deal architect

SAP's evolving partner economy

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

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

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

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

My feedback:

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

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

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

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

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

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

SAP Nation 3.0 - early concept design

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

Feedback welcome, thanks!

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

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

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

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

 

 

Mark Twain and Hasso Plattner

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

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

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

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

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

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

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

That is really gratifying.

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

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

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

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

The Future of Work: a Rural Sourcing perspective

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

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

How his location sourcing has evolved

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

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

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

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

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

How his business has evolved

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

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

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

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

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

The talent he is attracting now

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

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

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

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

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

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

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

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

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

What his competitors are doing

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

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

Not your Dad's SAP

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

The customers can roughly be classified into four categories

Innovators and Transformers

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

Modernizers

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

Diversifiers

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

Prudent

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

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

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

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

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

Most vendors would happily trade places with SAP.

SAP and Qualtrics: Experiences matter, but how much?

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

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

My questions tend to be

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

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

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

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

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

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

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

Plex: The Past, Present and Future of Manufacturing

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

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

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

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

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

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

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

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

Another invigorating visit with Plex and its customers.  

Vertical Software: One Industry which has bucked the trend

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

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

Describe the evolution of PSA over the last two decades.

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

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

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

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

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

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

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

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

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

 

Tech Marathoners: Rob Enslin - Part 2

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tech Marathoners: Rob Enslin

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The past, present and future of Work

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IBM Red Hat: Reading the tea leaves

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

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

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

Reading the tea leaves, though I wonder if this signals

a) The end of another hype cycle for AI?

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

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

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

b) A great disturbance in the Force?

I wrote earlier about The End of Cloud History I concluded

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

It is the end of cloud apps 1.0.”

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

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

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

Oracle OpenWorld: Thoughts from afar

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

Here’s what I liked

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

What I would have liked to have seen in addition

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

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

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

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

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

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

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

Applications at Oracle Open World: a conversation with Steve Miranda

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Great. Send me that information closer to the time.

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

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

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

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

The 90s called–they want their ERP back

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

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

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

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

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

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

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

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

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

AI in the enterprise: a reality check with John Sumser

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Well, tell me where it is promising in HCM AI

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SAP CX Live – better afternoons than mornings

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

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

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

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

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

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

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

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

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

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

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

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

SAP’s Rainbow Coalition

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

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

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

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

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

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

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A different Vegas. A very different Workday.

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

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

Analytics as the third “pillar”

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

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

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

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

The relative de-emphasis of industry verticals

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

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

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

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

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

The emergence of Workday Ventures and the Workday platform

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

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

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

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

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

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

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

Two HCM institutions

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

HR Executive magazine announces their annual list of top products

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

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

Sneak Preview: Workday Rising

It’s an annual ritual. A Workday executive does our readers a favor and shares a curtain raiser on their Rising event, which this year is expected to draw over 10,000 attendees. This time it is Barbry McGann, senior vice president of products. She leads product management for applications including Workday Financial Management, Workday HCM, and Workday Student. Barbry joined Workday in 2015, bringing more than 20 years of experience in product management and strategy. Prior to Workday, Barbry held several key product strategy, product marketing, and executive positions in leading enterprise software companies and start-ups including PeopleSoft, Oracle, and C3.

Barbry, Rising is moving from somewhat conservative Midwestern Chicago to outlandish Las Vegas. Will Dave and Aneel emulate the Flying Elvii? Will Joe Korngiebel have even more bling than usual? Tell me what we can expect.

Well, I think what you can expect is that there won't be anyone flying or anything crazy like that. It's really just going to be focused on creating a great opportunity to get our Workday community together and make connections, and learn how to overcome business challenges.

Our theme this year continues to be: “Go Further Together” to highlight that when our product innovation is combined with the power of the collective Workday Community, our customers have the confidence and clarity to take bold action and lead with certainty.

We will share some of where we're headed. Of course, we'll have Dave and Aneel kick off the executive keynote like they always do with a real focus on innovation that is driving the company and industry forward, along with their vision for the future of Workday.

· You'll hear about our advancements in artificial intelligence and machine learning. That will be a big part of what we're doing, you know, a way to give our customers deeper insights, so they can make better business decisions.

· You'll also hear about new developments that really illustrate how Workday is the only cloud system that enables customers to plan, execute, analyze, and extend in one secure environment.

· We'll talk about Adaptive Insights, which we acquired earlier this year, and some exciting product announcements and news that we want to share around that and the progression that we're making with our Adaptive Insights deployment.

· We'll also be really focusing on a big topic, Vinnie, that you recommended to Aneel back at the Tech Summit that we really should spend a lot of time on because it's a differentiator for us, and that's our data privacy principles. How are we looking at data privacy and protecting data privacy in this new world of artificial intelligence?

· Of course, we're going to talk about our customer satisfaction success around our goal to have 95% customer satisfaction and reveal our new numbers at Rising, as we always do as part of the keynote.

· We'll also showcase happy and live customers, highlighting their own stories and how they're achieving tremendous business value with our products today. They'll share tips and best practices. Some of the customers presenting include: GE, HP, Panera, Nissan, and Aon. Aon will be discussing their global financial deployment, which I think is really, really exciting.

· We'll also have a culture imperative keynote, with really good stories from CarMax and Quicken Loans on how they're investing in culture and how they've achieved financial results from this, which really ties together the financial benefits of human resources.

· Finally, as part of giving back, which is really important for us, you'll be able to swing by and see our Opportunity Onramps booth to get a free, professional headshot and help prepare local jobseekers with onsite resume reviews and interview questions. We're going to encourage our customers, our partners, employees, and even our analysts to give back to the community by conducting mock interviews with Las Vegas area students and job seekers.

That’s a quick run through of everything.

Obviously, the Adaptive Insights acquisition is going to get a fair amount of attention. Any functional or feature enhancements in HCM or Financials you're going to announce? Any industry solutions?

What we're going to stay focused on, as always, is our service-based industries with the regular emphasis on E&G, Healthcare, Financial Services, High Tech, Professional Services, and Hospitality.

You'll see a lot of how we're really leveraging the rich data set we have with 31 Million workers under contract to really drive innovation throughout all of our products. There will be some new highlights and key capabilities that we will be announcing, but you will find out more during the conference.

There'll be a lot, Vinnie. You're going to be delighted because we didn't cover a lot of this at the Tech Summit, and so I think that you'll be really delighted to see how much innovation is occurring.

What about fun stuff? Can’t wait to see what Dave and Aneel pull off in Vegas!

They are going to have some fun things in there but, again, I'm under a gag order that I can't reveal the fun items. I don't want to ruin the surprise for you, Vinnie.  And we will have other entertainment, for sure.  It'll be someone that you recognize and probably listen to – Imagine Dragons will be playing during our customer appreciation party.

Rising is also moving to a stadium layout at the Mandalay Bay. My innovation blog, New Florence is also looking forward to the creative elements that format brings.

See many of you there! Register here if you want to watch a live stream.

Rising is also moving to a stadium layout at the Mandalay Bay. My innovation blog, New Florence is also looking forward to the creative elements that format brings.

See many of you there! Register here if you want to watch a live stream.

Rising is also moving to a stadium layout at the Mandalay Bay. My innovation blog, New Florence is also looking forward to the creative elements that format brings.

See many of you there! Register here if you want to watch a live stream.

Inforum–peeling an onion

I wrote last week that I was looking forward to getting an update on Infor’s verticals – hospitality, healthcare, manufacturing, logistics, retail and others. At Inforum in Washington this week, I only got a detailed briefing about the Retail vertical.

So, in the couple of days I spent at Inforum this week I kept thinking this is just a financial and HR vendor which has contemporary technology. And at every corner, I would pick up a nuance.

Like Coleman, introduced last year as its digital assistant is now also an entry into RPA world. 

Its CRM group does not get the visibility of Salesforce or Microsoft or ServiceNow but in a breakout I learned about their CPQ, next-best offer and other capabilities.

The Retail group opened my eyes to how Infor is learning to cross-sell across its many, often confusing, units. Over 50% of its GT Nexus network revenues now come from retailers. They also leverage Predictix, its demand forecasting engine. Similarly many leverage its horizontal financials and hcm capabilities. Pilot Flying J presented to analysts how it is using Infor products to run its chain of truck stops.

Koch Industries (an investor and customer) shared their asset management story. Infor has long had some large, complex customers for its EAM like JPL and CERN. Add Koch portfolio credentials and you are talking some heavy iron.

Talking of HCM, while Infor does not get as much attention in the HCM space behind the Big 3 cloud players – Workday, SAP SuccessFactors and Oracle, it has a sizable presence in its Lawson and other customer bases. And its Talent Sciences group allows Infor to hold its own against all the data science and machine learning that is increasingly reshaping the world of Talent analytics

While they may not have much to show in terms of what I call “books of record” like retail merchandising and hospitality reservations, Infor does have plenty of industry level features.

Ashley Hart, the new CMO shared with analysts the running start she has made – moving advertising dollars from hub to private airports, sponsoring key tennis and golf stars, improving digital presence and measurement and new commercials. I think it is smart that Infor is targeting the executive buyer.

I think as big a challenge for her will be to help customers and prospects navigate the Infor maze. I tried to find the TV commercial launched this week to share with a colleague. I Googled for it, I searched YouTube, I looked at several places on the Infor site. I finally asked their chat group and they could not find it online either. They told me they would try and email me a link. (update - Sharon Sulc of Infor provided me the video below)

I bent the ears of several Infor execs this week about developing more industry capabilities. Honestly, before they add even more capabilities, I think they would do better to organize and share what they already have.

I look forward to peeling this onion some more.

 

 

Dreamforce Keynote–the good and not-so-good

I am not at the Salesforce event this week but changed my travel plans to make sure I could watch yesterday’s streaming of the 2 hour keynote.

Some of it was predictable. Marc Benioff  has an admirable loyalty to Hawaii, friends in the music industry, Monastic monks and Deepak Chopra and as far back as I can remember they have been fixtures at Dreamforce.

The customer profiles were mind-blowing. I love the generous time 3 customers – Unilever, Marriott and Brunello Cucinelli S.p.A – got on the stage. Too many vendors gloss over customer mentions in such sessions – have 50 logos on a slide or invite executives to just pick up some award. Salesforce executives did a really nice job describing technology as applied to each of these customers and their industries. And each had subtle “social” statements. The Ben & Jerry/Unilever portion focused on allowing customers to make sustainability choices about ingredients in their ice cream. Tony Prophet, a black executive pulled up on his Marriott app his reservation at a Bellevue property for a LGBT conference. Nice focus on diversity. Brunello, even speaking in Italian, passionately emphasized “soul” in business and implored Marc to create something enduring by invoking the Parthenon and Florence. All well done.

