing the Traction Gap. Here we talk about partnering and white spaces in the market.

Most enterprise vendors now offer their own platforms. Could they use your framework to develop a vibrant network of startups on their platforms?

At Siebel, we used partners to dominate – I know the word is overused— the industry.  We grew from initial product release to $2 billion in revenue in 4.5 years. In 1999, Deloitte named Siebel the “fastest growing company in the US” with a staggering CAGR of more than 750,000%.  We only accomplished this because we (by “we” I mean Tom Siebel) put significant resources (personnel and capital) into building a technical platform and a robust ecosystem to support it. 

Tom knew he had to “remove the constraints on the growth of the business.” We needed systems integrators who were trained and certified on Siebel implementations. We needed to our applications tuned to run optimally on various hardware systems. And, we needed numerous third-party applications that could interface and interoperate with our application suite.

Consequently, Tom charged me with building the Siebel Alliance Program. Tom had created our first systems integration partnership with Andersen (now Accenture).  He also had created our first hardware relationship with Compaq and our first software partnership with Microsoft.

I simply took Tom’s initial ideas and those partnerships and developed a scalable partner program from them.  We began the Siebel Alliance Program with Accenture, Compaq and Microsoft and over the course of three years we accumulated a total of 750 partners. These partners generated about a $B of additional annual license revenue for Siebel and helped us ensure that those licenses were implemented successfully. By partners, I don't mean they were reselling Siebel applications.  I mean we partnered with them to market, sell, and implement our joint solutions. We were compensated on our products/services and they were compensated on their products/services.

So, as you might imagine, I am a huge fan of partnerships. We won the Forbes award for the most innovative partnering program in the technology industry at the time and every technology company knew how powerful it was. It wasn’t a secret.  I find it interesting – with all the success we had with the Siebel Alliance Program - that none of the incumbent technology companies have replicated its form or function.

I believe the current technology platform leaders have a tremendous opportunity to develop a similar program. Sure, they all have partner programs, but those programs don’t really put a lot of skin in the game. By that, I mean, they don’t obligate the leaders to do much or to invest in their partners beyond providing basic access to some technology and lightweight market awareness. 

For our program, we actively recruited and hired hundreds of MBAs from the top universities as well as industry professionals and chartered them to create joint business plans with our partners, advocate for our partners with our product and sales organizations, and held the Siebel Alliance organization accountable for helping our partners achieve their revenue and market share objectives. We built specific marketing programs – brand and demand gen – that partners could sponsor to generate leads for themselves. We put skin in the game.  

The program was so successful that Harvard Business School wrote a business case study about it. So, I'm pretty proud of it.

Today, though, for the most part, the large technology platform companies offer what I call “paper partnerships”.  Those partnership don’t obligate either party to much of anything.  They're not “skin in the game” partnerships so they are anemic, at best. 

Most startup teams have little experience partnering with these large technology providers. And, even if they do, they have found that those companies offer little that their startup can benefit from. There's little provided by the large company that is likely to generate significant market awareness or revenue for the startup. For example, startups need to know who, from the partner’s organization, wakes up every morning worried about helping the startup to succeed; where are the demand gen programs they can co-invest in to generate awareness and interest in the startup’s products?  Which teams inside the large company are held accountable for achieving the market share and revenue objectives of the startups in their partner community? The answer? None. Those partner programs are essentially worthless – at least as far as the startup community is concerned. 

Salesforce built an App Store and prospective customers can certainly search for and find add-on applications and products for the Salesforce ecosystem there. However, that's a pretty lightweight endorsement for startups. Who is held accountable within the four walls of Salesforce to wake up every morning, ensuring that a particular partner has the leads it needs, generating a robust pipeline, and helping the startup to convert that pipeline into revenue?

I don’t mean to call out Salesforce. At least they developed an innovative approach and put a lot of energy behind it. And, they have done some advanced partnering with Vlocity. Vlocity was founded by some of my former Siebel colleagues.  What's Vlocity doing?  They're building vertical applications on top of the force.com platform. 

Salesforce saw a need to have much deeper vertical versions of their platform.  That's what we did at Siebel (create vertical solutions of Siebel) and David Schmaier led that initiative as the executive VP. David is the founder and CEO of Vlocity. David and his team are replicating what we did at Siebel for Salesforce and it's going very well. 

I'm an investor in Vlocity, and, to your point about partnering, it's an example of what can – and I think should - be done between technology platform providers and the startup ecosystem.  As this example shows, it's not just about partnering with systems integrators. 

If you want these partnerships to amount to anything there needs to be alignment and shared objectives. For example, if you want to garner the attention of the partner’s sales organization, there is nothing like making partner revenue a part of the sales rep’s quota.

The truth is that partner programs as conceived and implemented by the current technology platform leaders just don’t do much for startups – in terms of market share and revenue - and therefore it shouldn’t be surprising that those programs aren’t valued by startups.

Apple has done well in its ecosystem – with the App Store - but the consumer world doesn’t require face-to-face interactions. In the B2B world, people's work reputations are on the line when they make a buy decision. And, in almost all cases, there are multiple decision makers who must be convinced.  For B2B, startups need brand credibility from the platform provider. This happens when they implicitly endorse the startup by working closely with them. 

In the consumer world, a startup can “borrow” the brand of Apple because if their application is admitted into the Apple App Store, it tells consumers, "Look, we vetted this product. It adheres to our rules." 

Conversely, I don’t think that Salesforce’s App Store does a lot for startups. It’s essentially a digital catalog with some ratings/rankings. That’s not enough for most businesses to make a buy decision. If you speak with startups about the Salesforce App Store and ask them if it is a significant source of revenue for them, I think you will find that for most, it isn’t.

Startups lack credibility.  They lack access to prospective customers.  And, they lack sufficient marketing dollars.  This is where the enterprise vendors could really help startups.

I had hoped that the technology leaders would have adopted at least some of the best practices we had created with the Siebel Alliance Program. Tom Siebel and his new company, C3, are developing a similar program to what we had at Siebel Systems. So, I believe the principles are as valid today as they were back then.

When you look at the cloud apps market there are so many white spaces - major geographies, industry verticals etc - and they do not seem to be targeted by established vendors or even by startups. How are investors like you guiding them through these white spaces?

Cloud computing with its subscription business model - and delivery and usage model -has democratized business application software. Prior to cloud computing, it was prohibitively expensive for smaller companies to acquire and implement enterprise-class applications.

But, by dramatically dropping the cost of these solutions, I suspect it has constrained the application providers’ ability to support smaller geographies and industry verticals.  Going after smaller markets that require significant translation and support infrastructure at much lower price points isn’t practical. 

Even with traditional (re: higher priced) enterprise software, it was always challenging to create localized versions of products for a specific market.  Most US companies started out with the English speaking markets and then typically moved to countries such as Germany, Spain, and France with relatively large populations.  But, when they were asked to support a Dutch or Finnish version, it was seldom worth the upfront and ongoing cost.

For a large company to continue to grow at a significant rate, it needs to acquire or build new solutions that add significant revenue streams – quickly. In that context, let's talk about SAP and Salesforce.  One is a classic enterprise technology company with primarily a perpetual license business model.  The other is the "modern" cloud computing company with a subscription business model. 

The challenge with both of those organizations is that to grow meaningfully they have to build or acquire something of meaningful size.  Moving into a small geography requires the same resources or at least the same FTE costs that might be invested in something else and could generate a much larger impact.  So, it should be little surprise why we are seeing these large companies look to make large acquisitions and avoid niche industries and geographical markets. 

To your point, one might think, “Hey, if these market leaders are not seeing a lot of companies growing fast enough to make a measurable impact on their top line why aren't they helping smaller companies to grow so that they can eventually acquire them?”

Technology leaders may want to look at making investments in smaller technology companies where they see strategic value. These leaders can protect their interests by exchanging an equity investment and access to their channels with a Right of First Refusal (ROFR) that allows the leader to acquire the smaller company when it reaches a certain revenue threshold, at some predetermined price based upon a number of factors such as the acquirer’s stock multiple at the time. 

With respect to investing in and expanding the number of verticals supported, there may be a dearth of deep domain expertise inside some of the larger technology companies to do that well. I don't know whether these companies have initiatives to try to hire subject matter experts from industry to help them drive their product management.  They may and I'm just not privy to it. 

I do know that Salesforce took a run at creating vertical solutions and it wasn't as effective as they had hoped, at least not at the time. This is one of the reasons that led to their investment in Vlocity.  I think this makes the case that the technology leaders, at least those in the B2B markets and not normally inclined to partnering, could really benefit by embracing partnerships. 

Instead, it looks like the majority of them sit back and wait to see which startups “make it”, without their help, and then acquire the few that do. This seems rather silly because by doing that they have to then compete in the open market – and pay a premium - to keep them out of the hands of competitors.

What do you find interesting in today's enterprise space?

Roughly every ten years, new technology is introduced that dramatically changes our work and personal lives.  In the 60s it was mainframe computing. In the 70s it was minicomputers. In the 80s it was PCs. In the 90s it was client/server computing and in the 2000s, it was largely cloud and mobile computing which spawned “digital transformation”, beginning in the consumer markets with companies such as Amazon, Apple, Facebook, NetFlix, Google, etc. Digital transformation has now moved full speed into the enterprise markets.

I believe digital transformation - digital disruption - is such a big transition it will require multiple decades.  I think it has a chance to undo a lot of the current market leaders in every industry.  To your point, maybe vertical providers will emerge and dominate the markets due to digital transformation issues.

The emerging opportunity in the enterprise is in systems of intelligence. This is where I think vertical solutions can dominate.  Systems of intelligence use the data generated and captured by systems of record and systems of engagement to enable companies to derive better business insights, faster and far more accurately than ever before.  I mean real-time insights and real-time responses, without humans involved, that can be triggered via key business events and moments of value. 

Here is an example in the retail space. Let’s say I'm walking through PetSmart and I'm a repeat PetSmart customer. I’m a member of the PetSmart loyalty program. If PetSmart has implemented a system of intelligence and placed beacons throughout the store, I have PetSmart’s loyalty application on my phone, and I provide my permission to send me offers, PetSmart can enable brands to generate contextually-relevant real-time offers to me as I walk through the store.  An offer could be from a brand I don’t normally buy for my dog. The system of intelligence has access to POS data from my prior store purchases. PetSmart makes $ by serving up the competitive offer and if/when I decide to redeem the offer in a coupon that could be set to expire if I walk out of the store without making the purchase. Powering this type of application requires a different type of computer and systems architecture. 

The biggest opportunity may come from vertical systems of intelligence built on top of the older systems of record and systems of engagement.  In my PetSmart example, it means that you've got to be able to interface with an existing point of sale system, not replace it. This is where I would advise B2B application startups to focus. Trying to replace the existing systems of record and engagement is tough to do. 

Trying to rip and replace technology is hard to do.  Building next-generation systems of intelligence that utilize the existing systems of record and engagement is far easier. That's what a lot of the startups we work with are doing.

Unfair to NetSuite?

For a fleeting moment I felt guilty I am not at SuiteWorld. Mark Hurd was talking about shipments from Shanghai and inventory allocations while in transit. I perked up at the webstream. But just as quickly he was talking about recruiting. And his comments were from a decade ago when he was at HP. I went "here we go again - like at Oracle MBX/MCX couple of weeks ago, finance and HCM seem to be Oracle's comfort zone. They are allergic to talking operational applications in the cloud".

The next session I was told to watch was about NetSuite products but the stream did not work. I can see from Albert Pang's tweet they are talking operations  "Allison Auclair, VP Product Mgmt of Oracle NetSuite, outlines what it takes to do next-gen manufacturing & retailing, covering everything from sourcing to online selling and from ordering to warehousing in its stepped-up effort to improve commerce & CRM experiences." Just my luck. I will try and watch a replay.

This is the first SuiteWorld I have missed in years. I much prefer analyst summits but NetSuite has never held one - I have asked multiple times. Oracle has moved away from them. I feel I am intruding on customer time when I go to user conferences. When I do go, I like a schedule which has plenty of customer and executive time. Oracle has not been able to deliver that so I have been watching their events from afar. Sorry, NetSuite.

I hope Oracle and NetSuite convene an analyst summit like I requested here. Every one of their competitors does one and they keep getting better each year.

I WILL show up for such a summit. If I am invited, and if the agenda does have operational and vertical functionality.  

Bruce Cleveland: Part 1- Traversing the Traction Gap

Bruce Cleveland, who many readers may remember from his Siebel days is now an investor and has a new book out, Traversing the Traction Gap. I had a long ranging conversation with him about the book and also about trends he sees in today's enterprise software industry. In this part we focus on the book, in Part 2 tomorrow he will discuss partnering and how to go after white spaces in the market.

How did the book come about?

Many people have asked, "How long did it take you to write the book?"  It took about a year of nights and weekends and a bunch of rewrites with others helping along the way. Not writing the book – I did that - but performing the interviews, creating graphics, getting legal sign off to use the quotes we collected, and that type of thing.  I learned it really does take a village to get a book out - at least something that's meaningful. More importantly, it took me 35 years of experience to accumulate the knowledge to write it. It required 10 or 12 years on the venture side and 25 years on the operating side.  

I was fortunate to work for and with some of the most amazing technology CEOs and leaders in the Valley.  Luminaries such as Larry Ellison and Tom Siebel were - and still are - the visionaries who created massive markets and incredibly successful technology companies.  Tom's new company, C3, is doing exceptionally well.  I had the advantage of a ringside seat observing the decisions they made and helping to execute them. Over the course of ten years as a venture investor, I met with and listened to presentations from at least 1,000 teams. I learned from those experiences as well. Finally, for the book, we interviewed dozens of successful founders and CEOs to better understand what led to their success.  So, the Traction Gap Framework is something that I developed but the ideas came from the cumulative knowledge and experience of many smart and talented people. 

