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IBM: SAP, Sabre and Smart Systems

Kudos to Vijay Vijayasankar for saying “he is very proud to be an IBMer” as he continues a debate we have been having for a while now about whether IBM is innovative or not. He cites SAP and Sabre (the reservation system) as long term examples of IBM innovation. Let me come back to each. Wish he had talked more about something more recent – like Watson and related impact on natural, smart systems.

IBM deserved plenty of ink earlier this year for what Watson demonstrated with its prowess at Jeopardy as Deep Blue did when it beat Garry Kasporov at chess in 1997. It was a feel good moment for all of us in tech – we cheered for IBM even if we competed against it.

But I have not seen IBM articulate clearly what Watson means to its business customers.  And when it does, I will tell clients to also look under the covers at Apache Hadoop and see the Yahoo! contribution to that open source tool and Cloudera’s distribution of the tool. I have also tell them to talk to Google whose labs are teaching computers that pointy towers define edifices like the Eiffel Tower and by transcribing millions of Google Voice messages they are teaching computers to understand nuances of human accents. And to talk to Microsoft which is pioneering surface computing and Kinect based gesture interface technology. And to companies like Mercedes which is pioneering digital avatars like “Gloria” to communicate with us in its cars.

Now back to Sabre and SAP. To me, when I hear Sabre I think less of IBM but of the IT industry icon, Max Hopper (later in his career he was on Gartner’s board and I had a chance to shake his hand on a couple of occasions) and Bob Crandall, the crusty CEO of American Airlines who saw the value in the Sabre infotech business versus the messy core business of running an airline and related butting heads with unions and weather and other operational issues. 

But Sabre to me also reminds of so much that went wrong with aviation. It was the antithesis of the frequent flyer CRM innovation. I remember writing a letter to the Delta CEO in the mid 90s saying I had analyzed my records and flew on average 100K miles a year with them, and my air tickets averaged $ 15,000. Could we not agree on a simple arrangement of 15c a mile? Save yourself and me (and my accountants) the aggravation of buying tickets each time, and just send me a statement each month. They laughed at me.

Yield management – the Sabre design principle – was meant to optimize revenue per seat and here was this moron daring to propose something so simple. The reality is yield management brought them 45c a mile on some trips, 7c on others. Markets dictate pricing not systems. On average Sabre brought airlines 15c a mile. They could have simplified reservations, eliminated hairy ticket accounting (remember how long it took to change paper tickets?), got predictable revenue by getting away from yield management which forced us to check on competitor fares every time we flew. It would have fit with their evolving frequent flyer long term customer management mindset. Yield management was about optimizing each seat. CRM was about optimizing customer life time revenues. 

Along came Southwest and simplified fares to close to what I was proposing. Southwest was started in Texas to compete with car driving so their fares were sensitive to mileage based costs. And Southwest showed they could be profitable while the majors went yo-yo on their numbers most years. (Vijay, go talk to IBM procurement folks and see how they negotiated hefty discounts with each airline using Sabre and negated the so called advantages of yield management)

The other ancillary problem with yield management was a focus on hub and spoke networks. American anchored their yield management around DFW airport, Delta around Atlanta Hartsfield, United with O’Hare etc. So they forced us all to adjust to those monstrosities with their miles of walkways and endless delays. Books could be written about the enormity of impact to the economy in extra fuel and passenger cost in transit and extra flying time these hubs have cost us. Southwest (and Jetblue and others) again showed us there was a different way – fly into Dallas Love Field, Chicago Midway, Oakland and other secondary airports. Less convenient, the majors said. Getting on the L to downtown Chicago or BART to San Francisco or driving another 15 miles to Fort Worth with another $ 200-300 jingling in my pocket is not inconvenient in my books. Especially when I flew in non-stop into those airports (where the majors allowed us to – remember all their lobbying for decades to not allow Southwest to fly non-stop into Love Field?)

On SAP, if IBM is doing innovative stuff around HANA or educating SAP about multi-tenancy around ByD that may be worth talking about about. But bragging about hundreds of FI/CO, SD projects is not innovation. In that vein, my respect goes to Chris Everett,  who built Price Waterhouse’s SAP practice into a multi-billion dollar business which IBM ended up buying. In 1993, he took the risk of betting big on R/3 when it was just coming out. He did this in a conservative accounting firm. That was risky and innovative. Or my little team at Price Waterhouse in London in 1989. We installed R/2 on a mainframe in the Docklands – a rough area back then, on a platform from a company called IBM which was widely considered then as dying. We prototyped using manuals in German which none of us were fluent in and from a company few had heard of outside Germany.