What I did not care much about was the long lead in. I have written before Salesforce overplays the activism card and that leads to expectations it often cannot live up to. What Tony did in his Marriott segment was so much more subtle. I also think Salesforce overplays the Trailblazer and ecosystem stance. As an application vendor, customers pay it a lot of money. The custom building and SI costs are over and above. If anything Salesforce should be aggressively managing this not bragging about the billions it is costing customers. As an analyst, I tell customers to evaluate vendors based on functionality, economics, architecture not their diversity or activist stance. So,  I cringed a few times at the beginning of the keynote.

All’s well that ends well and other vendors would do well to emulate the time and space the 3 customers got in the Dreamforce keynote. Watch the replay here – especially the portions on the 3 customers.

Infor’s Vertical Journey

Five years ago, I wrote a note titled Infor: a grown-up sleath startup. I wrote about investments Charles Phillips and his team were making including those  in ION middleware and in beautification its captive design agency Hook and Loop was bringing to the product, to its events and real estate. But I was particularly excited about Infor’s industry focus. I followed up in 2014 with the Infor promise in the note It’s a Vertical World after all.

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

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

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

My hope was the savings to Infor not having to invest in cloud infrastructure and instead leveraging that of Amazon’s would go towards verticalization.  I have seen investment in horizontal HCM, analytics, even a new general ledger. While Infor has made some  industry investment, I would like to see a lot more. I want them to deliver to their tag line “we understand that making tires is different than processing milk. Processing milk is different from manufacturing apparel, and both are dramatically different from caring for sick patients”.

So, I was excited when I heard Infor has acquired Vivonet which offers solutions for POS, kiosks, kitchen systems, payments, labor scheduling, and food and labor cost management. In the press release, Infor says it already has hospitality functionality which covers property management, revenue management, asset and incident management, analytics, and artificial intelligence.

I am going to Inforum next week and am going to try and see what “books of record” major hospitality companies have adopted from Infor. I am also going to try and find out which are anchoring their digital transformations around Infor products. I travel a fair amount and must admit I do not see Infor (or other ERP competitors) show up as strategic vendors for too many in that industry.

It will be good to also see Infor progress in other industries it is focused on including healthcare, retail and manufacturing. And since it is in Washington, DC I presume we will hear about Infor’s progress in public sector and aerospace markets. In short, I am looking forward to seeing Infor’s delivery five years after I got excited about their vertical strategy. 

Oracle’s streak of missed opportunities

No, this does not have much to do with Oracle’s recent quarter. Nor is it about intrigue and gossip so many analysts use to compare Oracle to the Trumpian White House. It has more to do with two decades of enterprise tech I have researched as I write SAP Nation 3.0. It is striking how many times I have seen opportunities Oracle could have taken advantage of.

As I wrote in Who will claim the Enterprise “Western Frontier” most enterprise vendors, not just Oracle, missed out on several trillion dollar markets that have emerged since 2000 and have made Google, Foxconn, GE, Amazon and others sizable technology players.

But even within its peer group, Oracle has missed out on several opportunities.  It took way too long to deliver Fusion. Even then, it could have stalled growth at Workday, Salesforce, Adobe and other cloud vendors. It could have delivered a knockout punch to SAP starting around 2010 with its early start with Fusion and its many cloud acquisitions. It could have taken several of its vertical industry capabilities to the cloud and gone after SAP in those markets. It did not and SAP with S/4 and its own cloud acquisitions has weathered the storm.

With its IaaS, Oracle could have navigated around Amazon, Microsoft Azure, Google and mopped up the hosting market around its EBS, PeopleSoft. J.D. Edwards and Siebel customer bases. Not particularly exciting, but a relatively captive 25,000 + customers is nothing to sneeze about.

While it finally has rolled out its SOAR cloud migration offering, Oracle could have done that years ago and would have been well on its way to migrating the 4 customer bases above to the cloud.

It has chosen to go after third party maintenance vendors like Rimini via the legal route, when it could have listened to its customers who wanted support for customizations and more responsive ticket support even more than cost savings. Oracle likes to emphasize the trust and security angles but that is only one criterion in a multi-dimensional decision. It also uses the security angle  in its IaaS  pitch, but often loses on capex scale and continuous improvement track record. Its autonomous database pitch has been diffused because it is only available on its IaaS (it says it needs that to be able to deliver to the high availability SLA) and not (yet) to its much bigger on-prem database market.

With more of a focus on customer value from its technology, I am convinced Oracle could easily be twice its size. Instead it has way too many customers who are wary about its commercial practices and only grudgingly bring it into new opportunities.

I could go on.

Actually looking at two decades of Oracle’s meandering I am tempted to write Oracle Nation. Maybe some day I will write that. For now SAP’s continuing turnaround makes for a much more compelling story.

A subdued SuccessConnect

Vegas has way of making people, how do you say it, exuberant. On one day there was the CHRO of SAP, Stefan Reis presenting to the press corps about moving his workforce systems to the cloud to manage the giant 90,000+ global employee base. The next day he is in god-awful trousers with planet Mars props on stage handing out “HR punks” t-shirts to everyone and taking potshots at  competitors like Workday. But he redeemed himself with poignant moderating of guests like Adriana Marais who has signed up for a one-way ticket to Mars and Michael J. Fox who moved the audience to tears sharing the joys of life even as he fights Parkinson’s.

Fox was one of  many “feel good” moments at the SuccessFactors event in Las Vegas last week as I wrote here. But from a product perspective, the event was muted, especially compared to the announcements coming out of HRTech event which was being held a couple of blocks away.

The most glitzy announcement was the Digital Assistant, an Alexa for the enterprise  which applies machine learning to guide and recommend actions through processes such as onboarding. It  leverages the CoPilot bot framework that SAP has been showcasing in other non-HCM scenarios for over a year.

Most customers I talked you were more excited about the analytical tools like Collaborative Planning which SAP and SuccessFactors keep maturing. Others were more interested in the redesigned Android app in collaboration with Google.

Several analysts were impressed with lady execs like Athena Karp, CEO & Founder, HiredScore and Caitlin MacGregor, CEO & Co-Founder, Plum on a panel in the media room.  That showcased a new community SAP is fostering which is focused on emerging HCM hot buttons like well-being, pay equity and  unbiased recruiting.

The customers I talked to were ok with the modest level of new product announcements. Several told me they can barely keep up with the existing 4 releases a year. Indeed David Ludlow, GVP told me in a one on one “we are being asked to make it easy to consume features we already have through multiple channels like chatbots.”

Makes sense. Just don’t slow down the flow of  “feel good” moments.

Implementation Groundhog Day

I was recently introduced to Bonnie Tinder, founder of Raven Intel. Her startup is on a mission to “quantify the quality” of HCM implementation projects, especially the role of the SI partner. As her site says “We’re amplifying the voice of the past customer so the future customer can find the perfect partner.” It is a noble mission and she has a white paper out in time for HR Tech this week which summarizes findings from the initial 100 projects her team has analyzed using net promoter scoring and other techniques. 

In talking to her, though I felt like “déjà vu all over again”.  At the start of my career at PwC I remember a firm-wide event where the tagline was “Selling is only the beginning”. We had had a few major disasters and the leadership was trying to push a quality drive in the rank and file. In the mid 90s when I analyzed ERP integrators at Gartner I co-authored a report on SIs which started with a quote from a US District Court case “A Michelangelo should not charge Sistine Chapel rates......for painting a farmer's barn".  Our study like Bonnie’s focus had surveyed countless customers and we had also scored SIs on a number of ERP project dimensions. In 2000, a few of us set up a digital marketplace for customers to more objectively procure SI services for SAP, Peoplesoft, ecommerce and other projects. We had planning tools for customers, proposal engines for vendors and we had looked at the whole supply chain of such projects. Our timing was poor with the tech market meltdown and the startup failed a couple of years later. In the next few years, I was enamored with the CMM Level 5 and Six Sigma focus at Indian firms and took a number of CIOs on due diligence trips there and to E. Europe. By 2010 I slowed that down as I saw the rigor failing and the firms getting greedy. In 2014, I wrote SAP Nation because I saw an out-of-control SI and outsourcing ecosystem. Now as I write the next volume of SAP Nation I am seeing folks like Jarret Pazahanick talk about the “Wild West” of implementation consultants around the more contemporary crop of cloud solutions.

Like I said déjà vu all over again.

Some things never seem to change. Buyers don’t seem to have the muscle memory of the last major project failure. Vendors continue to treat SIs more as a sales channel than a delivery arm. So, you have Salesforce flagrantly bragging how many $ partners make for every $ of software, when customers want to see that tightly managed. As I wrote in “Fool me twice, shame on me” I worry that SAP did not learn from the last wave of massive project failures which hurt its brand, not that of SIs. SIs continue to brag about RPA and other automation, but show little movement to more machine, less human in their delivery. We have done hundreds of thousands of ERP, CRM type projects in the last few decades. It’s not rocket science. There should be predictability and there should be significant economies of repetition.

And yet in other ways things are changing. The upgrade and application management onus has moved from SI to the SaaS vendor. The hosting has moved to the IaaS vendor. We should expect Six Sigma and CMM 5 productivity from these vendors. The buy versus build pendulum is swinging as software vendors neglect vertical markets. That brings different expectations of SIs.

What has not changed is that customers are still expected to absorb all the risk. As Brad Keywell put so well in this profile I did of him “Most troubling, the customer is left taking all of the risk, outlaying all of the money, and then holding the bag if the implementation is a failure – the legacy risk-reward model is out of whack. Legacy software vendors ask for money but then avoid accountability for outcomes.”

In the last two decades most CIOs have expanded their stable of service providers – contract manufacturers, 3PLs, digital agencies, design thinking firms, service arms of industrial asset vendors. Many look at me and shake their heads when I tell them they still have to keep an eye on their HCM and CRM and ERP implementers.

Why are we still fighting that battle decades later, they ask? Welcome to Groundhog Day.

Tech Marathoners: Brad Keywell–Part 2

We ran yesterday Part 1 of the interview with Brad Keywell. Part 2  below continues with his fascinating focus on verticals when most tech vendors play it safe around horizontal markets. He also talks about how he believes the current enterprise technology model is broken and what needs to change

More on verticals, including the recent focus on Uptake

I suppose you could say that twenty years of building businesses is what led to our awareness of an opportunity greater than nearly all others we’d ever seen. It led to a mental model of how enterprise technology can create the most extraordinary impact – and how legacy enterprise technology was the silent inhibitor of progress for most industries. It led to an appreciation of sensors and connectivity and cloud computing and edge computing, and the impact that can come from creating outcomes (not tools).