Over time, patterns began to emerge as I began to see what tended to cause startup failure: 80% for enterprise or B2B oriented startups. B2C -- 90% to 95% failure rates.  CPG -- 98% failure rates. I realized that there are a lot of great ideas and very talented teams, yet many make mistakes that are avoidable. 

So, I started to unpack all of this.  When I joined two other people to create a new venture firm, Wildcat Venture Partners, I brought those ideas with me based upon the patterns I had observed. The most common cause of failure? Many phenomenal product teams stumble when it comes time to take their products to market. While they may have great product engineering skills, most teams lack “market engineering” skills – a term I came up with to represent category creation/redefinition, thought leadership content, market validation processes, pricing models, etc. I decided to double-click on this. 

All early stage startups – and new products inside an existing company – must go through 3 phases: go-to-product, go-to-market, and go-to-scale. There is a lot of help from angel investors, incubators and accelerators for the go-to-product phase. There is also a lot of help in the go-to-scale phase from groups such as Bain, McKinsey, etc. However, there is very little help for that murky go-to-market period. And, the evidence – 80% failure rates and higher – shows us that this is the most challenging phase for startups.  One of my partners is Geoffrey Moore, author of “Crossing the Chasm”. That book has taught millions of entrepreneurs how to think about markets. 

Most of the groups we invest in come out of great colleges or great companies, be it Salesforce, Google, Facebook, or wherever. There, they have learned how to develop a product. However, many of those groups have never experienced bringing a product to market. And, there has been virtually nothing written with respect to how to do it successfully.  There are no prescriptive guides.  There aren't’ guardrails or guideposts for startup teams to follow. I decided that, based upon my personal operating experience taking an early stage startup from an idea to a billion-dollar outcome and investing in multiple early stage startups that went on to become billion dollar outcomes, that I would share my experience and the experience of others who had succeeded.

The Traction Gap Framework

We don’t need more acronyms introduced into the technology landscape. I decided to adopt Minimum Viable Product – MVP -  a term that Steve Blank, Eric Ries, and Marc Andreessen propagated, and derived the names of the value inflection points for the framework from that term. It may be debatable about what constitutes an MVP, but it's something that people are familiar with.  In my experience, if you can explain new ideas in terms people already understand, then they can quickly pick up on those ideas. 

I adopted the “minimum viable” format and applied it to the value inflection points associated with the framework.  The reason that I call them value inflection points is that as you reach each successive point, your company increases in value because you have diminished risk in the eyes of the investor community. In fact, it’s a step function change in value, not a smooth curve.

The first value inflection point of the Traction Gap Framework is called minimum viable category or MVC.  Creating a category, or redefining an existing category, is critical market engineering work.  You must to this early, while you are in the process of deciding whether the product has a viable market. You need to define/redefine your category because the current “category king” defines the “rules” – the attributes - of the existing category and you will be compared against them. This is not a battle you can win – well, at least not very easily.

The next value inflection point is called initial product release or IPR.  This is the first time that you make your product available publicly.  It can be an alpha or beta version, but it's basically the time at which you first place it in front of people, and they tell you whether it's great or it sucks.  Based upon the feedback during this period, you polish it up and, eventually, you reach what you declare to be a minimum viable product or MVP; something that you can begin to actively market. 

The next value inflection point is minimum viable repeatability or MVR. This is the point where you have successfully built and released multiple versions of the product, hired multiple people, experimented with and hardened pricing models, and are now beginning to build the systems such as sales, marketing and governance processes that you need to scale your company.

Then, finally, if you can scale for 12 to 18 successive months - growing quarter over quarter - you will reach this theoretical point called minimum viable traction or MVT. There are actual metrics associated with each value inflection point, including MVT.  But, to provide you with a visual image; you know you’re at MVT when you travel to “Sand Hill Road in Menlo Park” (Venture Capital Row – although SF has become far more popular for VCs over the past few years), meet with the venture capitalists located there, and they begin to sell you why you should take their $ vs. you selling them.

In addition to the value inflection points, the Traction Gap Framework consists of four architectural pillars: product, revenue, team, and systems.  These pillars are present from the moment of ideation and last in perpetuity, as long as there is a company. 

At the various value inflection points, the Traction Gap Framework architectural pillars take different points of prominence.  In the go-to product phase, product and team take center stage. From MVP to MVR or minimum viable repeatability, revenue architecture comes to the fore. Then, finally, as you reach MVR on your way to minimum viable traction, systems finally become important as you prepare to scale. 

The Traction Gap Framework breaks down this very murky time where there is very little data. It provides startup teams and investors with some guard rails and milestones they can target.

During this time, most startups are what I call “PowerPoint companies” -- they don't have a lot of market or customer data to prove that their products will succeed or feedback regarding what it will take to generate success. The challenge for startups at this stage is to get to a point where they become a “Spreadsheet company”; a company with performance data —metrics - that the team and investors can react against. Most venture firms are not comfortable investing in early stage startups that are still in “PowerPoint” mode.  Some will – like the Pre-Seed/Seed firms. And, even the best-known firms will invest early if they know the CEO and/or have strong conviction about the market opportunity. But, most teams will find that the venture community is hesitant to invest until they see tangible traction. 

Understanding what constitutes traction has been elusive for entrepreneurs because there's typically not a lot of feedback given to them by the venture community. And, most venture investors haven’t personally built a company from startup to scale, so there is little expert counsel they can provide based upon personal experience.  I wanted to expose some of the metrics venture investors associate with traction (e.g., capital raised, net burn rate, revenue growth, and usage rates) and how to achieve them. 

That's the background on the framework, the reason I developed it, the terminology I created, and the overall rationale for it.

How portable is the Traction Gap Framework?

I sat down with Geoffrey Moore and asked him, "When you were thinking about publishing ‘Crossing the Chasm’, were you worried that you didn’t have enough proof of concept?  At the time, your ideas were quite nascent, right?”  Geoff said that he wasn’t really worried about that. Geoff said he published it and subsequently augmented and supplemented his original thoughts as needed. So, that gave me the confidence to put my framework out there.

I use variable names for the value inflection points of the framework so that it can support a variety of different business models.  In fact, I treated very lightly - in this book - the B2C business model.  The reason is that most of the investments I make use a B2B or B2B2C business model. 

But, I gave considerable thought to the framework’s applicability and adaptability to other business models and other industries.  We've now accumulated metrics for B2C and we can swap in those metrics at their appropriate value inflection points.  Over time, I can see us doing something similar by industry verticals.  So far, it seems to hunt well.  I suspect it will readily work with other business models.

And, for the most part, I believe the framework is flexible and adaptable enough to scale to other geographies and cultures.

In Part 2 tomorrow we will cover Bruce's thoughts about the current enterprise market. 

Workfront - a system of record for "Work"

I have been pushing software vendors to deliver vertical operational books of record in the cloud - for utilities, retail etc. There are plenty of horizontal books of record -Workday for employee data, Salesforce for customer data, ServiceNow for service ticket data etc. But as I learned from a recent briefing by Workfront, there is space for at least one more horizontal book of record - that for "work". I had previously reviewed CEO Alex Shootman's book "Done Right" and knew they were focused on making work more enjoyable and productive.

Steve ZoBell, Chief Product & Technology Officer, described to me the problem they are helping solve:

"Work happens in a very ad hoc way today.  Strategy is not aligning with execution in companies.  Many times, company leaders don't realize that the most important work isn't being prioritized.  They have no visibility into  what is happening, who is working on what, what the deadlines are and if the work is being completed. 

Much of this happens because every single enterprise is reinventing process. But it is worse than that.  It's every department, every team reinventing the process over and over, resulting in them working harder than they have before, but they don't feel like they're being effective.

There is a study that says the average worker only spends 39% of their day working on the job they were hired to do.  That's just a travesty.  We need a system which can measure anything and see everything, providing complete visibility.  This is the value that we are bringing to  customers who are utilizing Workfront as an operational system of record for work."

The graph below shows the breadth of Workfront’s enterprise coverage.

An example of enterprise wide visibility to work comes from one of their customers, a global real estate company.  150+ teams composed of over 6,000 associates are doing tasks like building inspections and refurbishment projects,  which are all managed within Workfront. It's well beyond that traditional notion of projects and portfolio management.

Under NDA they shared examples of big brand companies where they "landed and expanded" - start off with a specific work area, and increasingly expand to other areas, particularly those involving knowledge workers.

They actually do better with creative work at digital agencies or marketing departments where by definition, work can be spontaneous, even chaotic. Below is a graph on some of the activities they help organize in a Marketing function.

I am going to meet some of their customers in the next few weeks and look forward to learning more use cases and how Workfront "lands and expands".

Image Credit - Workfront

 

SAP Nation 3.0 excerpts: Chapter 2 The Enterprise Computing "Continent" in the 2000s

My new book is now available to buy here in print version, and for pre-order in the Kindle version (will be released on Friday). As with my earlier books, I am excerpting roughly 10% of the 400 page book in a series of posts on my two blogs.

Chapter 2 focuses on missed opportunities for SAP competitors over the last 5 years to deliver a knockout punch while SAP was distracted and vulnerable. It also covers 8 very large markets that SAP and its cohorts missed out in the last two decades.

"SAP looked vulnerable when I wrote the first volume of this book series, five years ago. Besides the runaway costs and massive project failures at some customers, even more concerning was the fact that the competition was circling around.

Oracle had a decade’s lead with its Fusion cloud applications over what SAP was working on — S/4. Microsoft had already invested billions in its Azure cloud data centers, and could have used them to significant advantage in business applications. Infor had a new management team that was focused on vertical applications for many industries.

Customers were using Workday, Ultimate Software and Salesforce to “ring-fence” SAP, and were deploying lighter cloud applications, like NetSuite, in global, two-tier ERP settings. Those SaaS vendors had introduced the efficiencies of multitenancy to the overpriced enterprise applications market. They bundled software, application management, hosting and upgrades into one contract, which was priced as a per-user service.

TPM vendors like Rimini Street, Spinnaker Support and Support Revolution, with their cut-rate pricing and, especially, their support for customizations, threatened to hollow out SAP’s highly profitable ECC maintenance revenue stream.

S/4 has not been a runaway success, but SAP’s competition has not exactly gone for the kill either."

"But from a customer perspective, you cannot run your enterprise without order entry, billing, manufacturing, logistics and industry-specific functionality. There is only so much you can do with Salesforce, Workday or ServiceNow. You can do even less if you are outside the U.S.

It is a bit like the aviation sector. Southwest is one of my favorite airlines. I love it because it flies nonstop to over 30 cities from my home airport in Tampa, FL. But flights on its 737s average only two hours, and that cannot take me on global treks . If I lived in Germany, Singapore or Rio, it would be even less interesting because Southwest has chosen to stay focused on the North American market.

Partly because SAP’s competitors did not target it aggressively enough, and partly because its own cloud acquisitions and developed products afforded it a shield, the company 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, it has done remarkably well. In those five 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."

"My Deal Architect blog focuses on enterprise tech — so I could see what SAP, Oracle, Salesforce, Workday, etc. were doing. My New Florence blog, on the other hand, had a broader STEM focus and covered innovations in health tech, clean tech, consumer tech and other emerging markets. In 15 years, it has catalogued over 6,000 posts. It also gave me the ammunition to write a number of books that profiled hundreds of case studies. This contrast between the two blogs allowed me to see several trillion-dollar markets emerge — markets that SAP and its cohorts have mostly ignored. The following eight subsections will describe those missed opportunities:"

" The new rock stars were product designers like Jony Ive at Apple and Yves Behar at fuseproject. Contract manufacturers like Foxconn, Jabil and Flex and design firms like IDEO benefited from this massive new market. But SAP, Oracle or even Indian outsourcers? Not so much. In fact, based on the attractive design increasingly prevalent in consumer markets, enterprise vendors started to be scrutinized for their own poor UX. I have heard Mark Hurd, co-CEO of Oracle, quantify these trends in his presentations. He says consumer spend on technology has caught up to enterprise spend — annually about $1 trillion each — and is growing faster. Even more dramatically, over 80% of enterprise tech is spent on keeping the lights on, not innovation. In contrast, the consumer is getting almost pure innovation for her dollar. What Hurd does not point out is that because of Oracle or at his previous company, HP, or peers like IBM, software maintenance, EDS outsourcing and other charges have been large contributors to the enterprise tech stagnation. They have delivered nowhere near the price/ performance improvements or innovation that consumer tech has seen. It should be no wonder then that the tech the consumer gets at home on Sunday night or in her car is so much better than what she finds at work on Monday morning."

"CRM vendors are increasingly focused on the entire customer experience and CX is the new byword for this sector. And yet, most of these vendors (with exceptions like the Adobe Advertising Cloud and Salesforce’s Datorama acquisition) have missed out on some of the biggest budgets in the CX segment — digital advertising. In the last two decades, digital advertising has grown from near zero to over US$200 billion a year. Eons ago, digital advertising had already outrun print advertising. Now it has overtaken TV advertising. Marketers have moved to programmatic advertising, where machines, more than humans buy advertising. Google, Facebook and increasingly Amazon are the big beneficiaries of this shift in marketing dollars. With the massive growth in digital advertising, Accenture Interactive has aggressively acquired digital agencies, making it now the biggest agency in the world. It would be fair to say it is influencing CX trends as much, if not more, than the early- generation CRM software vendors did. Accenture Interactive has little in common with its traditional IT outsourcing brethren. Accenture’s IT outsourcing group does plenty with ERP and CRM software vendors. Interactive does fine on its own and includes as clients the chief marketing officers (CMOs) of over three-quarters of the Fortune 100. It does not need to chase after Salesforce or SAP."