Sorry, Vijay – I am old school. Show me areas where IBM  is putting big bets – and taking risks. Innovation without risk-taking is just “new and improved” toothpaste marketing.

Paul Turner on the “New” Two-Tier ERP strategy

This continues a series of columns from practitioners I respect. The category "Real Deal" describes them well.

In the 90s as AS/400s and LANs took off, many multi-nationals adopted two-tier ERP strategies – a mainframe based application for corporate and domestic subsidiaries, decentralized versions for international subs.

Paul is currently a Senior Director at NetSuite, but has spent a lifetime in and around financial systems at Hyperion (now Oracle), Callidus Software, Xerox, Electronic Data Systems, Citigroup, Standard & Poors and more. And done so around the world with a fine start with a first class honors BS in Computer Science from Lancaster University, England.

He writes about a new wave of cloud based two-tier ERP implementations.

“In the first wave of two-tier ERP you ended up with solutions like Microsoft Great Plains – but often with tens, or even hundreds of separate GP instances, and you had to hire local IT resources to manage each one. Or more recently, we are seeing warmed up on-premise solutions repackaged as hosted/cloud solutions.

I see seven ways cloud ERP redefines the term “two-tier”:

1. Accelerates entry into emerging markets and products. Fast-moving “companies within companies” can’t wait. Cloud ERP paired with global language, currency and regulatory support make it the ideal platform for supporting emerging and growing businesses.

2. Quickly deploys to meet the needs of M&A, divestitures and joint ventures. Cloud ERP provides a fast, flexible, cost-effective and repeatable ability to run the new business while shedding the infrastructure complexities typically inherent in the prior applications, avoiding lengthy ties and financial commitments to the prior parent.

3. Faster consolidation and better corporate visibility. Two-tier ERP doesn’t mean less visibility—it means more. Cloud ERP solutions like NetSuite OneWorld support all subsidiaries’ charts-of-accounts within a single instance. Consolidated financials can be pushed or pulled into the corporate ERP’s financials for final consolidation.

4. Eliminates the need to put IT boots on the ground. Cloud delivery enables deployment of mature, full-featured ERP without having to hire local IT resources. The whole subsidiary deployment process can be managed from the division or from corporate—cutting costs, speeding deployment and reducing your infrastructure footprint.

5. Customizes while staying up-to-date. True cloud ERP supports extensive customization that enables subsidiaries with different go-to-market needs to tailor to their requirements without being forced into deploying a separate instance or saddling the subsidiaries with version-lock.

6. Integration to corporate systems. It’s key for any cloud solution to integrate with on-premise systems in a two-tier model - so it ties back to the corporate Oracle and SAP instance. Done right, cloud ERP solutions provide an always-on web services based platform that can be accessed 24/7 by enterprise integration tools like Informatica, IBM Cast Iron, Dell Boomi or Pervasive Software to provide on-demand access to subsidiary financial data.

7. Elastic growth. Cloud ERP solutions like NetSuite enable dynamic growth as divisions and subsidiaries demands increase—there’s no need to provision resources in anticipation of demand.”

Paul can be emailed at pturner at netsuite dot com

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IBM: We need more innovators, less integrators

First, some compliments. I am pleased to see so many IBMers comment on my post where I said we need more Apple/Google/Amazon moments, less IBM ones. Good on them for being proud employees of an iconic company celebrating its hundredth birthday.

One even called me “pathologically ridiculous” -  I presume that is a clinical state I was previously unaware of.

But they did not address the basic question in my post. How much of IBM’s revenues comes from new products innovated in the last 5 years? Because that is the benchmark that Apple and Google and Amazon blow IBM away on as what I consider a legitimate claim to innovation. The author above asks “What about all of the other (IBM) brands? Tivoli, WebSphere, DB2, Rational?” and by naming those brands just reinforces my point IBM is old-in-the-tooth. If Pharma patents applied to software, there would be generic versions of those by now – we call them Open source in our industry. IBM prides itself as supporting and leveraging Open source but cordons it off from its own proprietary and profitable products.

Here’s another benchmark for innovation – for the $ 100 billion (give or take) IBM charges its customers every year, how come I cannot find more reasons to post about them on my daily innovation blog, New Florence? (Last week I posted one on their massive data drive from its Almaden Labs, but for that much customer investment there should be at least one a week innovation I could profile and trust me I scan every announcement their PR folks send me).

The reality is IBM in the last decade has transitioned away from innovator to integrator. Even in its Smarter Planet projects that it heavily markets as innovative, very little of technology is IBM’s, it is usually just the service integrator.