In 2012, I developed a thesis that only strengthened as I tested it with leaders and operators on the front lines of industry. This thesis led to the founding of Uptake.

We observe and question, and in that we find inefficiencies and industry ‘blind spots’. Some are more troubling than others – some rise to the level where you say ‘someone needs to make this happen, now!’ We then look at the addressable market, and our likelihood of success. We look at what happens if we're right versus what happens if we're wrong. We also look at what we're good at and what we're not good at and how much of the idea calls on us at our best (versus asks us to overcome our worst).

That's part of why I say that Uptake is laser-focused on the most extraordinary opportunity I’ve ever seen for technology to impact how industries work and how they operate. For the first time, technology can deliver precise outcomes – with certainty, Uptake delivers outcomes that makes our customers more productive, more reliable, safer and more cybersecure. We deliver these outcomes to the largest industries in the world.

If you multiply impact delivered through technology by the size of the industry where the impact is delivered, the magnitude of the value creation is beyond anything every addressed by enterprise technology. Uptake delivers ‘better’ to its customers, and the monetary magnitude of the ‘better’ that we deliver (more profit, more productivity, more uptime, to name a few) is extraordinary.

My assertion is that nothing has ever been seen in enterprise technology with the potential for impact as great as the outcomes which can be delivered through applications under the ‘industrial Internet’ banner. I believe that.

How have we built Uptake? Why is it so unique? From minute one we’ve focused on creating a platform with a single code base, which can then be leveraged across multiple industries. From minute one we’ve oriented industrial AI and machine learning at the core of our platform, optimizing all functionality and architecture to optimize the efficacy of the actionable insight we deliver. From minute one we’ve oriented our activity to build everything that's needed (in our platform, application, and content layers), so that all that’s needed from our customers is the inputs (data feeds, sensor connectivity, etc) and then we deliver them actionable insight through our industry-specific applications. By doing that, we’ve created a true outcomes, not tools or small features. By building applications that deliver outcomes, we necessarily have built all of the tooling and mechanics required to optimize our industry-specific efficacy and insight.

One of the secondary benefits of the Uptake approach to vertical-specific outcomes is that it actually empowers the CTO and the CIO in a way that lets them be more closely aligned to the CEO and operational leadership. By deploying Uptake’s applications, the CTO and CIO become more aligned with operational leaders in pursuit of profit, efficiency, and reliability. These outcomes can be delivered more certainly whereas, in the old days, the CTO and CIO were asked to “keep the lights on” and maintain network reliability. Now these technology leaders can enable operational outcomes with impact-creating efficacy.

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

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

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

When I started Uptake, I posed some simple questions: "Why shouldn't enterprise software customers expect a reliable outcome? Why shouldn’t enterprise software customers expect applications that work – why would they be satisfied anything less? Why shouldn't software delivered to the enterprise look just as good as consumer software?” The answer came back loud and clear, and just as simple. Enterprise software needs to deliver outcomes, needs to work on a self-contained basis in delivery of outcomes, and needs to be beautiful and designed with empathy towards users. As simple and clear as that proposition is, too few legacy enterprise software vendors are capable of delivering on that simplicity.

Uptake breaks the mold – Uptake starts where legacy vendors have stopped. Uptake delivers. By delivering outcomes, our growth has been extraordinary.

My sense of purpose comes from my knowledge that Uptake can deliver applications that provide actionable insights with reliability-creating, productivity-creating, safety-creating outcomes – this is why our best customers are those (CTOs, CIOs, CEOs, and boards of directors) in search of better outcomes. Uptake has delivered a depth of quality and precision and efficacy that is unparalleled by any other company that I've seen in the industrial Internet space. Why? Uptake was created with obsessive focus on vertical-specific outcomes. We're not retrofitting ourselves to try to do this – we were built for this.

Our entire enterprise exists in service of outcomes that make our customers better, more profitable, more efficient, more reliable, and more. This explains why we made a number of decisions to invest so heavily in quality, scalability, cloud-neutrality, insight efficacy, AI and machine learning optimization, and outcome-delivering applications. What do these decisions look like?

· Number one: A single code base.

· Number two: A true multi-tenant platform natively deployable across both public clouds and virtual private clouds, a true application layer supporting a developer ecosystem, and deep proprietary content as a key asset to augment the precision of our insights.

· Number three: Vertical-specific applications tailored to create value and solve industry-specific opportunities, so that we can walk into our customers with a vertical-specific answer and industry-specific outcomes (rather than the legacy software formula of offering a neutral, vanilla platform).

· Number four: Applications that deliver better results than the current state of operations for our customers. That’s how we’ve grown – by delivering results.

The future of enterprise tech

I think enterprise software is extraordinarily ripe to be aligned with outcomes, be aligned with operators, be aligned with those in an enterprise who are interested in being a better business and making more money and being more efficient and safer.

AI and machine learning are at the core of our future. Today’s business leaders have newfound responsibility to deploy AI and machine learning to optimize their operations. We are entering a ‘new normal’ in which deploying and harnessing data science engines, primarily oriented towards AI and machine learning, across the enterprise and in every function is a must-have, not a nice-to-have. Not too long ago, ‘state of the art’ was dashboarding. Now, state of the art is predictive insight.

The legacy enterprise software landscape is littered with advertising slogans suggesting that they’ve taken something dumb and made it ‘smart’. My response? Not so fast. Stop pretending you’re something that you’re not. If analytics are on the fringe and not at the core, your ‘smart-ness’ is severely limited. A more appropriate slogan? ‘Buyer beware!’

My challenge to those at operating companies who deploy capital towards technology: Fresh capital should be invested in optimization of data integrity, data science, and prediction-and-data-enriched-insight that leads to an action. Capital spent on legacy software will likely be money wasted. Proactive and predictive operational insight delivered by technology is the future – applications that say ‘Do this; don't do that’, ‘Fix this, don't fix that’, ‘Run the machine faster here and slower there’. That’s what the future sounds like.

Choosing to get better (rather than ‘be right’), choosing to prioritize learning and adjusting over defensiveness and ego, choosing brutal truth over posturing or sugar-coating -- these are the choices I make. I choose to focus on purpose and impact. And I choose to act in all ways as a team, not a confederation of bureaucratic individuals. Uptake is defined by the choices we make, and we choose to work as a team and win as a team. We choose to define ‘winning’ as impact and outcomes delivered to customers – our customer obsession has the customers bottom line as its scorecard. The cumulative effect of these choices we’ve made at Uptake is a very special enterprise consisting of people who love to learn (versus people who love to prove that they're right). It sounds like this, "Please, tell me how I can be better. Provide me with more facts, tell me what I might be missing, and let’s all get better."

Tech Marathoners: Brad Keywell

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

This time it is Brad Keywell who is a lifelong entrepreneur and co-founder of seven technology companies, a cultural curator of innovation platforms, and a philanthropist. He is the founder and CEO of Uptake Technologies, an Industrial AI software platform harnessing predictive analytics to deliver outcomes of increased productivity, reliability, safety, and cybersecurity to global industry. Additionally, he is a founding investor in Tempus and co-founder of Groupon, Echo Global Logistics, MediaOcean, Drivin, and the venture capital firm Lightbank as well as on the Board of Trustees of Equity Residential, founder and Chairman of Chicago Ideas, Chairman of Future Founders Foundation, and an Adjunct Professor of Entrepreneurship at the University of Chicago Booth School of Business.

In Part 1 below he describes his highly unusual path into technology, his repeated successes and a focus on verticals when most tech companies tend to play safe and go after larger, horizontal markets. In part 2 tomorrow, we will hear him talk about his recent company Uptake and about how he sees enterprise tech evolve.

The formative entrepreneurial roots

You talk about the concept of starting to program computers in the fifth grade – so I’ll start by sharing this: I didn't start programming in fifth grade! On the other hand, I did start my first business when I was six years old – which is somewhere in kindergarten range.

The consistent part of the businesses that I started up until age 17 was they were fairly creative, they started in my imagination and then I took action (despite my friends confusion about why I was working and not playing video games). I started a greeting card company when I was six. I started a ‘home watch’ service – to help watch homes of people who were on vacation – when I was 13. I started a Sunday brunch delivery service as soon as I got my driver’s license. I started what you might call a local magazine, selling ads to generate revenue. But, as you can see, coding a computer was not part of these early ventures.

In college I started three different companies, and by my senior year had something like 20 employees. In the midst of that, I met someone who became a mentor – I met Sam Zell, the legendary real estate entrepreneur and industrialist. He’s been a mentor to me for thirty years, and remains so to this day. In my opinion, he's one of the greatest entrepreneurs of all time.

In 1988, I was an 18-year old freshman, and Sam was in his mid 40s and hitting his entrepreneurial stride. He cared a lot about the teaching of entrepreneurship at the University of Michigan. As a freshman, I advocated my way into an MBA graduate-level class on entrepreneurship, and it turned out that Sam conceived and funded that class, and I introduced myself to him when he was on campus giving a speech. That's how we met. I share that story because my formative influences were a combination of doing stuff on my own (and figuring out how to build businesses), combined with the great fortune of having an extraordinary mentor. My love for technology emerged during this period, as I learned that effective software can supercharge effective business building and impact creation.

While it may seem counterintuitive, I decided to go to law school. My instinct was that learning the underpinnings of the way things work is the most valuable asset as you can have if your goal is to impact the world. Law school was especially effective for me because I was certain I was not going to practice law -- ever. So I was there for the best possible reason – to learn, to understand, to find patterns. And over time, it has proven to be an extraordinarily valuable foundation for understanding how things are, how they should be, and how to make ‘better’ happen.

While it may seem nonlinear, it’s interesting to me how it all fits when I look in the rear view mirror. The first business that my business partner and I built after law school was in the apparel industry. We had success with apparel-related businesses in college, and we thought we knew something we could leverage.

While we grew that business, the true value was to put us in the arena and give us first-hand experience learning what we were good at (technology creation, partnership facilitation, customer success, growing sales forces, etc) and what we would rather avoid (inventory-intensive businesses, commoditized products, cash flow negative product cycles, to name a few). I appreciated those businesses in which you can control the outcome through hard work, resourcefulness, execution, and innovation – and those businesses where the outcome was entirely dependent on circumstances outside of your control (for example, commodities-based businesses)

I look at these early years as a playground of learning – an invaluable cycle of success, failure, learning, improvement, and constantly getting better. The most consistent part of my journey has been intensive learning - learning, learning, learning. My orientation is simple – what else can I learn? Some take the position of ‘knowing’ – I choose to focus on learning and being open to reconsidering what I think I know if better facts exist.