"GE had talked about the “power of 1%”: 1% in fuel savings for aviation and utilities, 1% of productivity improvement in healthcare, 1% reduction in oil and gas cap-ex, etc. The payback they described was in the hundreds of billions. You hear similar claims from IT vendors, but somehow the tiny 1% factor made it much more believable.

GE has since had a meltdown over issues related to its capital and power business units. But the presentation I saw back in 2012 woke up executives in every industry to the power of listening to machines. And it has led to a batch of smaller vendors like C3 and Uptake as well as other industrial asset companies like Siemens and Schneider Electric that are helping companies realize that 1% payback."

" I hear similar comments from CIOs around the world: Facebook, Amazon and Microsoft — who expected them to be so innovative with data centers and networks? This was a technology infrastructure market where IBM, HP with EDS, Oracle with Sun and large telcos around the globe had dominated. They should have been leading this market in investment and innovation, but for years chose not to do so. Now they are play- ing catch-up, and others should give up as Blumberg suggests."

" Other enterprise vendors have similarly struggled to keep up with these industry changes. This has led to opportunities for new players. For example, the fintech sector is fragmented with many promising start-ups and offerings from large institu- tions like Goldman Sachs, but little from the major application vendors. In China, mobile apps like Ant Financial’s Alipay and Tencent’s WeChat now enable half-a-billion Chinese people to access a dizzying array of financial services to make payments, get loans, monitor investments and credit ratings, pay for taxis and book travel."

"Most enterprise vendors are now talking about AI and ML, but not automation on the shop floor, in logistics or in the oil patch. Also, if you peel their ML onion, you realize many are merely leveraging voice or image recognition technology from Amazon, Google or Microsoft. When you look at the massive amount of image and vocal-accent data their machines had to be trained on, you wonder where enterprise vendors will get their own training data, given that most of it is squirreled away in on-premise customer data centers. They have been creative with branding — Salesforce with Einstein, IBM with Watson and Infor with Coleman (as in Katherine Coleman Goble Johnson, the NASA mathematician profiled in the movie Hidden Figures) — but with limited enterprise impact. Indeed, when Salesforce and IBM announced Einstein and Watson would work together, IBM CEO Ginni Rometty chuckled in an interview with Fortune that “It’s good comedy.”"

" Most of these vendors have brilliant technology visionaries: SAP has Dr. Plattner; Oracle has Larry Ellison and Thomas Kurian (till he moved to Google); Salesforce has Parker Harris; Workday has Stan Swete. The list is long. However, they don’t have enough process visionaries who can dream up next-gen shop floors, emergency rooms or warehouses. So you see the industry continue to invest in infrastructure, platforms and tools."

" By 1820, Americans were well ahead in the race against other global powers like the British and Spanish in the effort to dominate the North American continent. Five years ago, it seemed improbable, but by 2020 SAP will have a similar opportunity to lead the enterprise technology “continent.” It is build- ing momentum, and has been going through massive changes."

Be like Bill and Warren and Elon ...

Michael Simmons writes about the 5 hour rule of many successful executives

"Over the last year, I’ve explored the personal history of many widely-admired business leaders like Elon Musk, Oprah Winfrey, Bill Gates, Warren Buffett and Mark Zuckerberg in order to understand how they apply the principles of deliberate practice..... Many of these leaders, despite being extremely busy, set aside at least an hour a day (or five hours a week) over their entire career for activities that could be classified as deliberate practice or learning.... For the leaders I tracked, the 5-hour rule often fell into three buckets: reading, reflection, and experimentation."

If you want to emulate them from the reading angle, you are in luck - as there is a bumper crop of just-released books 

I am a long term member of the Enterprise Irregulars. We are known as a group of analysts and bloggers. Well, almost to make the point that long-form content is still alive and well, 5 of us have just released books. Denis Pombriant and Brian Sommer have already contributed guest columns about their books on this blog. I am interviewing Paul Greenberg about his book next week. Thomas Otter has just finished his dissertation around data privacy and is turning that into a book. You have been reading on this blog excerpts from my new book, SAP Nation 3.0.

That's just the start. I interviewed Bruce Cleveland about his Traction Gap book and will run a two part conversation next week. Similarly, I talked to Tom Bogan at Adaptive (now part of Workday) about their new eBook and will run that interview soon. I hope to talk to Brian Solis about his new book, LifeScale.

Two people I have long admired, Tom Peters and Rick Karlgaard both have books on very different topics, Excellence and Late Bloomers, that I hope to review soon.

Paul says it very well for every author in his book intro

"Sigh. Every time I finish a book, I vow never to write another one. They are so hard. But then, within two to four years, the book is almost obsolete because a sea change of some kind comes along and makes dramatic alterations to institutional thinking, approaches, systems, technologies, and cultures that stirs my blood and makes me get back into it again."

The books I am reading and reviewing cover a wide range of topics from Denis with renewables to Rich with societal expectations. Paul's books are always chock full of interesting anecdotes. My book has plenty of history - that of enterprise tech in last two decades and that of the US westward expansion in the 1800s.

For me, each of my 7 books has opened up opportunities for conversations before, during and after writing the books. I interviewed over a hundred SAP customers and watchers for my new book. After he reviewed the book, I interviewed Ray Lane about what he is seeing now as an investor. These conversations in turn give me ideas for my blogs and make our client services richer. It is a virtuous cycle for my three roles as advisor/analyst/author.

Budding authors now routinely ask for my advice. To me, that is so heartening. And if more readers start following Bill, Warren, Elon and others in their reading habits, it will be so much more.

Brian Sommer guest column: The origin story of "Digital with Impact"

Vinnie’s readers might not know that he and I frequently team up on larger client projects. Yes, we’ve been arch-enemies at times but have done lots of deals and even launched a dot-com together.

About two years ago, we noticed a number of client projects that weren’t coming to fruition. I distinctly remember Vinnie one time opining that “51% of all ERP selections were ending up with a no-decision conclusion”. I was seeing something similar, too.

As time wore on, we individually and collectively encountered many projects of various names that were prematurely being halted. Some of those project names are in the following exhibit.

While Vinnie loves to document transformation successes in his books and his New Florence blogs, I thought more energy was needed around the digital misfires that were all too common.  I wanted to find out why we always seem to read about the same 8-10 digital transformation success stories in the business press and never about the ones that didn’t make it. 

And so began a journey….

Early into this journey, I noticed all manner of projects getting digitally washed with the digital transformation moniker. Many projects were a simple “introduction of digital technology to a process”. This isn’t transformation: it’s incrementalism. I also ran into lots of consultancies and integrators who were rebranding their ERP practices as some sort of transformational journey guides. They weren’t. In fact, little of what I encountered would really qualify as transformational or a project that was going to harness vast amounts of new data types (e.g., IoT sensor data).

But there were the great clients and companies that really wanted the holy grail. Sadly, many of these went looking to their old technology and integration partners for solutions. And, even when Vinnie and I would try to tell them what they were going to find, they just wouldn’t believe us. Radical new solutions and business models may require you get new partners who truly understand the modern digital world.

My research into the space took me to numerous firms, factories, industries, geographies, etc.  I can’t even begin to tell you how many business journals and other reference materials I also poured through. What I learned was that there was no one reason that these projects suffered. But patterns did emerge. And in those patterns, I also saw the way forward for other firms.

The book, Digital With Impact, is designed as an executive guide. It takes readers through four phases that must be completed if a digital transformation project is to be successful.  And, as straightforward as those four phases seem, there are significant pitfalls in each of them.

While this summary won’t do the book justice, these phases are See, Think, Reconcile and Transform. The See phase is where transformation teams need to get out of the office and kick the tires of dozens or hundreds of new innovations. They need to see what the art of the possible is with new technology, new business models and emerging competition. The Think phase is where the team starts designing radically new (not incrementally improved) processes, businesses and more. The Reconcile phase looks at the company’s resources (e.g., employees, skills, capital, plant & equipment) and compares them to the new project requirements. Just because a firm can dream up something big doesn’t mean they can get it done. The Transform piece is something a lot people actually have experience with; however, the scale of these initiatives could make even the best people wince.

Digital misfires often occurred when firms tried to skip or shortcut one or more of these phases. Surprisingly, many firms flat out tried to go straight to transform without doing any real research or developing new designs. I just can’t emphasize enough that firms must do the work if they ever want to get the rewards.

Vinnie and I even made some visits to non-clients to assess their digital savvy. Amazingly, some didn’t see any need or urgency to change. Some, incorrectly, think they can get to a new (but undefined) future state on their timetable without any concern re: net-new competitors. You had to be there for some of these meetings!

Somewhere in the middle of this work, Vinnie and I met in Chicago to spend a day or two documenting exercises and activities that companies could use to work through these phases. Since then, I added more exercises and experimented with several of these with real business people. Not surprisingly, many people are very close to their job/company and find ideating radically new business concepts to be hard to do. I’m starting to think my business cards need to reflect my real value add to clients: pusher. I push people out of their familiar comfortable business world and into one that is unlike anything in their past.

I finished up the manuscript a few weeks ago and started to shepherd it through the publishing process. I got some great feedback on the manuscript from a number of tech leaders and colleagues. And, thankfully, their feedback was positive and I even snuck a few of their better suggestions into the book itself.

If this book helps just one team be successful, it was worth it.

Brian

p.s., a big thanks to Vinnie on his pushing to get me to write this.

Denis Pombriant: Green New Deal is a tipping point

Many of you may know Denis Pombriant as a CRM analyst. He is way deeper than that as his bio says "Denis Pombriant lives in the Boston area and writes about the enterprise software market. Denis specializes in disruptive innovation and its effects on business and markets. He has been researching and writing about climate change for a decade."

He has recently finished another book, this time on sustainability and I invited him to write a guest column about it.

I consider Denis a friend - besides analyzing technology vendors, we share a love for history and good food. On this topic, I am ambivalent - I catalog many renewable innovations on the New Florence blog, but renewable energy has repeatedly disappointed, and so we need to show it tough love not continue to write blank checks as I wrote here. However, he makes many points that merit healthy discussion   

With the Green New Deal, the national discussion about pollution and global warming has taken on the cast of an economic challenge and this should be seen as a watershed. But what kind?

As I write in my book, “The Age of Sustainability: The Space Race, Disruptive Innovation, and Ecosystem Services,” the science and technology aspects of solving climate change are already well in view. What’s missing is a discussion of economics.

Solving climate change is like solving a Rubik’s Cube. You have to solve all sides at once else you could end up with one perfect side while the others still look like a dog’s breakfast. Solving “the cube” requires minute tradeoffs and negotiations in one’s mind while iterating towards a solution and much the same can be said of climate change. To solve climate change, we need interlocking solutions for carbon abatement, energy provision, and economics.

Up to the present moment a discussion of climate change might likely include controlling emissions and the tacit assumption that our energy paradigm, our reliance on fossil fuels, can somehow remain intact. But both are flawed assumptions. There’s already too much carbon in the atmosphere and oceans, enough to cause severe weather conditions that are getting worse. So, controlling emissions will, at best, slow down the rate of increase but that’s not a solution.

Also, our reliance on fossil fuels is nearing an end, something few want to discuss. But we haven’t found net new oil anywhere on earth since 2003 and the current boom in hydraulic fracking may help extract oil from existing fields, but it’s not a discovery tool. Experts tell different but related stories about oil. For instance,

A 2013 article in The Guardian states, “Official data from the International Energy Agency (IEA), US Energy Information Administration (EIA), International Monetary Fund (IMF), among other sources, showed that conventional oil [production] had most likely peaked around 2008.”¹⁹ The article quotes Dr. Richard G. Miller, who worked for BP from 1985 until retiring in 2008, saying, “We need new production equal to a new Saudi Arabia every 3 to 4 years to maintain and grow supply. . . .New discoveries have not matched consumption since 1986. We are drawing down on our reserves, even though reserves are apparently climbing every year. Reserves are growing due to better technology in old fields, raising the amount we can recover—but production is still falling at 4.1% p.a. [per annum].”²⁰

–The Age of Sustainability

In addition, the 2014 BP Annual Report stated that the Earth had a 53-year supply of oil remaining in the ground (proven reserves) if extracted at current rates. At some point soon, we’ll need to face the reality that we need an energy plan B because it will take time–probably all of those remaining years–to convert to renewable energy sources. So, we’re faced with the unpleasant reality that the current energy paradigm is doing significant harm to the ecosystem we live in, and it’s running out. Humanity is cornered but there are ways out of this maze.

Also keep in mind that we only burn about 60 percent of the fossil fuels we extract the rest goes into products. For instance, there are 500 pharmaceuticals based on coal and it’s an important part of steelmaking. Natural gas is used extensively in making polymers like plastics and other materials, and most carbon sources can be used in making fertilizers, rubber, paints, varnishes, glass, cement, and much more. Petroleum is also the raw material for making jet fuel, something we’ll always need for air travel and defense. So, the fossil fuels that are left are rapidly becoming too valuable to burn in most applications.

Enter economics

The question of economics is becoming important for two reasons. First, it is the gateway to a discussion of writing down the significant investments in the fossil fuel paradigm. This amounts to many trillions of dollars in global ventures supporting oilfields, ocean-going drilling platforms, pipelines, refineries, mines, tankers and more. Most of them will become worthless over the next half century as our energy diet inevitably shifts. There are also storage facilities, liquified natural gas terminals, and distribution channels that we are barely thinking about.

Just consider pipelines. In the US alone there are more than 185,000 miles of liquid petroleum pipelines; 320,000 miles of gas transmission pipelines and more than 2 million miles of gas distribution pipelines bringing natural gas to homes and businesses.