Nothing wrong in that except even with the largest services revenue in the world, it has less than 10% market share in the global services marketplace. We have too many integrators out there. If IBM was truly innovative it would be automating and commoditizing much of that labor – its own and that of the rest of the market.

What I find disconcerting is that even at the top IBM confuses its nice margins from milking old software and old data centers and old partners like SAP as “innovation”. This WSJ article I should  have written about a while ago summarizes that state of delusion.

“In a rare public broadside, IBM Chief Executive Samuel J. Palmisano said he doesn't worry about companies such as H-P that have slashed their investments in core technologies and need to make expensive acquisitions to keep up.”

Talk about a pot-kettle mindset. 

Dreamforce: a rainbow coalition

In a discussion I had with a client a few weeks ago he asked me if salesforce implementations and service providers have reached a mature state given the company is over a decade old. I told him the answer depended on which of 4 customer categories you fell into – users of the traditional CRM applications, more recent users of social assets salesforce had developed or acquired like Chatter or Radian6, vendors which were using Force.com to transition from on-premise to SaaS versions and finally users which were using salesforce’s platform to modernize legacy applications for cloud/mobile/social computing.

Sure enough on the Dreamforce stage there were examples of each. Burberry CEO Angela Ahrendts and Gatorade’s “social mission center” were front and center as examples of leveraging the social capabilities the company offers. Toyota, Enterasys and Coke showed off how the “internet of things” can also become social. Coke even discussed how licensing is becoming social as per-user pricing gets outdated in collaborative and device heavy environments. There were vendors like Kenandy (Sandra Kurtzig is bringing ERP, a concept she pioneered at ASK eons ago to the cloud) and Infor using Force.com. There were long time traditional users like Kelly Services which have expanded usage of newer salesforce products. If you walked the expo halls plenty of partners had mobile extensions.

And then there was the variety in the glitz which ranged from Daniel Akaka delivering with his wife traditional Hawaiian greetings to Metallica threatening along with the mosh pit of the 45,000+ in attendance at the conference to blow the top off Moscone Center. And in between genres as different as Neil Young and MC Hammer and will.i.am.

There was demographic diversity. Ray Lane, partner at Kleiner Perkins and an investor in Kenandy, standing alongside Ms. Kurtzig told the audience “you thirty somethings, our (60+) generation is not done yet!”.

Somehow missing in the conference were methods and rules for each of the coalitions of customers. Sure, there is a wildly expanding range of systems integrators who offer to do anything but salesforce needs to invest much more in detailed roadmaps to help companies become social enterprises or vendors seeking to use its tools to move from legacy to SaaS.

CEO Marc Benioff moderated a panel which included two tech savvy regulators, Vivek Kundra and Neelie Kroes from the EU. I have a feeling he will need regulators in his customer coalitions, otherwise he may suffer the same fate of a much bigger vendor we all know of which put too much on its faith in its service partners.

Marc does not want his customers to be singing Metallica’s “Bleeding Me” – he wants to have them continue to proudly say “U Can’t touch this”

Workday during Hurricane Dreamforce

As kids in the Northeast found in the wake of Irene, there are Snow days even in the summer. Hurricane Dreamforce blew into San Francisco (what else can you call an event with an attendance of 45,000?) this week and many of us bloggers and analysts found ourselves in the middle of a Workday. A briefing by Workday that is. Kudos to Workday for leveraging the time and expense already invested for the bloggers and analysts to be in town.

On surface the agenda was fairly technology, platform and architecture oriented (it’s a theme I saw repeated at Dreamforce and will cover in  another post). But with a bit of probing  the application and business benefits came through fairly well.

My favorite sessions were how mobile applications are being leveraged for expense and other tracking, a natural interface application where even an awkwardly posed question returned a person’s PTO balance and discussion of in-memory/grid concepts and how they were dramatically reducing payroll processing times and accelerating analytical/reporting  and how they are reducing need for read-writes and therefore cooling in their data centers.

The really impressive thing was how comfortable the 15+ presenters were – many couple of levels removed from the executives who mostly opened and closed sessions and chimed in as needed. It reminded me of trips to Walldorf in the 90s – SAP had deep bench strength in their product area, and young as Workday is, it is building similar competence.

Aneel Bhusri, co-CEO was asked if he was content with the “slow growth” – 144 live HCM customers in the 6+ years the company has been in business. His response – that represents 2 million employees. And in 3-4 years he would like to have 10 million employees under the software’s care. That would be lots of expenses to track and plenty of gross-to-nets to process.

So, glad we got to hear about the application and infrastructure innovations.

My kind of Snow day!

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