Those early years also taught me how much technology matters. It matters more than most businesses realize, and I see many leaders as masters of their industry but naïve to the enabling power (or crippling obstacles) that arise from technology in relation to their industry. In other words, I am a technologist whose education came in the arena, not in the classroom. I learned on the front lines of industry, not in the front row of the classroom. By 1997, you could say I received my diploma from the school of hard knocks – the best school of all. From that point on, my entire focus has been on technology -- building businesses whose core value creation comes from the building, deployment, and enhancing of purpose-built technology.

For over twenty years, my story is one of building technology companies. We build. From scratch. This is not about investing, it’s about building. It’s not about theory, it’s about the actual identification of inefficiency and arbitrage and opportunity, and then creating technology and entire businesses to unlock spectacular value for our customers.

Why vertical focus?

I look at industries and I see opportunity, often hidden by ‘the way things are’ and ‘it’s always been this way’. My assumption is that operators within vertical industries see more than I see and know their industries better than I do. Yet I happen to be a very good learner -- one of my edges is my willingness to study and look and listen and learn with intensity. I come to problems with humility, not with ego. So it’s with humility that I explore vertical-centric opportunities, and sometimes what I find is spectacularly compelling.

Being willing to ask questions and reach out where others might find it uncomfortable to learn is core to being able to crack some of the industry problems.

I’ve been a voracious learner about logistics. I’ve learned about media buying. I’ve learned about manufacturing, about oil and gas, about energy generation, and more. I learn about the technology that exists and doesn't exist. And with the pattern recognition that comes from experience, I assess where there's opportunity that we're best oriented to solve.

Starting companies is what I do. It’s also who I am – it's where I find maximum excitement and optimism and possibility. When you start a company, you are not beholden to the way things are – you can enable things to be the way they should be! That’s at the core of the value of emerging enterprises -- the ability to learn and take advantage of new technologies that might not have existed two, three, four years ago. This helps explain why new enterprises can become so valuable so fast – they serve the extraordinarily service of liberating the industry from ‘the way things have always been’ and creating the conditions for ‘the way things should be’.

I'll give you a quick bit of the “how”. The ‘how’ of our methodology of conceiving an idea for a new enterprise and creating a company. We have lots of ideas. My orientation is to ask why the idea is bad (rather than try to get you to tell me that it’s good). I challenge experts in an industry to tell me what's flawed about my idea? By expediting the understanding of why it’s a bad idea, it allows for us to move on to another idea. And it eliminates the drama that comes when someone is convinced that that they’re right and upset if you don’t agree with them.

I prefer to build, prove, succeed, fail, refine, build some more, prove some more. What now is described as agile, is basically the way we've been operating for years, decades.

Another element of our “how” is that we’re pretty good at knowing what we're not good at. We're entering spaces where we have deep confidence in our ability, our network, our competency, our resourcefulness, and our skill set.

I’ll give you a few examples.

Echo is a technology business that addresses inefficiency by leveraging analytics to create optimization and leverage in the logistics and freight and transportation space. That business started with me – one person -- at a desk in 2005. It's now 3,500-plus people. It's publicly traded on the Nasdaq stock exchange. It's a $2 billion revenue business. The edge in creating and growing Echo is that we were willing to ignore the "it's always been this way” mentality, and instead focus on the way things should be. We were able to focus on the best way of doing things, the best technology to make it happen, and to then get it done.

MediaBank is an enterprise technology company that we started in 2007. We created the technology, data leverage, analytics, and optimization platform that now serves as the foundation of the media buying industry – we changed the name to MediaOcean, and it’s now used by WPP, Omnicom, IPG, Publicis, and other leaders to run their businesses. We sold it recently to Vista Equity Partners.

I’m very proud of the businesses that we created and the impact they continue to make on important industries.

When we start these businesses, either my partner (Eric Lefkofsky) or I serve as the CEO. In the case of Echo, Doug Waggoner (the person that I hired to replace me as CEO) is still there ten years later. In the case of MediaBank, Bill Wise (the person I hired to replace me as CEO) is still there eight years later. One of the things we're good at is building and leading, and then at the appropriate time knowing when to hand the reins to even better leaders. Leaders like Doug and Bill have shown what it looks like when operational leaders partner in leadership with entrepreneurs – by leveraging diverse talent sets, we’ve been able to create leadership evolutions where one plus one equals three (or more!).

Groupon is really the only pure consumer-facing business that we started. We started Groupon in 2009. What’s relevant in relation to enterprise software is that Groupon addresses an inefficiency of local retail, so it also provided a fertile learning ground. Groupon is a very operationally intensive business. It's in-the-trenches sales, customer service, integration, and deployment of tools and technology used by merchants, with customers acting on discount offers.

The cumulative effect of these experiences is relevant to our evolution. Echo grew from one person to 1,000 people in two and a half years, giving us very important lessons and understandings about ourselves and our capabilities. We then directly applied that calibration of our capabilities to Groupon, which grew from 125 people to 5,000 people in calendar year 2010.

The growth experience of Echo created mental models that were valuable in growing MediaOcean. And the growth experience of both Echo and MediaOcean created mental models that were critical in growing Groupon.

Those are just some of the stories of the businesses we’ve grown. And it gives some of the sense of learning, growth, and evolution that led to mental models and a refined understanding of industry dynamics.

Is vendor information flow too lumpy?

Charles Phillips, CEO of Infor recently hosted a virtual fireside chat. It’s something I have encouraged him to do in the past. It was only a half an hour or so and one of my analyst colleagues said it had a feel of “declaring victory after 5 years”. I passed on feedback to his AR team that he should do similar every quarter or so, and pick a different topic to drill deeper into – an industry or geography or a specific product area.

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.

What I am getting at is I would like vendors to do more phone briefings, not just present at longer in-person events. This is especially true of smaller vendors like Zoho, FinancialForce, Ultimate and many others. It is not that easy for analysts to fly to day-long events for each.

While I would prefer these in a group call, I am happy to take individual briefings as well. With the caveat that these are briefings to add to analyst body of knowledge, not a commitment to write something right away on the briefing topic.

The other feedback I have received from several clients is how removed events are from product reality. There are 50 shades of grey when it comes to features and maturity. What they present to us in analyst briefings under NDA is often are not available to purchase till 3-4 years later. What is shown in user conferences is 1-2 years out. What you get in response to RFPs and competitive evaluation demos is a more realistic representation of current state of product. It is only during implementation that you realistically understand maturity of that release and the quality of implementation resources familiar with that functionality. Finally, it is only when customers periodically talk to each other about their experiences do you get a feel for the real quality of a particular release. That’s another reason we need a more continuous information flow and conversation with vendors about “as-is” not just a “to-be” state presentation common at vendor events.

Of course, I can hear AR reps at vendors groan. They have a tough enough time coordinating information flow even in the current state of affairs. More continuous conversations with pesky analysts?

Come on, while most of us do not have the endless bank of fables Brian Sommer has access to, we are full of all kinds of useless trivia. We are pretty fun to converse with. Try us

Start of tech event season

This past long weekend my wife and I were at two restaurants and one hotel, each of which was planning to shut down for a week or two for maintenance, to give employees some needed time off. I turned to my wife and said maybe we should also take a hint.

Not likely – Labor Day marks the start of the second half of tech event season. In general, I only accept a third to half of events I am invited to. The decision matrix has become more complex over the years

a) If it is an event aimed primarily at analysts and maybe a handful of customers that gets a high priority

b) If I am speaking, if the event will give me new materials for a consulting assignment or materials for books or many blogs the priority goes up.

c) If the analyst relations team highly customizes the agenda and arranges for customer meetings and relevant partner meetings the priority goes up.

d) if the event adds something interesting like Plex does with plant visits the priority goes way up

e) If an event is being streamed, it actually gets low priority to travel to

f) If it is an event I was at in previous years, it often gets low priority.

g) if it requires somersaults to get to the event, it gets low priority. It seems like some weeks have 4 to 5 interesting events in far flung cities.

Two events I am definitely not going to this year – Oracle OpenWorld and Dreamforce, both because of e) and f). I have decided on some, still considering others.

We live in a many to many world and often its like ships that pass in the night. Some vendors get offended when you decline an invite. Some analysts get offended when they are not invited to an event. I am much more of the mindset that it is September and October and I should be shutting down for some maintenance

Why we all need to draw bigger circles

A few days ago, I wrote about Bill Joy’s advice “If you cannot solve a problem, make the problem bigger. If you draw a bigger circle, you start to see several systems you can work on.”

Reading James Farrar’s post “Diginomica and the Salesforce Counsel of Despair”, I kept thinking we could all heed that advice.

I have a lot of respect for James and what he is doing for Uber drivers. But I wonder how  much he has factored the consumer pov. I moved most of my business to Uber a few years ago because I found taxis in many cities unhygienic and surly.  But recently, especially arriving late at night at my home airport I have noticed Uber drivers have been playing games – shopping around and canceling rides after they commit. I complained to Uber after I saw a female customer stranded at 2 am. Uber sent me a nice note but did little to investigate. In contrast, this week in New York city I took two yellow cab rides (cannot remember the last time I had) and three Carey Limo rides. Clean vehicles and pleasant drivers including a couple who fed my curiosity about the history of the city’s bridges. And I said to myself, thank you Uber for forcing the entire market to evolve.

That of course also raises the bar for Uber and for its drivers. And I wondered if similar is happening in London where the leg room in black cabs are always a treat for my 6 ft 2 frame. And where taxi drivers are famous for The Knowledge – a 150+ year tradition of learning every nook and cranny of the city. In other words, Uber was not going to have easy competition in that city and probably needed to compete more on price.

I wondered if James had surveyed a broad sample of Uber drivers like Tony DiBenedetto, former CEO of Tribridge did as he told me in an interview for Silicon Collar. He decided to sell his car and started taking Uber everywhere.  In addition, he started journaling each experience and told me about the drivers he met

Most of them were not ex-taxi drivers. I would say 50% of the people who drove me in that first month had a second job. It was everything from young kids just trying to make it, to retired people, or people who were bored. One of my drivers was a helicopter pilot who for two weeks a month worked for the big oil companies in New Orleans. The other two weeks he just didn't see himself doing nothing. He's ex-military, and so he picked up the Uber thing to basically not be bored. I thought that was interesting. The retired people were all pretty similar: They wanted to get out of the house or make a little extra cash. I'd say 5% to 10% were in between jobs. There's no question that it fills a gap in employment. It allows for people to run their little businesses, and still do Uber as a supplement. All the drivers love the flexibility.