We need a serious discussion about how to write down all of this sunk investment without causing a global recession.

The second economic question worth considering is the so-called Green New Deal, a call for government involvement in all of this. Certainly, there’s a role for government in this massive transition. For example, supporting road construction to both repair the existing infrastructure and to prepare us for electric driving makes sense and is a traditional government responsibility. But there doesn’t appear to be a good reason for government nudging, or investment in, such things as electric vehicle manufacture for instance.

Most major car companies have already announced plans to deliver electric vehicles to the market as soon as this year. It’s a long list including the usual suspects like Ford and GM and most Japanese and German manufacturers including Porsche and BMW. But also, smaller companies like Volvo and the super luxury maker Aston Martin have all made commitments to building electric vehicles.

K-waves

So the Green New Deal exists in a very different economic time and space than its namesake, New Deal from the Great Depression and some contrarians are already griping about the significant costs that could be involved, perhaps rightly so. The original New Deal formed a Keynesian economic stimulus, an approach that put money into the pockets of working people to get a stalled economy moving again. But that’s not the case today.

To understand this economic moment, you need to understand the normal ebbs and flows of modern capitalism that began in the Industrial Revolution. Research shows that on a schedule of 50 to 60 years, the capitalist economy goes through a cycle of invention, distribution, consolidation and decline based on one or more significant disruptive innovations.

For instance, there was an age of steam and steel in which steel-making and steam engines powered the economy. When we developed steam engines small enough to fit in boats and on rails, we ignited a huge transportation disruption and we learned to build those engines out of steel while laying down steel railroads that spanned the continent. That age, as all ages do, eventually commoditized. We still rely on steam to generate electricity and we still build skyscrapers and bridges from steel, but neither drives the economy as they once did.

Today we live at the tail end of the age of information and telecommunications. From the time the silicon chip was patented in 1959 until the present, that innovation has changed or inspired such industries as computers, software, cloud computing, handheld devices, and social media, to name a few. Communications is digitized and from POTS (Plain Old Telephone Service) grew the Internet and communications satellites and much more.

The next age

K-waves take shape because a technological disruption ideally fits the demands of an age. Steam power served the power needs of an industrializing society, railroads and the telegraphy system they brought along, knitted together a continent-girding republic. Computers and modern telephony enabled the information management needs of modern business and finance.

The next K-wave will focus on the energy needs of a world population that will reach 10 billion by mid-century. Some of those needs are well established such as transportation but others are only now emerging. Consider fresh water for example. Many countries are experiencing the early climate-linked effects of desertification when insufficient rainfall and irrigation make farming difficult or impossible. Other regions are experiencing too much rain and flooding during critical planting seasons. Historically, we’ve regarded fresh water as an ecosystem service, something that nature provided and that we didn’t need to think very hard about but that’s changing.

Syria provides an important lesson. Drought hampered wheat farming in Syria, forcing agricultural people to migrate to cities where crowding and resource scarcity contributed to widespread dissatisfaction with their government. The resulting civil war is ongoing, but the diaspora of millions of Syrians has destabilized governments throughout Europe and beyond. The planet cannot afford for this to normalize.

So, some of the new energy inputs will need to be dedicated to things we've taken for granted like provisioning fresh water and providing better irrigation support for dry farming regions. We’ll also need to manage water where it is hyper abundant. There will be other resource needs that we traditionally got from nature that we will need energy to satisfy too.

Final thoughts

The great thing about K-waves is that the seeds of the next one are planted in the present though we might not immediately realize their significance. The first computers were developed in secret near the end of WWII or just after. They were room-filling things made of vacuum tubes and they were hand soldered together. The tubes gave off enormous amounts of heat too. They were the impractical playthings of geeky scientists and few people thought they would lead to pocket size devices that are tens of thousands of times more powerful today.

Our handheld devices represent what could be the ultimate commoditization of computing. There may be a lot of life left in the information technology sector but, like steel-making, it is becoming simply part of the economy and not its driver.

The new economic driver is likely sustainability. The term sums up the most important needs humanity faces in this century. That need translates into demand and with the global population trend this demand will likely translate into the greatest jobs creating, industry producing, and wealth generating opportunity in human history. Failing to take advantage of this opportunity could also spell doom for our species. But history shows we’ve always made the right decisions in similar situations. The opportunities only come around every 50 to 60 years and

SAP Nation 3.0 Excerpts: A tapestry of customers and strategies

My new book is now available to buy here in print version, and for pre-order in the Kindle version. As with my earlier books, I will excerpt roughly 10% of the 400 page book in a series of posts on my two blogs. While there is plenty in the book about what Brian Sommer calls "shale-fracking customers' wallets" and Jarret Pazahanick calls the "Wild West" of the SAP SI ecosystem, the bulk of the book is customer case studies.

I personally interviewed the majority of executives who are quoted. They spent countless hours talking to me, reviewing their transcripts (nearly 1,500 printed pages) and their book profiles (distilled down to 250 book pages). For a handful of other customers, I extracted the text from videos of their presentations at SAP and other events or from their quotes in articles.

They are spread across 4 customer categories I used for the book - Risk-Takers, Modernizers, Diversifiers and Bystanders. They represent over 20 industries and over 15 countries, and talk about experiences across a wide range of relatively new SAP products - S/4HANA, C/4HANA, SCP, IBP, AIN and also Salesforce, Workday, Plex, Rimini Street and other surround products and services. They are balanced - critical of SAP where needed. In book, I am also critical of SAP's competitors for their own missed opportunities.

Across these and other customers I noticed a wide range of customer strategies

"Here is a sampling:

• Ring-fencing ECC with many of SAP's own cloud properties, as with SuccessFactors at Terumo BCT and components of C/4 at Pregis.
• 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 as at a restaurant chain.
• New implementations of the SAP Analytics Cloud as at the Executive Huddle at the San Francisco 49ers.
• Trying out relatively new on-premise, but impactful SAP functionality like IBP at Louisiana-Pacific.
• Trying out Leonardo ML pilot projects as at Costco and Queensland OSR.
• Developing new ISV functionality on SCP as Vertex has done with their indirect tax app.
• Moving to new licensing and hosting models like Bombardier with IBM.

We also are seeing blends from this growing toolbox of strategies. So, some are moving to S/4 in the cloud, and at the same time have shifted to TPM for ECC support while they gradually migrate. 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.  

Given the wide proliferation of products and terminology in SAP World, my firm, Deal Architect, recommends (and often facilitates for clients) an intense offsite meeting to help customers take a fresh look at SAP and the broader market. That confab should cover and assess the fit of many of the strategies above, while also evaluating internal and external talent and fit with emerging technology trends."

More excerpts to come over the next few weeks....

Oracle: How about an Application Analyst summit?

It's no secret. I have written in several posts that to me the highest value vendor event is an analyst summit. I feel like I am intruding on customer time at user conferences and similar events.

Workday started off the trend with its first analyst summit almost a decade ago. Since then, the quality of such summits has kept improving. Plex often combines them with customer plant visits or allows us to mingle in a Customer Advisory Board meeting. SAP recently combined their analyst summit with the Qualtrics X4 event. Other vendors have their interesting twists - lots of access to executives, customer presence, often an interesting social activity.

I raved about a cloud summit Oracle hosted four years ago. For some reason, Oracle has moved away from such summits - it has short 3-4 hour ones which seem hurried. In fairness, they may hosted longer ones I have not been invited to. Unlike other vendors, Oracle persists with a "caste system" and has different agendas for those they consider "independent analysts" versus those from my former employer, Gartner or other bigger firms.

So most of my Oracle exposure has come from OOW or its thematic events.  It would be nice if they would facilitate connecting us with customers, executives and partners at such events. That has not happened much in recent years.

As a result, I have not traveled to Oracle events in the last year. In retrospect, looking at the agenda, I should have gone to MBX/MCX events last week. Oracle suggested I at least watch 4 streamed keynotes. 6 hours is an investment I will gladly make especially if I don't have to put up the wear and tear of travel.

So, I watch the first MCX keynote here.  First 25 minutes are marching bands and cute Ann Handley talk. Then come buzzwords about the "Experience Economy". Finally after 50 minutes, there's a customer on stage. Judy Sims, CMO of Oracle does a nice job interviewing Jennifer Storms, CMO of NBC Sports Group for about 20 minutes. Then more announcements. No product demos. Not a strong start I say. My grade for this segment = C. Without the NBC Sports customer segment it would have been be a D. 

On to the next keynote - this time from the MBX track. Marching band again and introductory comments for first 15 minutes. Charlene Li of Altimeter then talks about "Disruption". She is very good on other topics, but was a bit flat here. When I hear disruption, I expect example after example a la Clayton Christensen. Around 40.00, Steve Miranda of Oracle takes over. He spend a few minutes on history of change in enterprise tech. Starts demo around 50.00 - does a credible job, but focuses mostly on digital assistants and ML. Around 60.00, Steve interviews an executive from Caesars Entertainment. Around 75.00, an Accenture partner discusses some jargon - mercifully for a consultant, he does not have 80 slides in tow. He then interviews an exec from Willis Towers Watson. Most of the focus in the session has been on hcm and financial processes. Nothing on SCM or operational processes. My score for this session = B

On to the next MCX keynote - to me, the best of the four keynotes I watched. I enjoyed the tap dancing and hand jiving that kicks it off. Around 15.00,there is some product focus with Oracle thoughts on Design. Then, it gets better. Co-CEO Mark Hurd talks about sales and marketing trends at Oracle, the 80 customer "touches" it takes to sell enterprise applications, his efforts to recruit salespeople straight from campus. He was initially mocked for the idea but Oracle has persisted and now has 10,000 such recruits, many in inside selling. That is followed by an interview with Andrew Sinclair of Motorola Solutions. Very impressive description of how the company supports emergency services around the world.

My score for this session = A-. Would have been higher with more Oracle product exposure

Finally, the second MBX keynote. At around 10.00 Willis Sparks of Eurasia Group covers geopolitical trends. He is very good. At 40.00, Mark takes over. He presents his view on the industry. Nice if you have not heard him - but I have heard many variations of this from Mark. Around 70.00 he brings customer executives on stage - Hormel Foods, Adventist Health for 10 minutes each. Again more focus on financial and hr processes. Finally, a half-hour session on digital trends by Deloitte.

My score for this session = B- . It would be even lower without the Willis Sparks segment.  

4 webcasts - little over 6 hours. Not enough product or customer exposure, a little too much time given to partners. I listen to Jon Reed and Brian Sommer's podcast and read Bob Ferrari's posts from the event. They do not appear to have picked up on much new functionality in Oracle products. Brian comments the event was "crawling with chatbots"

After my research for SAP Nation 3.0, I believe SAP's competitors need to step up. In Oracle's case I would love to see it showcase much more intensely how its applications are growing in function points across geographies, industries and processes. Mark keeps predicting 80% of production apps will be in the cloud by 2025. After 15 years of Fusion and countless acquisitions, Oracle still mostly showcases CRM, HR and financial apps. Unless this changes, it will have a very small share of what Mark is projecting for the 2025 cloud enterprise apps market.    

Oracle, how about a 2 day analyst summit focused on your applications? Focus on SCM, operational, vertical applications you are working on. Allow us to spend some time with your application visionaries and customers who are pushing the boundaries of your applications. Entertainment and partner sessions, optional. 

I will gladly travel for that. How about it, Oracle?   

Update: someone just reminded me Oracle NDAs and admin processes can be pretty onerous. I suspect even if Oracle decides to host a summit I request above, there may need to be some negotiations before analysts decide to show.

SAP Nation 3.0: Early Book Reviews

I got very nice feedback from tech executives I respect who had seen early copies of the book

"Don't be fooled by the title - the book is not just about SAP. It is about drama in enterprise computing. As Vinnie points out, few would have speculated in the late '90s that Apple, near dead or Google, not born yet would have many times revenue of SAP or its peers.  I’ve been fortunate enough to have a front row seat overlooking this market both as executive and as investor. With new startups and developer communities reshaping the industry, SAP’s opportunity to reshape itself is still on the table, but only if it is willing to take a zero-sum approach. Platform vendors have to use their market cap and sales organizations to offer new services.  Otherwise Amazon, Google and Microsoft will within a few years position to operate enterprise workloads, anywhere at any cost. Vinnie deftly brings out the trajectory at SAP and its enviable blue chip customer base, but also its many missed opportunities."

Raymond J. Lane,

Managing Partner, Greatpoint Ventures.

Previous Leadership/Board Roles at Oracle, HP, Kleiner Perkins and Carnegie Mellon U.     

“A prolific writer and prescient observer of technology trends, Vinnie Mirchandani has produced an intriguing look at the many forces shaping enterprise applications today.”

Francisco D’Souza

Vice Chairman and CEO

Cognizant

"In previous books, Vinnie has painted a rather dim view of SAP as an expensive, back-office system, grudgingly accepted by business as a necessary evil. The fast changing and rapidly expanding digital landscape in the enterprise now presents incumbents like SAP a fresh opportunity to move into front-line operations in many industries. Will they be able to dominate this new digital space or will they squander the opportunity? This book does an excellent job of examining this question, taking a somewhat optimistic tone about their chances of success supported by a number of examples. Time will tell how the story ends."

Phiroz Darukhanavala (Daru)

CTO , BP (Retired)

"We are in the midst of massive digital transformation.  Software companies are not immune.  The shift from on-premises to cloud and now the shift from clouds to data driven digital networks will leave some vendors behind as the industry consolidates and evolves into digital duopolies.  Vinnie’s book looks at the shift and asks key questions about how SAP and other software vendors will make this transition.  More importantly, he raises the question on how the software market will look like post a financial engineered world,  asking what strategies they should take, where they should invest, and whom they should partner with.  A must read for those who want to know how the software market will evolve in the next decade."

R “Ray” Wang

Founder and CEO of Constellation Research

Author of Disrupting Digital Business

As usual, Dennis Howlett was the first to publish a media review on one of my books. His summary "SAP Nation 3.0 is very much a book of its time that will surprise, delight, infuriate and more." 

Dennis did not, however, get the first review in on Amazon. Marco gets that honor.

"This is the third volume in Mirchandani’s unfurling saga of the SAP software juggernaut and its ecosystem of clients, app providers and other partners. As in the previous two installments, he manages to *animate* the enterprise computing space like no other commentator I’ve encountered. His secret weapon is that he is attuned to – and integrates throughout the book – all the key aspects of the Big Picture: the technological dimension, the business side, user experience, market behavior, vendor dynamics, etc. While this approach succeeds at dramatizing this ongoing technology/business story, and even instilling an element of intrigue – will the software giant rally and prevail? – Mirchandani does not shoehorn the narrative into any pat conclusions, but rather lets the dozens of sharp voices of the interviewees tell the tale in their own words. He subtly emphasizes what the subjects bring up, such as how SAP has or hasn’t succeeded at addressing individual vertical markets or cloud deployment and what styles the firm uses in negotiations, etc. As with any picture drawn with great detail, the eventual image is loaded with complexity and yet it is coherent. This detail is culled from many dozens of diverse participants from throughout the business and technology value chain … and for anyone with a stake in enterprise or application software, the insights they continually offer are gold nuggets. Perhaps the book’s biggest takeaway – and the main reason this work could be vital to the whole C suite, not just CIOs and CFOs – is the myriad ways that technology is driving innovation and business success."

There will be plenty more reviews. I am sure there will be reaction from SAP, its partners and its competitors.

As one of the sections in the book says "It's not your Dad's SAP". I see a lot of one-dimensional commentary on SAP - related to rumors of its recent restructuring, about its Indirect Access stance, its SI ecosystem. To me, SAP Nation is a fascinating, complex, evolving organism. It deserves a fresh look every few years. I hope I start that process this time around for a number of readers and with customer executives I advise. 

Here comes the sun...and the book

It is a glorious Spring day and I heard the Beatles this morning - this song cheers me up no matter what time of the year. Then I got an email from Amazon "Congratulations, the paperback edition of your book "SAP Nation 3. 0: Manifest Destiny" is live in the Amazon Store." 

It's available on the amazon.com site here. It may take a couple of days for Amazon sites around the world to show as available. This is the print-on-demand version and works best for orders in small quantities. If you want 25+ copies at a much better unit price please send me a note. Corporate Graphics is running a bulk job and those copies should be available by the end of April.

The Kindle eBook version should be out by early April. You can pre-order here.  Many other channels are serviced by Ingram-Spark and they also have a print-on-demand version uploaded.

Whew! As the Beatles sang "Little darling, it feels like years since it's been here".

This had the longest gestation period of all my books. I wanted to explore many dimensions of the ever-changing SAP Nation. I started the book thinking it would mostly be S/4HANA focused - that gets plenty of coverage, but so do many of SAP's new products including C/4HANA, SCP, AIN and IBP. My last few books have averaged 250 pages - several readers told me they liked books they could finish on a long flight. I broke that rule for this one - it is 400 pages long. I would be remiss to shortchange the 35 case studies which make up 250 pages in the book. As it is, their raw transcripts are five times as long.

I personally hope lots of customer executives read what their peers told me over the countless hours they spent with me. And that they revisit their view of SAP and their own investments in software and talent.

"Given the wide proliferation of products and terminology in SAP World, my firm, Deal Architect, recommends (and often facilitates for clients) an intense offsite meeting to help customers take a fresh look at SAP and the broader market. That confab should cover and assess the fit of many of the strategies above, while also evaluating internal and external talent and fit with emerging technology trends."

In the meantime, thank you to the village which helped bring the book to  life. As the lads sang "I say, it's all right". 

Conversations with ASUG

Merriam-Webster defines ecology as a "branch of science concerned with the interrelationship of organisms and their environments". If ecologists were to study today's software vendors they would be fascinated not just by how the core organism functions but by the tapestry of their environments. Their halo includes layers of resellers, systems integrators, hosting firms, ISV partners, platform participants, developer communities, analysts and other influencers, media and other watchers. And then you have user groups. SAP alone lists 38 user groups around the globe.

In my long career as analyst, advisor and author I have interacted with most of this "surround" environment around software vendors. Honestly, the one element with which I had the least interaction is user groups. I am on mailing lists of a few, and I periodically reach out to their leaders but never could get a continuous conversation going. I blame myself for not trying harder.

That changed last year. I approached Geoff Scott, CEO of ASUG to see if we could talk every few weeks. Geoff's wonderful assistant, Kim made sure we didn't ignore each other. She would diligently reschedule calls if needed and made sure we talked. So talk we did, openly, off the record about what we were seeing in the SAP ecology. 

As I was writing SAP Nation 3.0, I asked Geoff if he could describe from his vantage point, on the record, how SAP and ASUG have changed in the last 5 years. I liked his first draft so much that I asked him if he could reshape it as a foreword to the book. I am glad he agreed. The book is about customer conversations - 35 case studies over 250 pages make up bulk of book, so the foreword from the head of one of SAP's biggest user groups is like the cherry on top of the dessert.

Here is an extract from his section

"As SAP has changed to become more cloud-centric, ASUG has changed, too. We invested in new ways of learning and connecting like-minded SAP customers and partners, and we launched new programs and services all with the goal of helping our customers maximize the return on their SAP investments.

The process has taken time and energy, and key to it has been the involvement of our members, including our 12-person Board of Directors and more than 300 volunteers. Which leads me to an example from 2017-2018, one that is emblematic of how much the relationship has changed and how it’s benefited SAP customers. The topic? SAP licensing and indirect access (IA) of SAP software."

It went further. He introduced me to several executives from his Board who ended up describing their companies and their SAP investments. Very honest feedback about the software and the relationship with SAP - on the record, as you will see in the book.   

Tom Wailgum, part of analyst relations at ASUG, facilitated those interviews. He later told me 19 of the companies profiled in the case studies (most I had identified from other sources) are ASUG members. He also identified a few journalists I have since sent a media review copy of the book. He also shares with me periodic ASUG research like he did this week about the "State of the Community". The extract below is a small fraction of the long infograph - check here for full graph. Drill down here and you get more detail below the infographic. Even then, it is a very high level summarization of the nitty gritty of what users do on a daily basis. And the conversations they have with each other. That's what ASUG facilitates -  as their site says

"From the outside, we’re a huge organization of more than 100,000 members from thousands of companies—from global enterprises to startups—spanning traditional and emerging industries across North America. But the real power of ASUG lies in informal partnerships formed through knowledge-sharing and commitment to a common cause."

In the book, couple of CIOs talk about how they find it easier to find answers to their questions by networking within ASUG than going through their contacts at SAP. ASUG is a mother lode of information that I hope I get to mine further in coming years.

Having had this experience with ASUG, I hope I can open up conversations with some of SAP's other user groups around the world. Even more, I would love to start conversing with user groups of other vendors. That is if they can be as open as Geoff and Tom have been at ASUG.

 

Oracle Applications: a new chapter?

Steve Miranda, EVP, Applications Product Development at Oracle briefed analysts about this week's co-located Modern Business Experience (MBX) and Modern Customer Experience (MCX) in Las Vegas. He also blogged about it: "we are bringing together marketing, sales, and service with HR, finance, and supply chain, because we are seeing more and more similarities between each area."

On the earnings call last week, Mark Hurd, co-CEO of Oracle glowed about the applications business

"Fusion Apps, 35% up, Fusion ERP revenue was up 47% organically. NetSuite revenue was up 28%."

Steve is one of the nicest guys in the software industry. He is also one of the smartest application architects in the industry. Mark has run some of the most sophisticated supply chains and salesforces in the tech industry. I have talked to him about complex business processes and applications. I know they know business applications cold.  

And yet when I was researching my new book, SAP Nation 3.0, I repeatedly saw Oracle miss out over the last two decades on opportunity after opportunity to become the dominant enterprise application vendor.

"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. It has seemed more intent in going after Amazon for the cloud infrastructure and platform markets ...Around business applications, 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.....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. "

Mark explained during the q&a during the earnings call that he is not that concerned that his on-prem customer base is not moving to the cloud. He said "our user base actually knows our cloud roadmap. They actually have confidence in our R&D, they know we’re going to be there to migrate them when they want to be there. They actually have less of a sense of urgency in many cases to move than the (competitors like Deltek and Lawson) you’re describing, Brad, because they’re in much more desperate situations without a roadmap, without knowing how they’re going to get from here to there, knowing their competitors are beginning to move."

In the book, I  point out that after two decades of cloud applications (Netsuite was founded in 1998), we actually now have an industry crisis. CIOs are reporting it is increasingly difficult to recruit talent to their on-prem environments. The customizations and technical debt around those applications are increasingly a security and compliance risk. And they have little hope of seeing the benefits of better UX, multi-tenancy, machine learning or IoT any time soon. 

In this post I called for SAP, Oracle, Infor, Microsoft and other on-prem apps vendors to "tilt the bell curve". Of their own customers - not worry about those of competitors.

Mark also said "Our vertical revenue was up 38% and our annualized revenue in the verticals is now over $800 million." I would love to see details - to me vertical applications do operational stuff - merchandising in retail, claims processing in insurance, net metering in utilities, support robotics and wearables on the shop floor etc. If it has those, why is Oracle not aggressively showcasing these capabilities? I like the fact that they are bringing marketing and hcm executives under the same tent in Vegas, but why not operational executives in various industries? I asked Steve and he basically said the risk was the agenda would become unwieldy. On the other hand, that would hugely differentiate them from what Workday, Salesforce, SAP and others can offer today or in the foreseeable future. Also, in the last wave of ERP and CRM projects customers mostly implemented back office functionality and showed poor payback. This time around many want to start with operational areas.

Under NDA, Steve described exciting new features in the horizontal applications they will showcase in Vegas this week. Every time I listen to Steve and Mark, I get excited about Oracle's application future. 

But when I step away and look at what could have been, I turn cautious.  The industry could use a much more focused and vibrant Oracle applications business. Are we seeing the start of a new chapter with the new event format in Vegas? I hope they can turn my caution to enthusiasm.

SAP Nation 3.0: Those who ignore history.....

The book is available for advance purchase on Amazon here. I am sending out media review copies this week. Over the next few weeks, as I do with all my books, I will share about 5%  of the 400 pages in posts on this blog.

I recently summarized the book for a SAP Executive. I told him there were three waves of history in the book:

a) The ongoing turnaround at SAP since the first volume of SAP Nation 5 years ago has been impressive and in many ways unrewarded by Wall Street or analysts. Most of the 35 customer case studies talk about SAP products that did not exist/had not been acquired. Many of the SAP executives I profile in the book have a sense of urgency I find lacking in its competitors.

b) When you look at the industry from a 20 year lens, however, SAP does not look that impressive. Many, many missed application opportunities while SAP has been distracted with platforms and databases. I also cover plenty of "unforced errors" SAP has made like its Indirect Access licensing policy. As the book says "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."

c) I also profile the race in the North American Continent in the 1800s. There is plenty for SAP and its cohorts to learn from how that history evolved. Two extracts from book:

• In 1800, the United States, then the original 13 colonies, was a young, skinny country. Two-thirds of the population lived within 50 miles of the Atlantic Ocean. You could have placed bets on who would win the race for North America—would it be the Americans, the Spanish, the British, the French, or maybe even the Russians or the Dutch? Over the next few decades, Americans had the biggest market share.
• (The Louisiana Purchase) was a major risk for President Jefferson but it doubled the real estate of the young United States. 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.

In 400 pages, I cover a lot of ground - actually, the customers in the case studies do quite a bit of work for me. If you want to hear gossip about SAP's recent restructuring you wont find too much in the book. Nor will you find too much adulation about the $8 billion investment in Qualtrics. Both are there as milestones in the journey.

There is plenty on how the enterprise software industry continues to morph.  And as I ask in the book

"Are they ready to issue the Manifest Destiny clarion call to go from "sea to shining sea"? The continent of enterprise computing is waiting to be tamed."  

Look forward to your input as various formats of the book become available for purchase throughout April.  

The third decade at Salesforce

Congrats to Marc Benioff and team for twenty glorious years. $1 billion in annual revenues by end of first decade, $ 16 billion forecast bt the end of the second - what a rocket ship!  He is also one heck of a generous, big hug kind of leader. I have enjoyed cataloging him and the company in many of my books and blogs

Someone asked me recently about how I saw Salesforce's third decade. I started with its history and I told them their biggest innovation was collapsing what used to be four contracts.  You used to buy software from one vendor.  You would get hosting from a data center vendor.  You would get application management from an offshore firm.  You'd do upgrades with the help of systems integrators. Salesforce and other SaaS vendors packaged all that into one buy and delivered SLAs across those previously disparate contracts. That was a massive leap forward for the software industry.

I then told them how Salesforce and other SaaS vendor need to evolve. When you give a vendor a five-year contract, you are entitled to see continuous improvement.  It's called Six Sigma benchmarking. In the auto, aerospace and other industries, they're constantly expecting 2%, 5% improvements a year from their suppliers.  In outsourcing, we have seen CMM Level 5 performances. That is something SaaS vendors will increasingly be expected to deliver.