Which brings me to some of the points I made to James on Twitter

• I admire what you are doing. Personally, I am generous to Uber drivers and like talking to them on my trips. Having said that when I wrote my recent book, Silicon Collar, I found our economy supports 800+ occupations and new ones every year...UK is likely similar..
• I am at other end of spectrum. we have 6m unfilled blue collar/trade jobs. Been so for a decade. Why do workers not want them?
• so If Uber makes you miserable, look around. Lots of opportunities. It's similar to advice I give to many young workers not happy in their careers. 

So, honestly, no offense to the kind man, but not sure I can relate much to James’s point that Uber “takes advantage of sweated labour with workers in London earning as little as £2 per hour.”

Which brings me to Salesforce. As James points out, it has become an icon for corporate activism

Salesforce has been at the vanguard, if not the barricades, in Silicon Valley’s fight for social justice. It has been an evangelical champion of equality claiming it as nothing less than a ‘higher purpose’ for the company. Salesforce weirdly refers to its workforce as the ‘Ohana’ (Hawaiian for family) and pursue four pillars of equality — equal rights, equal pay, equal education and equal opportunity. To its great credit, Salesforce has taken principled stands against discriminatory public policy proposals in Indiana and Georgia albeit in the name of the Ohana.

I am a Marc Benioff fan and have written about him in several of my books and blogs. I consider him a cloud computing pioneer, a colorful and generous tech exec whose conferences have reshaped the somewhat drab enterprise software market.

But I do wonder if in his activism, Marc has drawn a large enough circle and asked his customers if they are comfortable with that profile. As I wrote in Salesforce is vulnerable I am not sure many of them are. Many would prefer Salesforce focus on its economics and expanding its functional footprint as a cloud leader.  

I like activism at an individual executive level, I am less comfortable with it at the corporate level. It attracts activists for hundreds of causes and they hold you to ever higher standards. As a customer advocate, to me customers deserve way more attention than activists or for that matter, even Wall Street.

Having said that, I am glad Salesforce is not canceling their contract with the US Customs and Border Patrol (CBP) agency. According to Bloomberg, several hundred Salesforce employees have sent a letter to management

"Given the inhuman separation from their parents currently taking place at the border, we believe that our core value of Equality is at stake and that Salesforce should re-examine our contractual relationship with CBP and speak out against its practices,"

That makes me wonder if these activists have drawn a big enough circle around the CBP which has the hugely unenviable job of enforcing a broken immigration system. As I wrote here

The 3 million a year (immigrants) arrive here through a dizzying array of (over 200) preferences and visas – and many do with no formal paperwork. There is the F1 direct immigrant preference for unmarried sons and daughters of U.S. citizens, and their minor children. Not to be confused with the F-1 Student Visa which has restrictions on when and where you can work. Many F-1 visas get converted to immigrant visas when their employers hire them after graduation. Many of these lanes have not been well monitored. The H1-B visa, the so-called “Genius Visa”, was originally meant for highly specialized skills, PhDs in Astrophysics and such but they mostly got used for much more mainstream software developers. There has been so much abuse of the spousal visa that Congress had to add a specific section about it to the Immigration and Naturalization Act. Then there are diversity lottery and investor visas. And yet in spite of all these lanes, we have in addition millions of undocumented workers.

This week to celebrate the 40th anniversary of my own arrival in the US, I played tourist on my trip to New York and took a ferry to Ellis Island and Liberty Island. I took a photo of a quote from a century ago which to me reflects the attitude of majority of immigration officers I have met. In those 40 years, I have entered the country countless times as I have traveled to over 70 countries. Yes, a few are jerks, but the vast majority are good, caring workers trying hard to enforce compliance in a relentless flow of humanity.

Which brings me to Diginomica. James comments about them

When I raised the subject of the staff called for boycott of Dreamforce on twitter last week, Dennis Howlett complained bitterly about my use of language. In his post he mischievously raised the spectre of a trade unionism of long ago, Marxism and even the Soviet Union. He even compared me to Derek Robinson, a 1970’s trade unionist and member of the Communist Party of the Great Britain. In several Diginomica articles including this one, a consistent complaint from Howlett is the supposed politicisation of my union’s dispute with Uber.

I don’t know much about trade unions and socialist/communist ideologies. I do have a keen interest in Diginomica. collaborate often with their team. I quote them, they review my books, and quote me. There is mutual respect.

Having said that, I have told Dennis several times they need to broaden their circle when it comes to global coverage. Particularly since the arrival of President Trump, European media coverage of the US has been negative, even snarky. While they are entitled to that pov (Lord, many Americans are even more critical), I think in being fixated on US warts they miss out on plenty of non-US coverage.

It’s fine to criticize the US for leaving the Paris climate accord, but publications like Diginomica should have been all over Germany’s track record on renewables. After basking in the glow as a Green Chancellor for years, Angela Merkel is poised to miss her own modest targets. As I wrote here

Yet, in spite of spending hundreds of billions of euros on subsidizing renewables, Germany will struggle to meet its 18% renewables target for 2020. The country continues to rely heavily on its coal and lignite, and more recently on natural gas from Russia.

It’s fine to criticize US on trade tariffs, but in their coverage of manufacturing markets, I wish Diginomcia would ask why more non- US companies do not make and hire more here like BMW has with its SUV plant in S. Carolina. It is a tenet of modern business to make as close to demand, not cling to old Ricardian principles of comparative advantage.  Besides its vast market, the US has some of the best energy economics in the world, very competitive state and local incentives and our labor equipped with modern automation and accustomed to making newer, smarter products is no longer uncompetitive. 

Same with our immigration. It’s fine to criticize when we do inhumane things like separate mother from child, but drawing a bigger circle would also mean pointing out factoids about our broken immigration system. It would mean asking the uncomfortable question why undocumented immigrants entering from the US South used to be mostly single men, now entire families are trying to enter. Have we been sending signals their chances of entering the country improve that way?

It would also mean asking why with global affluence growing – you only have to visit Dubai, Singapore or Shanghai or go see Crazy Rich Asians - to ask why the world is not following the decades of US leadership and becoming similarly generous to immigration. Why does Japan with its acute aging workforce not take in more? Why did rich Arabs not take in the Syrians who trekked across Europe? From a language, religion, weather, cuisine and many other perspectives that would have been the logical destination for those refugees. Yes, these are troubling questions but ones I wish European publications would ask even as they intensely criticize US policies.

Finally, James invokes the Pope. “Last weekend the Pope visited Ireland and had to face up to the consequences of generations of abuse and misuse of power.”  My wife and I are not much into formal religion. My wife was brought up in Catholic Ireland, and I myself went to school founded by Catholic missionaries. But we are global citizens and visit cathedrals and stupas and mosques wherever we travel. Having said that, we are disgusted with the abuse disclosures in the Catholic Church.  Again, though I invoke the larger circle. My sister-in-law spent hours braving the crowds to see the Pope in Dublin that weekend. There are countless millions like her who look up to the Pope. Who am I to question that much faith and loyalty?

I respect personal activism, not so much corporate activism. But as an analyst, I like to be objective and unemotional when looking at issues.  And following Bill Joy’s advice, I would love all of us to similarly draw bigger circles. We need to stem the current epidemic of guilting each other about failing on some moral benchmark or other.

“Draw a bigger circle”

We are approaching the two-year anniversary of Silicon Collar (released on September 2, 2016).  Many readers tell me their favorite book I authored is still The New Polymath. Amazon tells me SAP Nation sold the most.

Many disagreed with the thrust of Silicon Collar that automation takes decades to kill jobs. In the interim, automation actually makes workers smarter, speedier and safer. It changes the nature of work and often generates new types of work.

To me, it was one of the most significant books I have written because it reshaped my own approach to work and life. Let me explain.

The Background

When I started to write the book nearly 3 years ago, there was near-panic about machines taking over human jobs. Gartner had projections like “By 2025, three out of 10 jobs will be converted to software, robots or smart machines.” and “By 2018, digital business will require 50% fewer business process workers.” Two Oxford U researchers had an even more pessimistic assessment: “According to our estimates, about 47% of total U.S. employment is at risk.” WEF, McKinsey, MIT and many other thought leaders had similarly large and scary projections about job losses.

I read most of the research and interviewed other market watchers. Very few of them had talked to practitioners who were approving investments in, testing and working alongside automation. Others were one-dimensional – they would only base their research on projections around one type of automation like RPA. Still others appeared politically motivated – wanted more social benefits like Universal Basic Income in their anticipation of catastrophic job losses.

So, I did what Bill Joy (the Sun co-founder among many other things) likes to say “If you cannot solve a problem, make the problem bigger. If you draw a bigger circle, you start to see several systems you can work on.”

I interviewed 50+ practitioners in as many industries/work settings. They told me about machine learning, robotics, drones, wearables, exoskeletons, self-driving vehicles and many other forms of automation. More importantly they told me what worked, what did not, how expensive the machines were. They were pragmatic, not hysterical about the machines they were working with. They told me machines are good at certain tasks, not complete jobs. They told me about unintended consequences – how automation often leads to new, different jobs.

I then spent a lot of time on a very dry subject – data from the Bureau of Labor Statistics. Our labor economy is majestically diverse – supports over 800 occupations. And it is layered – in franchises, on platforms, concentric circles around the Fortune 500, the Federal government etc. – see my posts The Alt-Job economy and The Clover-Leaf Talent economy . I found very few market watchers understand these layers in our complex job economy and so use glib terms like “gig economy”

Most importantly, I spent time looking at automation in the last century – UPC scanners, ATM machines, how cars have been taking over driving from humans. I found UPC codes actually improved inventory control in stores and allowed them to order more SKUs. Sales went up and grocery checkout jobs increased. ATM machines transformed the role of the teller – made them customer service and sales reps. 50 years later, just in the US we still have 90,000 bank branches with over half a million associates. Cars have gradually been self-driving since cruise control was introduced in the 1960s, and yet globally 50% of new cars are still sold with stick shifts.

I concluded in an article called Slow-Motion Automation  “… societies absorb automation at a pace that’s much slower than technology’s evolution. And five powerful “circuit breakers” help delay and influence the trajectory of automation in surprising ways.”

People call me a luddite for not accepting machines are becoming faster and killing jobs. I accept that technology progress is accelerating, but its societal adoption is not accelerating and the impact on jobs is still pretty gradual. 

So, how has the book research changed me personally?