I recently wrote about 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.  I also talked about Amazon pricing. Prime started off free 2 day shipping, then added free movies and has since bundled countless new features. Amazon Web Services has delivered 60+ price cuts in its first decade.

I see an opportunity for Salesforce to lead the industry again with this continuous improvement mindset.

I also pointed out the SaaS model is increasingly looking like the on-premise model as large systems integrators burden customer costs with their implementation and on-going budgets.  In its first decade, the Salesforce ecosystem had many of the smaller "born in the cloud" SIs like Appirio and Model Metrics. It still has a few like Slalom, but the bigger SIs have muscled in. Nothing wrong with that, if Salesforce can make them bring plenty of automation, remote delivery and other innovations. . Between their costs and that of the Trailblazer community, Salesforce has to increasingly focus on customer economics. It cannot just talk impactful low code tools; it has to show their impact in the outcomes. 

Finally, I mentioned I would like to see the Force.com platform start to deliver significant new functionality. After a decade, it has shown nowhere near the vibrancy of marketplaces like the Amazon iOS store or Amazon Fulfillment launched at the same time. The SaaS model desperately needs variety. If you draw a grid with country-by-country availability and industry-by-industry availability of applications, it's shocking how little is available in the cloud - only about 20% on that grid. There are plenty of customers who say they are "cloud first" but are frustrated because while they can find plenty of CX, accounting and HCM functionality there is very little in the way of operational functionality. And even in the CX and HCM spaces there are plenty of holes when it comes to regional coverage around the world.  In my new book, I profile case studies across 20 industries in over 10 countries discussing a wide range of business processes. Across its over 400,000 customers, SAP is gradually filling up the white spaces in that grid. Oracle and others will do the same over the next few years. You can continue to sell point solutions, but suites often have an unfair advantage.

Look forward to the third decade. I hope to see Salesforce mature into an even more impactful industry player.

Qualtrics: Not just a shiny new object for SAP

I want to be respectful of the NDAs SAP requested during the recent analyst summit but wanted to share early thoughts that crossed my mind as we were introduced to SAP’s new acquisition.  We saw keynotes at the Qualtrics X4 conference, had a walk through of the show floor, a q&a with the management team and couple of conversations about the acquisition due diligence conducted by SAP.

a) Qualtrics punches above its weight class

Many of the customers we heard about this week are blue chip, SAP-class. The executives we met have impressive pedigree. The co-founder, Ryan Smith has been riding a unicorn the last few years. What's even more admirable from talking around is his work-life balance with 5 kids under 10 years. His brother, Jared Smith is a brilliant engineer with experience at Novell and Google (and as this story describes he worked with Kai-Fu Lee who is now funding a vast empire of machine learning startups in China). Zig Serafin, the COO ran Skype and Cortana units for Microsoft. They speak in jargon like instrumentation and conjoint analysis. Their tools are designed to turn ordinary users into data scientists. I believe they will sharpen SAP's analytical chops.

They are turning annoying survey tools into conversations. With digital assistants and real-time sentiment analysis, they are redefining how to collect experiential data. Their early focus on academia brought them users who used their tools for a wide range of scenarios. While the most common ones now are customer- and employee-centric, at the X4 event, Under Armour talked about a product engineering scenario. SAP sees a lot of promise in product centric/spend management scenarios as they look to integrate X - experiential data from Qualtrics and O - operational data from its systems. 

Rob Enslin of SAP described how he gradually warmed up to the acquisition. Abdul Razack, Head of Cloud Technology and Architecture showed us the image he doodled after his first due diligence visit to Qualtrics. Abdul said he was blown away when he was told the X4 event was attracting 10,000 attendees.  To Utah no less, not the easiest place to get to. BTW the slate for the event had heavy hitters like Obama and Branson and Imagine Dragons.

Credit: SAP

b) The bigger news is SAP's O data keeps growing by leaps and bounds

Having spent $8 billion on the acquisition, SAP could have focused the analyst summit mostly on Qualtrics. Instead, they spent most of the time talking about how the "Intelligent Enterprise" keeps expanding and maturing - S/4, C/4, cloud properties like Ariba and Concur, Leonardo ML and IoT progress, Cloud Platform, Analytics Platform all got plenty of time. To me, it was a nice summary of the products in the case studies profiled in my upcoming book.

I hope the messaging at SapphireNow is similar - lots more on the expanding Intelligent Enterprise, with Qualtrics adding another dimension which could blow people's minds. I would like to see it as the cherry on top of the dessert. I think that will resonate more with the SapphireNow audience.

c) Even bigger impact may come from spreading the Qualtrics ethos across SAP

Dennis Howlett can be a flamethrower as we saw this week in his commentary on SAP's restructuring. But in the book, he has a thoughtful section where he talks about how Qualtrics instrumentation can be used to improve SAP itself across customer, product, employee and brand dimensions.

That's it for now. More to come in the weeks ahead.

Influence, Intelligence and SAP

Last week, in the Enterprise Irregulars chat room I said in a thread "Analyst Relations at vendors generally want to influence v. seek intelligence. So they want analysts to say nice things about what they can offer today. As important should be influence of their own R&D. This is how our market and competition are changing and how our offering should change. But how many vendors really want to hear that from an analyst?"

Well, I have to eat crow.

At a meeting SAP organized for analysts this week in Utah, they actively sought feedback on messaging they are planning for their SapphireNow event. They also shared plenty of detail on their $ 8 billion acquisition of Qualtrics. Xs and Os were definitely in the air as it coincided with their X4 Experience Management user event in town . SAP has been looking at datasets which integrate Qualtrics experiential data with operational data from its own systems.  It was all under NDA (at least for a few weeks till SapphireNow) but the conversation with many of the senior executives was refreshingly open. I cannot remember the last time we have had so much candid conversations with a vendor.

Two other things stood out for me on this trip. We got to see the Xs and Os in a very different setting. Stacey Fish and Craig Cmehil of SAP, Jon Reed of Diginomica and I helped kick off a hackathon at Brigham Young University. The dataset the students worked on included employee data from SuccessFactors and related survey data from Qualtrics. Thinking back to my own student days, I would have been intimidated by the assignment. But these young men and women have already used ERP software and data visualization tools in class and in internships. It was invigorating to see their enthusiasm.

I enjoy presenting at campuses around the world on themes from my books. This session coincided with the 14th birthday and 6,000 post anniversary of the New Florence blog. I told these young ones I was amazed my blog was going strong after all these years - for me so much innovation is the sign "it's a great time to be alive" like it was in Florence during the European Renaissance.

On the drive, we had conversations about changing developer communities, a theme I also cover in the book. Open Source, ML in China, Industrie 4.0 in Germany, changing investments in Silicon Valley. We talked about movies about developers and geeks - War Games, Tron, Pump up the Volume and many others. It was a useful reminder of the constant turmoil that technology brings. It's exciting and scary at the same time.

Being around the SAP management team this week, you could not help but sense the restructuring SAP is going through. Dennis Howlett describes it in his own Hollywood terms here. Open as SAP may be, I stayed away from prying too much. There are legal and other sensitivities during such corporate initiatives. As an individual, I sympathize with those that get hurt during such moves. However, in my book, I point to many opportunities SAP has missed so I think we will see even more change. And, whether SAP changes or not, the world around it is changing rapidly as our conversations at and to and from BYU brought out in spades.       

Having said all that, SAP is an aberration when it comes to openness. I see too many vendors seek out a string of positive tweets at their events, limit access for conversations with execs, express annoyance at even the slightest negative comment. What is concerning is many of these comments come courtesy of their customers but they would rather have not have them publicly repeated. I expect to get unhappy comments from other vendors in the book. They would prefer I only pick on SAP. So, for the most part my observation about influence v. intelligence still applies. Will it change? I hope so, but after 25 years at Gartner and since, I am also pragmatic.

What I can do, is to compliment vendors like SAP when they do show openness. And hope it spreads around the industry.

Bruce Cleveland - Part 2 - thoughts on current enterprise market

In Part 1 yesterday, Bruce Cleveland talked about the framework in his new book, Traversing the Traction Gap. Here we talk about partnering and white spaces in the market.

Most enterprise vendors now offer their own platforms. Could they use your framework to develop a vibrant network of startups on their platforms?

At Siebel, we used partners to dominate – I know the word is overused— the industry.  We grew from initial product release to $2 billion in revenue in 4.5 years. In 1999, Deloitte named Siebel the “fastest growing company in the US” with a staggering CAGR of more than 750,000%.  We only accomplished this because we (by “we” I mean Tom Siebel) put significant resources (personnel and capital) into building a technical platform and a robust ecosystem to support it. 

Tom knew he had to “remove the constraints on the growth of the business.” We needed systems integrators who were trained and certified on Siebel implementations. We needed to our applications tuned to run optimally on various hardware systems. And, we needed numerous third-party applications that could interface and interoperate with our application suite.

Consequently, Tom charged me with building the Siebel Alliance Program. Tom had created our first systems integration partnership with Andersen (now Accenture).  He also had created our first hardware relationship with Compaq and our first software partnership with Microsoft.

I simply took Tom’s initial ideas and those partnerships and developed a scalable partner program from them.  We began the Siebel Alliance Program with Accenture, Compaq and Microsoft and over the course of three years we accumulated a total of 750 partners. These partners generated about a $B of additional annual license revenue for Siebel and helped us ensure that those licenses were implemented successfully. By partners, I don't mean they were reselling Siebel applications.  I mean we partnered with them to market, sell, and implement our joint solutions. We were compensated on our products/services and they were compensated on their products/services.

So, as you might imagine, I am a huge fan of partnerships. We won the Forbes award for the most innovative partnering program in the technology industry at the time and every technology company knew how powerful it was. It wasn’t a secret.  I find it interesting – with all the success we had with the Siebel Alliance Program - that none of the incumbent technology companies have replicated its form or function.

I believe the current technology platform leaders have a tremendous opportunity to develop a similar program. Sure, they all have partner programs, but those programs don’t really put a lot of skin in the game. By that, I mean, they don’t obligate the leaders to do much or to invest in their partners beyond providing basic access to some technology and lightweight market awareness. 

For our program, we actively recruited and hired hundreds of MBAs from the top universities as well as industry professionals and chartered them to create joint business plans with our partners, advocate for our partners with our product and sales organizations, and held the Siebel Alliance organization accountable for helping our partners achieve their revenue and market share objectives. We built specific marketing programs – brand and demand gen – that partners could sponsor to generate leads for themselves. We put skin in the game.  

The program was so successful that Harvard Business School wrote a business case study about it. So, I'm pretty proud of it.

 Today, though, for the most part, the large technology platform companies offer what I call “paper partnerships”.  Those partnership don’t obligate either party to much of anything.  They're not “skin in the game” partnerships so they are anemic, at best. 

Most startup teams have little experience partnering with these large technology providers. And, even if they do, they have found that those companies offer little that their startup can benefit from. There's little provided by the large company that is likely to generate significant market awareness or revenue for the startup. For example, startups need to know who, from the partner’s organization, wakes up every morning worried about helping the startup to succeed; where are the demand gen programs they can co-invest in to generate awareness and interest in the startup’s products?  Which teams inside the large company are held accountable for achieving the market share and revenue objectives of the startups in their partner community? The answer? None. Those partner programs are essentially worthless – at least as far as the startup community is concerned. 

Salesforce built an App Store and prospective customers can certainly search for and find add-on applications and products for the Salesforce ecosystem there. However, that's a pretty lightweight endorsement for startups. Who is held accountable within the four walls of Salesforce to wake up every morning, ensuring that a particular partner has the leads it needs, generating a robust pipeline, and helping the startup to convert that pipeline into revenue?

I don’t mean to call out Salesforce. At least they developed an innovative approach and put a lot of energy behind it. And, they have done some advanced partnering with Vlocity. Vlocity was founded by some of my former Siebel colleagues.  What's Vlocity doing?  They're building vertical applications on top of the force.com platform. 

Salesforce saw a need to have much deeper vertical versions of their platform.  That's what we did at Siebel (create vertical solutions of Siebel) and David Schmaier led that initiative as the executive VP. David is the founder and CEO of Vlocity. David and his team are replicating what we did at Siebel for Salesforce and it's going very well. 

I'm an investor in Vlocity, and, to your point about partnering, it's an example of what can – and I think should - be done between technology platform providers and the startup ecosystem.  As this example shows, it's not just about partnering with systems integrators. 

If you want these partnerships to amount to anything there needs to be alignment and shared objectives. For example, if you want to garner the attention of the partner’s sales organization, there is nothing like making partner revenue a part of the sales rep’s quota.

The truth is that partner programs as conceived and implemented by the current technology platform leaders just don’t do much for startups – in terms of market share and revenue - and therefore it shouldn’t be surprising that those programs aren’t valued by startups.

Apple has done well in its ecosystem – with the App Store - but the consumer world doesn’t require face-to-face interactions. In the B2B world, people's work reputations are on the line when they make a buy decision. And, in almost all cases, there are multiple decision makers who must be convinced.  For B2B, startups need brand credibility from the platform provider. This happens when they implicitly endorse the startup by working closely with them. 

In the consumer world, a startup can “borrow” the brand of Apple because if their application is admitted into the Apple App Store, it tells consumers, "Look, we vetted this product. It adheres to our rules." 

Conversely, I don’t think that Salesforce’s App Store does a lot for startups. It’s essentially a digital catalog with some ratings/rankings. That’s not enough for most businesses to make a buy decision. If you speak with startups about the Salesforce App Store and ask them if it is a significant source of revenue for them, I think you will find that for most, it isn’t.

Startups lack credibility.  They lack access to prospective customers.  And, they lack sufficient marketing dollars.  This is where the enterprise vendors could really help startups.

I had hoped that the technology leaders would have adopted at least some of the best practices we had created with the Siebel Alliance Program. Tom Siebel and his new company, C3, are developing a similar program to what we had at Siebel Systems. So, I believe the principles are as valid today as they were back then.

When you look at the cloud apps market there are so many white spaces - major geographies, industry verticals etc - and they do not seem to be targeted by established vendors or even by startups. How are investors like you guiding them through these white spaces?

Cloud computing with its subscription business model - and delivery and usage model -has democratized business application software. Prior to cloud computing, it was prohibitively expensive for smaller companies to acquire and implement enterprise-class applications.

But, by dramatically dropping the cost of these solutions, I suspect it has constrained the application providers’ ability to support smaller geographies and industry verticals.  Going after smaller markets that require significant translation and support infrastructure at much lower price points isn’t practical. 

Even with traditional (re: higher priced) enterprise software, it was always challenging to create localized versions of products for a specific market.  Most US companies started out with the English speaking markets and then typically moved to countries such as Germany, Spain, and France with relatively large populations.  But, when they were asked to support a Dutch or Finnish version, it was seldom worth the upfront and ongoing cost.

For a large company to continue to grow at a significant rate, it needs to acquire or build new solutions that add significant revenue streams – quickly. In that context, let's talk about SAP and Salesforce.  One is a classic enterprise technology company with primarily a perpetual license business model.  The other is the "modern" cloud computing company with a subscription business model. 

The challenge with both of those organizations is that to grow meaningfully they have to build or acquire something of meaningful size.  Moving into a small geography requires the same resources or at least the same FTE costs that might be invested in something else and could generate a much larger impact.  So, it should be little surprise why we are seeing these large companies look to make large acquisitions and avoid niche industries and geographical markets. 

To your point, one might think, “Hey, if these market leaders are not seeing a lot of companies growing fast enough to make a measurable impact on their top line why aren't they helping smaller companies to grow so that they can eventually acquire them?”

Technology leaders may want to look at making investments in smaller technology companies where they see strategic value. These leaders can protect their interests by exchanging an equity investment and access to their channels with a Right of First Refusal (ROFR) that allows the leader to acquire the smaller company when it reaches a certain revenue threshold, at some predetermined price based upon a number of factors such as the acquirer’s stock multiple at the time. 

With the respect to investing in and expanding the number of verticals supported, there may be a dearth of deep domain expertise inside some of the larger technology companies to do that well. I don't know whether these companies have initiatives to try to hire subject matter experts from industry to help them drive their product management.  They may and I'm just not privy to it. 

I do know that Salesforce took a run at creating vertical solutions and it wasn't as effective as they had hoped, at least not at the time. This is one of the reasons that led to their investment in Vlocity.  I think this makes the case that the technology leaders, at least those in the B2B markets and not normally inclined to partnering, could really benefit by embracing partnerships. 

Instead, it looks like the majority of them sit back and wait to see which startups “make it”, without their help, and then acquire the few that do. This seems rather silly because by doing that they have to then compete in the open market – and pay a premium - to keep them out of the hands of competitors.

What do you find interesting in today's enterprise space?

Roughly every ten years, new technology is introduced that dramatically changes our work and personal lives.  In the 60s it was mainframe computing. In the 70s it was minicomputers. In the 80s it was PCs. In the 90s it was client/server computing and in the 2000s, it was largely cloud and mobile computing which spawned “digital transformation”, beginning in the consumer markets with companies such as Amazon, Apple, Facebook, NetFlix, Google, etc. Digital transformation has now moved full speed into the enterprise markets.

I believe digital transformation - digital disruption - is such a big transition it will require multiple decades.  I think it has a chance to undo a lot of the current market leaders in every industry.  To your point, maybe vertical providers will emerge and dominate the markets due to digital transformation issues.

The emerging opportunity in the enterprise is in systems of intelligence. This is where I think vertical solutions can dominate.  Systems of intelligence use the data generated and captured by systems of record and systems of engagement to enable companies to derive better business insights, faster and far more accurately than ever before.  I mean real-time insights and real-time responses, without humans involved, that can be triggered via key business events and moments of value. 

Here is an example in the retail space. Let’s say I'm walking through PetSmart and I'm a repeat PetSmart customer. I’m a member of the PetSmart loyalty program. If PetSmart has implemented a system of intelligence and placed beacons throughout the store, I have PetSmart’s loyalty application on my phone, and I provide my permission to send me offers, PetSmart can enable brands to generate contextually-relevant real-time offers to me as I walk through the store.  An offer could be from a brand I don’t normally buy for my dog. The system of intelligence has access to POS data from my prior store purchases. PetSmart makes $ by serving up the competitive offer and if/when I decide to redeem the offer in a coupon that could be set to expire if I walk out of the store without making the purchase. Powering this type of application requires a different type of computer and systems architecture. 

The biggest opportunity may come from vertical systems of intelligence built on top of the older systems of record and systems of engagement.  In my PetSmart example, it means that you've got to be able to interface with an existing point of sale system, not replace it. This is where I would advise B2B application startups to focus. Trying to replace the existing systems of record and engagement is tough to do. 

Trying to rip and replace technology is hard to do.  Building next-generation systems of intelligence that utilize the existing systems of record and engagement is far easier.  That's what a lot of the startups we work with are doing.

Bruce Cleveland - Part 2 - thoughts on current enterprise market

In Part 1 yesterday, Bruce Cleveland talked about the framework in his new book, Traversing the Traction Gap. Here we talk about partnering and white spaces in the market.

Most enterprise vendors now offer their own platforms. Could they use your framework to develop a vibrant network of startups on their platforms?

At Siebel, we used partners to dominate – I know the word is overused— the industry.  We grew from initial product release to $2 billion in revenue in 4.5 years. In 1999, Deloitte named Siebel the “fastest growing company in the US” with a staggering CAGR of more than 750,000%.  We only accomplished this because we (by “we” I mean Tom Siebel) put significant resources (personnel and capital) into building a technical platform and a robust ecosystem to support it. 

Tom knew he had to “remove the constraints on the growth of the business.” We needed systems integrators who were trained and certified on Siebel implementations. We needed to our applications tuned to run optimally on various hardware systems. And, we needed numerous third-party applications that could interface and interoperate with our application suite.

Consequently, Tom charged me with building the Siebel Alliance Program. Tom had created our first systems integration partnership with Andersen (now Accenture).  He also had created our first hardware relationship with Compaq and our first software partnership with Microsoft.

I simply took Tom’s initial ideas and those partnerships and developed a scalable partner program from them.  We began the Siebel Alliance Program with Accenture, Compaq and Microsoft and over the course of three years we accumulated a total of 750 partners. These partners generated about a $B of additional annual license revenue for Siebel and helped us ensure that those licenses were implemented successfully. By partners, I don't mean they were reselling Siebel applications.  I mean we partnered with them to market, sell, and implement our joint solutions. We were compensated on our products/services and they were compensated on their products/services.

So, as you might imagine, I am a huge fan of partnerships. We won the Forbes award for the most innovative partnering program in the technology industry at the time and every technology company knew how powerful it was. It wasn’t a secret.  I find it interesting – with all the success we had with the Siebel Alliance Program - that none of the incumbent technology companies have replicated its form or function.

I believe the current technology platform leaders have a tremendous opportunity to develop a similar program. Sure, they all have partner programs, but those programs don’t really put a lot of skin in the game. By that, I mean, they don’t obligate the leaders to do much or to invest in their partners beyond providing basic access to some technology and lightweight market awareness.

For our program, we actively recruited and hired hundreds of MBAs from the top universities as well as industry professionals and chartered them to create joint business plans with our partners, advocate for our partners with our product and sales organizations, and held the Siebel Alliance organization accountable for helping our partners achieve their revenue and market share objectives. We built specific marketing programs – brand and demand gen – that partners could sponsor to generate leads for themselves. We put skin in the game.  

The program was so successful that Harvard Business School wrote a business case study about it. So, I'm pretty proud of it.

Today, though, for the most part, the large technology platform companies offer what I call “paper partnerships”.  Those partnership don’t obligate either party to much of anything.  They're not “skin in the game” partnerships so they are anemic, at best. 

Most startup teams have little experience partnering with these large technology providers. And, even if they do, they have found that those companies offer little that their startup can benefit from. There's little provided by the large company that is likely to generate significant market awareness or revenue for the startup. For example, startups need to know who, from the partner’s organization, wakes up every morning worried about helping the startup to succeed; where are the demand gen programs they can co-invest in to generate awareness and interest in the startup’s products?  Which teams inside the large company are held accountable for achieving the market share and revenue objectives of the startups in their partner community? The answer? None. Those partner programs are essentially worthless – at least as far as the startup community is concerned. 

Salesforce built an App Store and prospective customers can certainly search for and find add-on applications and products for the Salesforce ecosystem there. However, that's a pretty lightweight endorsement for startups. Who is held accountable within the four walls of Salesforce to wake up every morning, ensuring that a particular partner has the leads it needs, generating a robust pipeline, and helping the startup to convert that pipeline into revenue?

I don’t mean to call out Salesforce. At least they developed an innovative approach and put a lot of energy behind it. And, they have done some advanced partnering with Vlocity. Vlocity was founded by some of my former Siebel colleagues.  What's Vlocity doing?  They're building vertical applications on top of the force.com platform. 

Salesforce saw a need to have much deeper vertical versions of their platform.  That's what we did at Siebel (create vertical solutions of Siebel) and David Schmaier led that initiative as the executive VP. David is the founder and CEO of Vlocity. David and his team are replicating what we did at Siebel for Salesforce and it's going very well. 

I'm an investor in Vlocity, and, to your point about partnering, it's an example of what can – and I think should - be done between technology platform providers and the startup ecosystem.  As this example shows, it's not just about partnering with systems integrators. 

If you want these partnerships to amount to anything there needs to be alignment and shared objectives. For example, if you want to garner the attention of the partner’s sales organization, there is nothing like making partner revenue a part of the sales rep’s quota.

The truth is that partner programs as conceived and implemented by the current technology platform leaders just don’t do much for startups – in terms of market share and revenue - and therefore it shouldn’t be surprising that those programs aren’t valued by startups.

Apple has done well in its ecosystem – with the App Store - but the consumer world doesn’t require face-to-face interactions. In the B2B world, people's work reputations are on the line when they make a buy decision. And, in almost all cases, there are multiple decision makers who must be convinced.  For B2B, startups need brand credibility from the platform provider. This happens when they implicitly endorse the startup by working closely with them. 

In the consumer world, a startup can “borrow” the brand of Apple because if their application is admitted into the Apple App Store, it tells consumers, "Look, we vetted this product. It adheres to our rules."     

Conversely, I don’t think that Salesforce’s App Store does a lot for startups. It’s essentially a digital catalog with some ratings/rankings. That’s not enough for most businesses to make a buy decision. If you speak with startups about the Salesforce App Store and ask them if it is a significant source of revenue for them, I think you will find that for most, it isn’t.

Startups lack credibility.  They lack access to prospective customers.  And, they lack sufficient marketing dollars.  This is where the enterprise vendors could really help startups.

I had hoped that the technology leaders would have adopted at least some of the best practices we had created with the Siebel Alliance Program. Tom Siebel and his new company, C3, are developing a similar program to what we had at Siebel Systems. So, I believe the principles are as valid today as they were back then.

When you look at the cloud apps market there are so many white spaces - major geographies, industry verticals etc - and they do not seem to be targeted by established vendors or even by startups. How are investors like you guiding them through these white spaces?

Cloud computing with its subscription business model - and delivery and usage model -has democratized business application software. Prior to cloud computing, it was prohibitively expensive for smaller companies to acquire and implement enterprise-class applications.

But, by dramatically dropping the cost of these solutions, I suspect it has constrained the application providers’ ability to support smaller geographies and industry verticals.  Going after smaller markets that require significant translation and support infrastructure at much lower price points isn’t practical. 

Even with traditional (re: higher priced) enterprise software, it was always challenging to create localized versions of products for a specific market.  Most US companies started out with the English speaking markets and then typically moved to countries such as Germany, Spain, and France with relatively large populations.  But, when they were asked to support a Dutch or Finnish version, it was seldom worth the upfront and ongoing cost.

For a large company to continue to grow at a significant rate, it needs to acquire or build new solutions that add significant revenue streams – quickly. In that context, let's talk about SAP and Salesforce.  One is a classic enterprise technology company with primarily a perpetual license business model.  The other is the "modern" cloud computing company with a subscription business model. 

The challenge with both of those organizations is that to grow meaningfully they have to build or acquire something of meaningful size.  Moving into a small geography requires the same resources or at least the same FTE costs that might be invested in something else and could generate a much larger impact.  So, it should be little surprise why we are seeing these large companies look to make large acquisitions and avoid niche industries and geographical markets. 

To your point, one might think, “Hey, if these market leaders are not seeing a lot of companies growing fast enough to make a measurable impact on their top line why aren't they helping smaller companies to grow so that they can eventually acquire them?”

Technology leaders may want to look at making investments in smaller technology companies where they see strategic value. These leaders can protect their interests by exchanging an equity investment and access to their channels with a Right of First Refusal (ROFR) that allows the leader to acquire the smaller company when it reaches a certain revenue threshold, at some predetermined price based upon a number of factors such as the acquirer’s stock multiple at the time. 

With the respect to investing in and expanding the number of verticals supported, there may be a dearth of deep domain expertise inside some of the larger technology companies to do that well. I don't know whether these companies have initiatives to try to hire subject matter experts from industry to help them drive their product management.  They may and I'm just not privy to it. 