Made me curious about what people do every day

Like most people, I knew from my neighbors, friends and clients we worked in oh, 30-40 occupations – attorneys, brokers etc. When I wrote The New Polymath in 2010 I thought I had researched a wide range of occupations that Renaissance Men excel at.  The BLS data opened my eyes to our much, much larger set of occupations.

Now, when I watch a movie like Arrival, I observe that the Amy Adams character is a linguist who is fluent in Portuguese, Farsi, Sanskrit and Urdu and is qualified to decode alien language. Or that the Matt Damon character in The Martian is a botanist and as he says he literally has to “science the shit” to survive. I enjoy meeting with Mike Rowe and watching his Dirty Jobs episodes which highlight jobs we don’t even know existed.  When I meet a Phil Manougian at the National Hurricane Center, I like learning trivia that he is a NOAA Commissioned Corps Officer. It is one of 7 Federal Uniformed Services (others are Army, Marines, Navy, Air Force, Coast Guard and Public Health Service). When I go to a National Park, I seek out Park Rangers. Each has a fascinating story about his/her career path and all kinds of anecdotes from the wild. On flights, I am genuinely curious about what my neighbors do for a living. If they are willing to talk, I listen especially if they happen to be metallurgists, geneticists or in other occupations I don’t encounter on a regular basis. 

Made me more cautious about academia and analysts

I was shocked that the Oxford study I mentioned above had been cited and repeated in over 600 other academic publications, none of which chose to point out the flaws in the methodology as I had in the book. 5 years after their scary projections, not a single job has been lost and yet they have not chosen to reverse their study. Given the immense influence Oxford has, I find that irresponsible. At least, Gartner has backed off from its own pessimistic projections.

Now when I see a widely cited analyst and academic study on any subject I check to see if people have truly kicked its tires.

Made me much more interested in “history of work”

Like most technologists I like to look ahead, not back. I have written plenty about the “Future of Work”.  Silicon Collar forced me to do a lot of research on automation which originated in the last century – how it originated, how it gradually got adopted, the societal impact it had. The book made me go back and study the evolution of occupations. I wrote  “In fact, many of us continue with names which reflect the trades of our ancestors. It could be the Chinese Chong (derived from bow maker), the English Weaver, the Egyptian El-Mofti (from Arabic for legal expert), German Baumgartner (related to orchard), or the Indian Bhattacharya (from Sanskrit for teacher)—and there are thousands of other names derived from occupations in various societies.”

For my next book, I have been reading a lot about how the US tamed its West in the 1800s. Again there, my keen interest is in how occupations evolved.  There I am learning about Meriwether Lewis and his already wide set of skills when President Thomas Jefferson picked him to lead the Corps of Discovery. Then the President arranged for him to get a crash education in many other disciplines “Andrew Ellicott taught Lewis map making and surveying. Benjamin Smith Barton tutored Lewis in botany, Robert Patterson in mathematics, Caspar Wistar in anatomy and fossils, and Benjamin Rush in medicine.”  

It is fascinating to read about our Mountain Men and their mapping and trapping skills. About our whalers and how the light bulb affected their fortunes. Or our cowboys who arbitraged and moved cattle from Texas to the rail junction in Kansas for sale in Chicago and the Northeast. The early logistics pioneers at firms like Russell, Majors and Waddell who outfitted the oxen wagons the pioneers took west, and the Pony Express, the “human telegraph”. So many colorful occupations adorn our history books. Did you know Sam Clemens aka Mark Twain was a steamboat pilot for a couple of years in the 1850s on the Mississippi river before his writing career took off ? Granted he was fictional, but does Captain Ahab not intrigue you about what a real whaler’s life was like when the book was written around the same time?

So, in balance I continue to be fascinated by the ever evolving job economy. We have a choice of 840 occupations the BLS is tracking. The list will be updated in 2018 and I expect it will be longer and have more STEM influence. Our workers are getting 2nd, 3rd, later acts in life. No other country has so many new gen opportunities — franchises (about 7 million jobs), platforms (Apple, Amazon fulfillment, eBay work at home, Uber etc — about 20 million part time for now but rapidly changing ), new services — alternative healthcare, ethnic groceries, pet/child care etc.(another 5 million). I am not even including Silicon Valley type entrepreneurship opportunities in energy, space, food, IT etc.

Yes, lifetime employment and pensions are elusive, but we have ended up with a remarkable new labor economy that our parents would have drooled to be part of. The book research convinced me what a great time it is to be alive and working.

I look forward to drawing even bigger circles!

Who will claim the Enterprise “Western Frontier”?

This summer while researching for SAP Nation 3.0, I have also been reading plenty about the young nation of the US in the 1800s. The comparisons to the enterprise vendor market, two centuries later, in the 2000s are striking.

In 2000, enterprise vendors had many reasons to feel good about themselves. The Y2K challenge had been met - customers could breathe easier. ERP software had allowed enterprises to replace hundreds of fragmented, departmental solutions. New customer facing, supply chain, industry specific opportunities beckoned. A growing proportion of corporate IT spend was with outside vendors – “buy” had trumped “build”.

As you looked at who would dominate the coming century you could say IBM, Microsoft, Oracle, SAP, infrastructure vendors like HP and Verizon. At Gartner we even thought SIs like Accenture would become enterprise integrators and move to the top of the food chain.

The US, then the original thirteen colonies, in 1800 was a young, skinny country. 2/3rd of the population lived within 50 miles of the Atlantic Ocean. Under British rule, the Royal Proclamation of 1763 had declared the boundaries of the colonies as the Appalachian Mountains. Any travel or settlement beyond the mountains was illegal. Even after independence the country had not grown much. The Mississippi river was the western border. You could have put bets on the Americans, but also British, the French, the Spanish, even the Russians on who would take over North America. Each had a foothold across parts of the continent. May be even the Dutch or the Portuguese who were colonizing parts of the Caribbean and S. America.

In his inaugural address in 1801, President Thomas Jefferson talked about a nation "with room enough for our descendants to the hundredth and thousandth generation."  Jefferson was off by a wild margin.  Within five generations, by the end of that century, the country had citizens from "sea to shining sea". The Americans had won out handily – it was actually done by the middle of the century, though the Civil War which followed could have changed that trajectory.

It had taken Jefferson’s Louisiana Purchase from the French in 1803. It had taken similar vision from later Presidents to keep adding to the country's real estate. Andrew Jackson tried to buy Texas from Mexico in 1829. He was rebuffed but after many twists and turns, President James K. Polk annexed Texas in 1845. After the Mexican-American War in 1848, he signed the Treaty of Guadalupe-Hidalgo in 1848 and picked up California. He also negotiated the Oregon Treaty with Great Britain in 1846. In 1867, Secretary of State William H. Seward negotiated the purchase of Alaska from Russia.

None of these expansions were easy to finance nor were they always popular. Jefferson was questioned if he had constitutional authority to sign the treaty with Napoleon. With the country struggling with debts from the Civil War, Alaska was called "Seward's Folly". While the leadership arranged for the real estate, it took grit and plenty of sacrifice for the population to move west. It was a trickle when Meriwether Lewis and William Clark did the epic Corps of Discovery trek to the Pacific in 1804. Their maps and commentary on various Indian tribes along the way opened up wave after wave of others who followed west on the Oregon Trail many as mountain men and missionaries, the Mormon migration to Utah and the California Gold Rush of 1849.  The floodgates opened up with the completion of the transcontinental railroad in 1869.

Yet, there was a continual westward pull with feeling of "It's written down somewhere - it's got to be". If people could not see it in the stars, hear it in political speeches, imagine it in their holy books, they did find it in what John L O'Sullivan wrote in the July–August 1845 issue of the Democratic Review "It is our manifest destiny to overspread the continent allotted by Providence for the free development of our yearly multiplying millions."

In contrast, as we approach the end of the second decade of this century, we see no clear winners when it comes to enterprise tech vendors. If anything the market has become more fragmented since the start of the century. A new set of cloud software companies emerged and became stronger - Salesforce, Workday, NetSuite. Yet, in two decades, cloud applications have barely scratched 20% of the addressable market across geographies and verticals.  Lots of white space to be captured.  Cloud infrastructure has taken off. Amazon and Microsoft have penetrated markets that were IBM and Oracle and HP’s to lose. 

IT integrators like Deloitte were challenged by Indian and other global delivery services firms. Products became smarter with sensors and satellites and software. Who largely benefitted from this? Contract manufacturers like Foxconn, Flex and Jabil. Foxconn itself employs many times the staff large IT services firms do.  Industrie 4.0 and IOT took off to the benefit of large asset makers like GE and Siemens. Enterprise vendors have done little to verticalize. CIOs are doing their own modernization with micro-services. These vendors claim to be process experts – talk of “best practices”. Guess what, the next wave of process automation is being led by customers who are trying out drones and robots and RPA with specialist solutions.

Consumers used to get dregs - decades after governments and corporations got technology innovation. Now, we talk about the Sunday night, Monday morning disparity. What consumers have at home and car is better than what they get in their office, in their planes, in the hotels they stay at. Who was responsible? Players like Apple, Samsung and Google. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Enterprise tech ignored consumer markets, even now only glibly talk about B2B2C – business to business to consumer.

There have been several trillion dollar markets since the start of the century. But in each case enterprise technology players have played cautiously, not invested enough in CAPEX and R&D. They keep gloating about their quarterly performance, customer “stickiness”, how much “digital transformation” they are enabling.

The good news - nobody has yet become dominant. Nobody has shown the vision of  Jefferson and Seward to acquire massive chunks of real estate

For various reasons I will discuss in the book I am betting on SAP to be near the top in leading the pack. Unlike an IBM or an Oracle, it still has at core an application and business process DNA. It has some of the most sophisticated customers across the world. It has blunted the threat from cloud vendors with its own acquisitions. Having said that it has also shown a tendency to make unforced errors. It has chased often after platform markets when it should stay application centric. It has disappointed its customers with Indirect Access and other ill advised licensing moves. Its partners continue to do poorly and cost its customers way too much cost and effort.  

The century is still young. Other enterprise vendors can still rally their troops with a Manifest Destiny call. From sea to shining sea still awaits.

Nothing “permanent” about Oracle-Rimini

I cannot believe I am writing about another legal matter this week. I wrote earlier this week about litigation cases involving Oracle, SAP and Workday.

Judge Larry Hicks of the US District Court in the District of Nevada has had a distinguished career after his appointment there by President Bush in 2001. He has been on senior status since the end of 2012. The means he could have retired but continues to serve the public. You have to admire that.