I do know that Salesforce took a run at creating vertical solutions and it wasn't as effective as they had hoped, at least not at the time. This is one of the reasons that led to their investment in Vlocity.  I think this makes the case that the technology leaders, at least those in the B2B markets and not normally inclined to partnering, could really benefit by embracing partnerships. 

Instead, it looks like the majority of them sit back and wait to see which startups “make it”, without their help, and then acquire the few that do. This seems rather silly because by doing that they have to then compete in the open market – and pay a premium - to keep them out of the hands of competitors.

What is going on right now in the enterprise space that you think is interesting?

Roughly every ten years, new technology is introduced that dramatically changes our work and personal lives.  In the 60s it was mainframe computing. In the 70s it was minicomputers. In the 80s it was PCs. In the 90s it was client/server computing and in the 2000s, it was largely cloud and mobile computing which spawned “digital transformation”, beginning in the consumer markets with companies such as Amazon, Apple, Facebook, NetFlix, Google, etc. Digital transformation has now moved full speed into the enterprise markets.

I believe digital transformation - digital disruption - is such a big transition it will require multiple decades.  I think it has a chance to undo a lot of the current market leaders in every industry.  To your point, maybe vertical providers will emerge and dominate the markets due to digital transformation issues.

The emerging opportunity in the enterprise is in systems of intelligence. This is where I think vertical solutions can dominate.  Systems of intelligence use the data generated and captured by systems of record and systems of engagement to enable companies to derive better business insights, faster and far more accurately than ever before.  I mean real-time insights and real-time responses, without humans involved, that can be triggered via key business events and moments of value. 

Here is an example in the retail space. Let’s say I'm walking through PetSmart and I'm a repeat PetSmart customer. I’m a member of the PetSmart loyalty program. If PetSmart has implemented a system of intelligence and placed beacons throughout the store, I have PetSmart’s loyalty application on my phone, and I provide my permission to send me offers, PetSmart can enable brands to generate contextually-relevant real-time offers to me as I walk through the store.  An offer could be from a brand I don’t normally buy for my dog. The system of intelligence has access to POS data from my prior store purchases. PetSmart makes $ by serving up the competitive offer and if/when I decide to redeem the offer in a coupon that could be set to expire if I walk out of the store without making the purchase. Powering this type of application requires a different type of computer and systems architecture. 

The biggest opportunity may come from vertical systems of intelligence built on top of the older systems of record and systems of engagement.  In my PetSmart example, it means that you've got to be able to interface with an existing point of sale system, not replace it. This is where I would advise B2B application startups to focus. Trying to replace the existing systems of record and engagement is tough to do. 

Trying to rip and replace technology is hard to do.  Building next-generation systems of intelligence that utilize the existing systems of record and engagement is far easier.  That's what a lot of the startups we work with are doing.

Stop the speculation, folks

Amazon has just started to take advance orders for the eBook version of SAP Nation 3.0. It shows release date of April 15, but we are trying to get it out by March 31. The print version should also be available around that time.

In the meantime, I am seeing tweets and other social media speculation about the book, so allow me to give you a sneak preview.

It is a celebration of customers

35 case studies, representing over 20 industries and 10 countries, make up half the book. The book is for their peers to learn from their experiences. The dedication at the front of the book shows my gratitude to the executives who spent hours talking to me, reviewing transcripts and their profiles:

This book is dedicated to buyers of enterprise technology. They are the unsung stakeholders who pay the big bills and still do the bulk of the work delivering measurable outcomes.    

 The foreword to the book is written by Geoff Scott, CEO of ASUG. I am honored he agreed to do so - it adds to the customer voice in the book.

A note to SAP Detractors

No, this is not like the first volume. It is actually pretty generous to SAP for what I show is an on-going turnaround. The majority of the case studies in the book talk about products that did not exist 5 years ago. You can feel the vibrancy in the pipeline diversity.

The majority of SAP execs I profile were not there or not that prominent 5 years ago. You can feel the urgency in their voices.

To SAP Fans

No, don't expect a cake walk. I am tough about a number of "unforced errors" SAP continues to make. Some of the case studies talk about diversifying away from SAP. Overall, though you will have plenty to admire.

And to SAP competitors

Many of you do pretty poorly in the book. I talk about a lot of missed opportunities. After 20 years of cloud applications, less than 20% of enterprise customers have moved to new solutions. We have a huge challenge with older systems - they are heavily customized, awfully expensive, are security and compliance risks and are increasingly unattractive to recruit and retain talent around. As an industry we need to urgently "tilt the bell curve".

It is a cameo of a market in transition

Even though the book is SAP-centric, it brings out a wide range of industry trends. It highlights developer communities and startups in Silicon Valley, China, Germany, India and elsewhere. It showcases opportunities across the enterprise - in marketing, product engineering, logistics. It highlights changing economics in software.

It is my longest book to date. It also took me the longest time to write. I felt the constant pain of my transcriptionist, Tina Pham as she navigated a vast array of product names and TLAs in German, Aussie, Canadian, French, Indian and several other accents. I am pretty proud of the end result and the balance I have achieved.   

Few more short weeks. Thanks for your patience. Then we can have long debates, not speculate :)   

The coming Enterprise Software Hurricane

In interviewing SAP customers for the upcoming book, I ended up classifying them broadly into four groups. I termed the first three: a) Risk-takers who are trying out new Leonardo ML or IoT projects, developing new functionality with its Cloud Platform, moving to S/4HANA in the cloud; b) Modernizers who are moving to S/4 on prem, even staying with SAPGUI, others moving to cloud properties like Ariba or SuccessFactors or new on-prem functionality like IBP - relatively less disruptive changes; and c) Diversifiers who are "ring-fencing" with functionality from Salesforce, Workday, Plex or other SaaS vendors, two-tier settings with NetSuite and Microsoft and others who are trying out third party maintenance from Rimini or Spinnaker. This group also includes a growing number of customers who are moving back to SAP after trying something competitive.  

The fourth group is what I called Bystanders - and it is the biggest group - as they are not really budging or doing much. I estimated them as 60% of the SAP base of customers.  I estimate this percentage is much higher in Oracle, Infor, Unit4, Microsoft and other on-prem customer bases. With SAP, the European customer base has been especially static. On the other hand, the breadth of its developed and acquired products is much wider than that of its competitors so it has more ammunition to move its base. 

I interviewed several analysts on why these customer bases are moving so slowly. I am paraphrasing from several pages in the book: Cindy Jutras thinks it is fear whether customizations can be retired. Frank Scavo says it is business scenarios more than vendor functionality which drive such major, traumatic moves. Holger Mueller thinks end of life dates announced by vendors have some impact. He wonders how many customers would want to continue with systems in 2025 which do not support IoT or machine learning scenarios. As I wrote here, next-gen solutions have several challenges which need to be addressed before there is significant customer momentum.

The stakes are very high. There are at least a million Bystander customers across the major vendors (SAP itself has over 400,000 customers, with a large percent on ECC, BusinessOne, BusinessObjects, relational databases and other older technologies). You could cynically argue that on-prem vendors are collecting maintenance checks so are content to stay with status quo. The problem is status quo is making it difficult for customers to attract younger IT talent ( try competing for young developers for an on-prem, ABAP or Unit4 shop). Customers are struggling with older customizations. There are security and compliance challenges. There is plenty of technical debt. Their costs have been high and continue to be high. Either SAP, Oracle, Infor and other on-prem vendors start energizing their customer bases or they are creating a vacuum for a disruptive force to enter.

Who could that be? Last month, I heard Zoho executives prepare for an Amazon entry into enterprise apps. Heck, the way Zoho is going it is already a disruptive force. It could be SaaS vendors like Workday or Salesforce if they can start to grow their global and functional footprint

In the book, I point out that "tilting the bell curve of customers" to move Bystanders into the Risk Taker and Modernizer categories is SAP's big short term opportunity. The book has several ideas for SAP to do so. Other on-prem vendors have similar opportunities in their own customer bases. And, whoever does it quickly in their customer base will also have a shot at attracting Risk-takers and Modernizers from other on-prem competitors. However, as these vendors introduce new offerings and messages, SaaS, TPM and other vendors won't stand still - they will update their own offerings to remain competitive.

Image: Deal Architect

I live in Florida and have seen over and over that weather vacuums provide the seed for birth of destructive fronts and hurricanes. They are not fun and cause plenty of turbulence. In our state, we take elaborate measures to prepare for such disruptions.

I feel the same coming around enterprise software. A million+ Bystander customers not doing much is too big a vacuum. Nature hates a vacuum. Time for every vendor to start updating their contingency plans. 

The New York Times still does not get it

In 2006, I asked the question "Is the media biased?" I wrote "No this is not about being liberal or conservative. This is about how little MSM covers business technology as against consumer oriented technology. New York City is home to the largest number of Fortune 500 headquarters. The NY Times has a strong business readership..... Maybe NY Times journalists ought to step away from their Macs and Google searches and go visit some of the CIOs at the numerous headquarters in Manhattan."

In 2007, someone far more influential, Bill Gates pointed out

"The business computing market, which is way bigger than the consumer computing market, no one pays attention to it. Even in the Wall Street Journal, and you think, oh, this is the paper they're going to tell me about business computing; no, it's all about consumer computing."

Gates singled out the WSJ but the same applied to the Times.

So, over a decade later,  the Times now runs a story about how the city has "become a tech town". Clearly, with Amazon's recent interest (and then loss of interest) in Long Island City, and the growth of Silicon Alley, the tech intensity in the area has increased significantly. But those same CIOs I had talked about in 2006 have continued to spend tens of billions a year on tech. Wall Street has spent hundreds of billions since the deep recession in 2009 on building next-gen fintech. Agencies, another major NYC focus, have seen the swing to programmatic advertising and watched digital advertising become a $ 200 billion a year market.  

It sounds almost like Rip Van Winkle waking up from his 20 year slumber amazed how things have changed. No, New York has long been a flourishing tech town which the Times did not find that interesting. Consumer tech companies and sexier startups have made it bigger and more interesting to the Times but the underlying foundation has not disappeared and still does not get much attention.  

Microsoft - a perennial "underachiever" in enterprise apps

It's tough to argue with Microsoft - after all, it was at least briefly, the world's most valuable company late last year. CEO Satya Nadella is getting all kinds of kudos. "Whatever they're paying him, it's not enough," former Microsoft executive Brad Silverberg told CNBC.

To me, however, they could easily go from good to great if they got serious - really serious - about business applications. Instead, they are content to sell building blocks like Azure cloud, ML and IoT services and let their customers, resellers, developer community develop business apps. At Mobile World Congress 2019 this week Nadella cited a series of enterprise use cases using products like its HoloLens glasses in healthcare, remote training and manufacturing. But are we likely to see them packaged in Dynamics any time soon?  

Five years ago I wrote

"Like the Egyptian museum I suspect from time to time we will see disorganized messes, and some areas which remain hidden in the Microsoft storeroom.  But where they get the One Microsoft strategy humming,  competitors better watch out."

I was wrong. I wrote last year

"To me, Microsoft sometimes "goes low" and focuses on tactical competition with ERP and CRM vendors, when the world around it is being defined by GE’s vision of the Industrial Internet and impact on smart products, asset management and field service, advanced manufacturing and Industrie 4.0 concepts that companies like BMW and Boeing are deploying on their shop floors and Amazon’s sweeping vision for logistics. It is one of the few vendors which can pull all kinds of capabilities together to solve grand challenges customers face."

So, I write in my upcoming book

"Looking back, it certainly had the opportunity to be a dominant application vendor. In 2000, Microsoft acquired Great Plains (they could not have anticipated this book's westward theme, and changed the branding of that product to Dynamics GP), which was then a leading mid-market ERP vendor, though primarily in the U.S. In 2002, it acquired Navision, which was a leading ERP vendor in Europe. Both of these companies had made their own acquisitions, and Microsoft found itself with four ERP products—Great Plains, Navision, Axapta and Solomon.   In 2003, Microsoft began working on an effort that was code-named Project NextGen, which later morphed into Project Green to rationalize this portfolio. Four years later, Mary Jo Foley, one of the best-known Microsoft media followers, summed it up: "Microsoft must rue the day a few years back that the company hatched the “Project Green” idea."

Microsoft has largely focused on the CRM segment of the application market, which included making a sizable investment in LinkedIn. Their One Microsoft initiative has allowed them to showcase a wide range of assets to large customers. However, they have executed inconsistently around business applications, depending more on resellers for SME opportunities."

They continue to have the potential, but honestly they have been a perennial "underachiever" when it comes to business applications.

But then again, they are successful selling grills. Why should they sell cooked food?

Next-gen Enterprise Apps

I am reviewing the latest typeset draft of my next book. While much of the content is focused on SAP, its customers and its competitors, sprinkled throughout the book are glimpses of a rapidly changing enterprise apps market.

Anshu Sharma talks about a new generation of startups being funded in Silicon Valley. Kai-Fu Lee has invested in 150 AI startups in China. Sridhar Vembu of Zoho describes how it has become easier and easier to develop new enterprise class apps. Diane Fanelli tells how ISVs develop apps on SAP's cloud platform. Thomas Grassl describes how SAP is encouraging developer communities around the world. There are plenty of mentions of Python, PyTorch and Kubernetes throughout the book.

In India and elsewhere, big outsourcers like TCS and Cognizant are offering vertical applications to insurance and healthcare. IBM with Watson, Accenture with SynOps, Uptake, C3 and others are increasingly defining apps that are more machine than human-centric. Oracle, Salesforce, Workday, Microsoft, Apple, Google, Amazon and others are not exactly sitting still.

Navigating this new world is going to be tricky for enterprise buyers. It will be trickier for vendors as it will call for Coopetition with a capital C.

And God help us analysts navigate these shifting sands. But, change cometh. That's always exciting.  

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.