I wonder though if he has enjoyed presiding over the Oracle-Rimini saga which has been going on since January 2010. It’s been like a tennis match with volleys back and forth. Indeed, a sentence in his latest judgment brings that out nicely (italics mine)

In its decision, the Ninth Circuit affirmed in-part, reversed in-part, vacated in-part, and remanded in-part the jury’s verdict and the court’s various orders in this action.

I had to smile when I saw the latest injunction is titled “permanent”.  I did find Oracle’s reaction a bit strong given that they have not been able to put this to bed yet.

Rimini Street’s business has been built entirely on unlawful conduct, and Rimini’s executives have repeatedly lied to cover up their company’s illegal acts. Rimini, which admits that it is the subject of an ongoing federal criminal investigation, has proven itself to be disreputable, and it seems very clear that it will not stop its unlawful conduct until a Court orders it to stop.

Rimini for its part, blandly said it will appeal.

I realize this is all legal jargon and jockeying and I am no lawyer.

But…..Oracle could have solved this years ago by offering a similar service. Most Rimini customers I talk to were not just attracted by the lower price (they had to balance the viability risk that came with a small vendor being sued). They did like the fact that Rimini supports their customizations. They love the fact that their ticket volumes have GONE UP. Yes, they got tired of raising tickets with Oracle (or SAP) because they tell me they rarely got resolved so they quit raising them. They like the dedicated rep model they get with Rimini. Oracle usually tells them the quality of their product is more secure, more trusted etc. It was a quality of service, as much as product and an economic decision for many customers.

Oracle has also sent mixed messages to its customer base. It keeps telling them to move to the cloud (indeed the litigation I wrote about earlier in week suggests it coerces them to do so). But if they want to stay with the legacy products, why resent them looking around for support?

Here’s what baffles me. The reality is most Rimini customers continue to buy new stuff from Oracle (and SAP). They continue as YOUR customers, Oracle. I like the fact that you are challenging the Pentagon not to sole source cloud infrastructure, but in turn should you not respect incumbent customers balancing their portfolio if they so choose?

I apologize for putting my usual customer advocate hat. Let’s go back to our regularly scheduled programming and enjoy the tennis match!

Next-gen software executives

I was pleased to see Salesforce has appointed Parker Harris to its Board and promoted Keith Block to co-CEO. I have long been a fan of Parker – just brilliant and a nice guy to boot. I think the enterprise software industry has been incredibly lucky to have him, Stan Swete at Workday, Larry Ellison at Oracle, Hasso Plattner at SAP, Soma Somasundaram at Infor – some of the best enterprise architects all converge at the same time. Similarly executives like Keith, Bill McDermott at SAP, Tom Siebel now at C3 and others have taken sales to new heights in the last couple of decades.

But readers know my view is we are approaching the end of Cloud 1.0 apps.  We will need additionally some new executives in the next phase. We should actually have been starting to groom them a decade ago.

Here are some teams they need, each with an appropriately empowered executive:

Business Process Visionary

I was in Anchorage, Alaska recently and noted that along with Memphis, TN it is one of the 5 busiest cargo airports in the world. Of course, I said thanks to FedEx.  Amazon is no slouch when it comes to logistics – started working with the US Postal Service on “postal injections” 15 years ago. Started putting Kiva robots in its distribution centers almost a decade ago and is now exploring drones and other automation. Amazon, FedEx and others have transformed logistics and supply chain processes. Global manufacturing has turned upside down with Apple moving completely to contract manufacturing. It is about to change again as companies produce close to demand and are rethinking automation on the shop floor. BMW’s ultra-modern plant in South Carolina is an example of that.

Startups have been teaching companies to apply data science to enterprise processes – Oversight Systems around payables and other accounting , Uptake around complex assets, Palantir around fraud detection. In fintech, startups have been transforming banking operations. Ditto with other verticals. Small businesses are using platforms from Amazon, Apple, eBay and others for their eCommerce, their fulfillment, their talent sourcing.  Less than 10% of Fortune 500 talent is on their direct payroll. Some of the remainder in on 1099s, but the vast majority in in their suppliers, their service providers, their franchises and their platforms. Talent management has become exponentially more complex with this diversity.

You know what – none of the major software vendors or their SI partners have helped with much of this. Part of the reason is they have mostly taken old processes and taken them to the cloud. They have “reskinned” their process maps with prettier interfaces,  not tried to rethink the processes for industry changes and automation opportunities. But after two decades, it is time for the application software industry to start leading again with process innovation, not just keep talking about tired old “best practices”

Customer-centric economist

Most vendors have smart CFOs who can talk ARR, Rule of 40 and other investor lingo. But most of them could also use a peer who also helps them speak to customer technology economics.

For decades now, customers have learned from multi-year outsourcing contracts. They expect benchmarking and continuous improvements when they give a vendor years of runway and control. They want to see Six Sigma and CMM type productivity improvements. Most software vendors go in expecting to raise prices when customers renew their contracts. The disconnect between buyer versus vendor expectations is startling.

Another area where software vendors have fallen short is optimizing the cost of migrations to their solution. It’s not rocket science to take someone from Point A to Point B. Its been done hundreds of thousands of times around ERP, CRM and other projects in the last few decades. But most vendors just expect customers to pay SIs to get them there.

Vendors understand Point B intimately – it’s their software. Their salespeople know which Point As to  target.  They could use an internal economist who can focus on how best to deliver the migration - with automation and with specialist staff - at scale to the customer base.

Ecosystem overseer

Most vendors have a partner management role. But it often reports to sales and has a revenue goal to help fund customer events, training and other investments. That’s certainly one role. A separate one should focus on quality and customer economics in the ecosystem. It is mind boggling that vendors let their own brands suffer based on failures and overruns in their SI partners. It is shocking how many let them violate their own commitment to multi-tenancy and no-customization proclamations.

Again, this is not rocket science. SIs have done hundreds of thousands of these projects.  A few years ago, I wrote about cloud vendors and roofers.

I said

Cloud vendors are doing themselves a disservice by going in with service partners who remind the CIO of the last “roofing job”. They need a newer ecosystem of partners who use automation for the migration, the integration, the testing – the roofers who use conveyors and digital cameras. They need roofers who are done in 2 days. Partners who treat it as a repeatable, predictable job not treat it as a work of art. Then watch CIOs talk to their peer neighbors and start making the move one after another. And watch the neighborhood start to shine.

So congrats to Parker and Keith. But we will also need a new and different set of executives as we move into a new phase in the software industry

‘Tis the season for software lawsuits

Oracle, SAP and Workday have all been hit with lawsuits in the last few weeks for very different reasons as I describe below.

But first a preface – lawsuits draw a lot of attention but it’s usually wrong to extrapolate too much from them. Couple of perspectives on that:

- A vendor once asked their attorneys to brief me on the first day of their trial on an IP related lawsuit. My reaction was – wow, they must feel really confident to brief me months or years before a likely court decision. My second reaction was in fairness I should allow the other party to also brief me. Then I thought about it – the jury would not read or be allowed to what I wrote before it made its decision. And in good faith I could not pretend to tell my readers and consulting clients how exactly this jury may lean. Especially a jury of lay people listening to a complex IP case.  So I ended up not writing anything about the case that day or much even later.

- I have been “close to the action” on several cases as an expert witness and they are rarely open and shut cases. The attorneys are incredibly smart, but often don’t work full-time on software industry cases. So, there is sometimes a learning curve.  They are masters at simplifying complex topics to make them understandable to juries. They have to however, keep a safe distance from the expert, so the judge is sure you are truly independent. So, even though you are being paid by  “the same side” you are guessing why they take certain positions or ask certain questions. You usually have copious amounts of evidentiary data to work your way through, but cannot use that for any of your future writing or consulting.

Long and short – whatever you read in the public domain in an article or a post about any software litigation, the actual, gory details are likely quite different.

Having said that, it is interesting that at least 3 very different enterprise software related cases are currently in the news. My commentary is below with no inside knowledge in any of the cases.

Investor v Tech Vendor

City Of Sunrise Firefighters’ Pension Fund has a filed a suit against Oracle. It says “Oracle drove sales of cloud products using threats and extortive tactics. The use of such tactics concealed the lack of real demand for Oracle’s cloud services, making the growth unsustainable (and ultimately driving away customers).”

Audits are an unfortunate but common occurrence in the enterprise software world. Oracle has a poor reputation when it comes to this, but many of its peers are as guilty. While a small fraction of customers cheat and others involuntarily fall out of compliance, it is also a common way for sales fields to make their quarterly or annual numbers. Having said that, many customers have learned to “punish’ such vendors by freezing them out of future business many times what they end up paying as a result of what they consider unfair audits. Also it is starting to show up in a slow number of cloud software implementations as I wrote here – many coerced sales just end up as shelfware.

The filing says “These tactics alienated and angered the Company’s customers, which in some cases have not only refused to purchase Oracle’s cloud offerings but have also looked to terminate their existing business relationships.”. One of the best things that could come out of this lawsuit would be if they could “name names” and show what I have been saying that customers do punish vendors for such behavior. That could force a rethink at many vendors that such short term revenues come at a very hefty price.

Tech Vendor v Tech Vendor

Teradata is accusing SAP of theft and anti-competitive strategy: “SAP could not have so quickly developed and marketed HANA in the first place without its theft of Teradata’s trade secrets. Now, using the fruits of that theft and its position in ERP Applications, SAP is attempting to foreclose Teradata from supplying EDAW solutions to many of the largest corporations in the world.”

I am not sure what to make of this. Usually, you hear murmurs in the industry about some impending action but this appears to come out of left field.

I have not been a big fan of SAP’s HANA strategy in my books and blogs. I think the database has distracted it from application leadership. But did they steal in-memory and columnar database IP from Teradata?

I want to see how Teradata attorneys can succinctly explain arcane optimization algorithms to a jury. Also how they refute SAP’s considerable prior art when it comes to analytics – their three tier architecture in R/3 which allowed it to support multiple databases and understand how users access certain fields more than others , Business Warehouse going back to 1997, its Business Objects acquisition in 2007 and its Sybase acquisition in 2010 and many other elements. In The New Polymath, in 2010 I had written about work at the Hasso Plattner Institute in Pottsdam which I believe was the genesis for what became HANA.  Not saying one side has more merit than the other, but it will mean looking at a lot of documentation to say who developed what and when before the other did.

Customer v Tech Vendor

Sacramento City Unified School District has filed a suit against Workday and Sierra-Cedar for a payroll and finance implementation gone awry.

Project overruns and failures are not unusual around ERP software. In SAP Nation, I had a chapter which cataloged year by year of major project failures in the previous 15 years. And I knew many more where the customer settled botched projects in private. What is different here is so far Workday and its partners have largely kept their noses clean, The amounts involved are fairly manageable at around $ 5 million. Of course for a school district, that is a lot of money but I am used to seeing many 9 figure failures.

Complex as each of those 3 cases are likely to be, they will be child’s play compared to the EU v Google antitrust investigation which has gone on for almost a decade and will likely morph some more.

Like I said earlier though, don’t expect simple summaries from me or others on how and why they get settled. The devil is in the mounds of detail and often that is precluded from being publicly shared.

Why so many “no-go” software decisions?

Most people assume Gartner analysts spend their lives drawing up magic quadrants. Actually the biggest single activity for most analysts is handling client calls as they look for new solutions. When I run into Gartner analysts at industry events I will sometimes ask them how many calls they average a year. Best I can tell, it is less than half what we handled when I was there from 1995-2000.

It was a very different time. Y2K led to a frenzy of software evaluations. Gartner had a higher mix of buyer as against vendor clients. The analysts today are more specialized by market category than we used to be.

But there is a much bigger factor. The conversion to cloud applications in the last decade has gone much slower, especially in larger customers, than the conversion to client/server solutions in the 90s. Salesforce and NetSuite have been around for two decades. Workday and Oracle have been offering cloud solutions for a decade, SAP and Infor for at least five. The last wave of applications are 20 to 40 years old and ripe for modernization. There are lots of drivers which would suggest a much more vibrant cloud applications market.

There are proportionately fewer calls to analysts, and even where they are made, much fewer actually result in purchases.   The last point is concerning and bears investigation.

From my conversations I believe there are several reasons for the relatively slow migration

“Square peg, round hole”

There are lots of mismatches in the market. Many customers want to modernize their shop floor or their warehouse with sensors and robots and are instead expected to buy complete ERP and Warehouse Management systems which, by the way, were designed to interface with humans, not machines. They want predictive maintenance around their major assets and are offered old school depreciation-calculating asset management software. They want social marketing and are offered bundles of SFA-centric CRM software.  They want to modernize industry functionality and find little of that has been moved to the cloud.

Cost of moving to the cloud remains high

While multi-tenancy has reduced cost of upgrades, hosting and application management, the cost of getting there is still too high. Very few software vendors have developed automated migration tools. Fewer have learned to manage their systems integrator partners. Implementation costs and failure rates remain stubbornly high.

Cost of staying put keeps going down

Third party maintenance, new business models for outsourced application management, infrastructure-as-a-service all make staying with legacy applications palatable. End users may not like it, but cannot argue with the improving economics. 

The lag compared to consumer tech now seems permanent

A decade ago, most companies were willing to give enterprise vendors the benefit of the doubt to catch up with consumerization of technology. These days consumer tech companies are offering far more sophisticated infrastructure and artificial intelligence. The big surprise today is when Oracle or IBM delivers anything ahead of Amazon or Google. Even then, no one really expects their economics to be attractive.

It’s not all bad news. With so much of the market still wide open, we may see a second onslaught from Workday and  Salesforce. Oracle, SAP, Infor and others may jolt their laggard on-prem customer bases to migrate. A new generation of vendors offering point solutions may make them move to a new category of applications.

The market needs much more of that. We are in the summer doldrums with too many no-go decisions. 

Digital – with Impact

This is the third in my midsummer updates around cloud computing, renewables and digital transformations.

Over the last few months, I have been collaborating with my colleague, Brian Sommer as he works on a book titled “Digital with Impact”. Both of us saw the practice of Reengineering start off with much promise in the early 90s, only to lose steam in a few years. Companies bought into the false promise, encouraged by SIs, that packaged software available then would give them “best practices” and “reengineering in a box”. Many are still stuck with circa 1970 business processes and the on-going burden of those expensive systems. Both Brian and I worry something similar may be happening with today’s digital projects.

As Brian says “Today, digital isn’t simply a replacement for analog, spoken or other aspects of consumer or business activities. Digital in today’s business vernacular is about BIG change – not small changes at the margins.

Business leaders don’t need more encouragement to ‘go digital’. No, they need a path to define and achieve their transformational goals. That path comes in four phases: They survey the landscape and get quite educated on new technologies, competitive threats, new opportunities, etc. (SEE). Next, they synthesize this knowledge into a new to-be vision of the firm (THINK). Their next challenge is to make a frank assessment of how well their firm can complete this vision and what new resources or adjustments they will need to make (RECONCILE). Finally, these firms acquire the people, funding and more to make the change a reality (TRANSFORM). “

He is a firm believer that doing a software replacement with today’s cloud technologies is necessary, but usually inadequate for impactful digital projects. Most enterprise vendors have not kept up with new trillion dollar markets that have emerged in the last two decades, and do not have a big enough digital “vision”. Here are some examples of their myopia:

Products have became smarter with sensors and satellites and software. Who has largely driven this? Contract manufacturers like Foxconn, Flex and Jabil. Foxconn itself employs many times the staff large IT services firms do. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Cloud computing has taken off. Amazon and Microsoft have taken over infrastructure markets that were IBM and Oracle and HP’s to lose. Mobile computing took off. Who benefitted? Players like Apple, Samsung and Google. Industrie 4.0 and IOT took off to the benefit of large asset makers like GE and Siemens. Enterprise vendors have done little to verticalize. CIOs are doing their own modernization with micro-services. These vendors claim to be process experts – talk of “best practices”. Guess what, the next wave of process automation is being led by customers who are trying out drones and robots and RPA with specialist solutions – read Silicon Collar to see how little a role these vendors have played.

So, a bold digital strategy calls for assembling a broad team of vendors, not just pinning hopes on those who have done well in the past with back office processes or with IT infrastructure. 

It also helps to probe to see how vendors themselves are changing. Digital transformations at their customers significantly impacts their own product mix and business models - often traumatically. In the last few months I have had a chance to talk to two vendors – Cognizant and SAP - about their own digital transformations.

Rajeev Mehta, President of Cognizant, the outsourcing firm told me “We actually took our revenue guidance (to Wall Street) down in 2016. And we started seeing the impacts of our clients demanding, wanting to start looking at transformation. We started seeing our existing legacy footprint under threat."

That led to a revisit of their 2020 go-to-market strategy. That turned out to be fortuitous as an activist investor, Elliott Management started clamoring towards the end of 2016 to implement what they called a "Value Enhancement Plan".

I am working on a case study which describes the organizational, product mix and other changes at Cognizant, but one of the outcomes from their internal transformation is:

“Operating margins have improved steadily and the activist investor, Elliott Management divested their interest in Cognizant in May 2018, after a 50% jump in stock price just 18 months after they pushed for their reforms.”

I am working on a similar case study about the digital transformation at SAP. Christian Klein, COO and  member of the Executive Board of SAP SE, told me “we are tackling the whole value chain of SAP. We are looking end-to-end, so marketing, sales, finance, service and support, cloud operations, the cloud infrastructure. All of this has to work in harmony end-to-end. That's the first aspect of our transformation.  Next, we are infusing machine learning, IoT, predictive analytics, all this kind of new technology to also bring the intelligence into play to scale and to also get some synergies out of that.”

“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 because, at the end, everything that we do in the cloud, in system side impacts, in our case, our 90,000 employees and our 360,000 customers, so change management is a key aspect.”

Benni Blau on his staff shared with me details of ten projects they have internally worked on, and the success metrics they can show across marketing, sales, finance and other business areas.

There will be lot more on these and other case studies in Digital with Impact and SAP Nation 3.0 books in the next few months. 

Long and short. Don’t just do small d – digital. Do it with a broad team of vendors. And prioritize vendors who have been doing their own digital transformations and can actually show results from such efforts.

Renewables: The “great dual challenge,”

The new General Electric  is a shell of its former self as it sheds most of its business units and its industrial coverage is down to its aircraft engine, renewable, and power plant businesses. GE CEO John Flannery has called the three “highly complementary businesses poised for future growth”. Yes, each is based on turbine technologies, but I can see how green zealots cringe when they see the association between fuel guzzling planes, coal and natural gas-driven utilities and wind turbines. It is, however, the reality as GE sees it.

The Washington Post has an article on BP and how the oil giant was “forced to shrink to greatness”. It shows how the US government almost put the company out of business after the Deepwater Horizon explosion and how the rest of Big Oil shunned it. It has trimmed down and is starting to invest again.  Renewable investments may reach $500 million a year, a tiny fraction of BP’s $15 billion or more in capital spending. Its big bet is on natural gas and that utilities will increasingly move from coal to gas.  CEO Robert Dudley says “This is not a race to renewables. It has to be a race to reduce emissions,”The “great dual challenge,” is to do that while generating enough energy to lift people out of poverty and absorb population growth.

You could argue that GE and BP are not ardent supporters of renewables, but how do you explain the situation in Germany? Foreign Policy says

For years, Germany’s Energiewende, or renewable energy transition, was held up as a best practice for other nations to follow. After all, in just 15 years Europe’s biggest economy turned a third of its electricity generation green by subsidizing investments in solar energy and wind power. In doing so, it added 300,000 jobs to the economy. Even while it was in the process of phasing out nuclear power, Germany managed the transition while its factories hummed along, the economy posting record growth and trade surpluses. In the late aughts, Merkel was dubbed “the climate chancellor” for her engagement on behalf of the climate.

Yet, in spite of spending hundreds of billions of euros on subsidizing renewables, Germany will struggle to meet its 18% renewables target for 2020. The country continues to rely heavily on its coal and lignite, and more recently on natural gas from Russia.

Progress is more visible in smaller countries like Denmark (especially with wind), Kenya (especially with solar) and Iceland (with geothermal).  If you include hydro power in the renewables bucket (many hard-core green fans argue that dams cause ecological damage so aren't as as sustainable) Norway, Canada and Costa Rica are shining examples. The little island of Palau has announced plans to move completely to solar power in the next few years.

There is also good news from the state of California. Assembly Bill 32 pushed the state to reduce emissions by 2020; California did it in 2016, dropping from 1990’s 431 million metric tons to 429 million metric tons.

The next big hope is China which is said to be investing $ 360 billion (mostly in wind and solar energy) during the five-year 2016 to 2020 period.

Renewables are making nice gains in the utility sector, but that is not being matched in transportation (tankers, trucks etc.) and heating – which together account for 3/4 of global energy consumption.

A number of fan boys keep arguing otherwise, but the disappointing German experiment in particular tells us the BP comment about “the dual challenge” will be our reality for the foreseeable future.

Renewables are a bit like Artificial Intelligence. Every few years we get excited with progress but you look a few years later and the adoption progress is uneven.