deal architect

The Business Insider Mark Hurd interview

Maybe it is the Marshawn Lynch effect – most everyone is squirming this week as the NFL forces him to make mandatory media appearances in the run up to the Super Bowl. But I felt bad for Mark Hurd of Oracle being made to endure 25+ questions on personal life in this BusinessInsider interview.  Why should the man not be allowed to keep his parents and kids away from media scrutiny?

The thing is Mark makes a fascinating executive interview. Every time I meet him,  I learn something new from his broad career. It could be a manufacturing nuance from his NCR days, a supply chain or data center factoid from HP,  an executive pov on human resources or digital marketing from his Oracle experience.  He presides over a mind boggling portfolio of SaaS, PaaS and IaaS products at Oracle. How does he keep his Reteks straight from his Eloquas? How does he comfortably present in Dubai one day and Shanghai soon after?

Mark is pretty media savvy and am sure handled the interview well.  He good naturedly ribs me about something or another every time I meet him. But the interview also missed a couple of opportunities to follow up on statements he made:

"My number-one issue with customers is this statement: 'I didn’t know you did that. I didn’t know you had that.'"

“If you ask me, would we want to change places with SAP or IBM? No. Let me say that again. No.”

To each their own. Of course, I love to discuss sports and hobbies with executives I meet, but there are so many business intricacies to discuss with them. 

ERP Excitement

In the last couple of weeks, in very different settings I have seen the future of ERP.

Invited to be part of UNIT4/FinancialForce’s sales kickoff in Madrid, Spain and that of Plex Systems in Troy, MI, I saw wildly enthusiastic sales teams, fluent about cloud computing but very focused on specific verticals and geographies.  These are usually close knit events, and I was honored to be invited as an outsider to be part of both

Both vendors see  huge opportunity in replacing previous generation on-premise ERP. In SAP Nation, I profiled Middlesbrough Council in the UK which is replacing SAP with UNIT4’s Agresso. Several other UK local governments are doing similar around their previous SAP and Oracle implementations. UNIT4 is focused on people centric, services-oriented industries.

Plex, on the other hand, is squarely focused on specific manufacturing industries – auto, aerospace/defense with a increasing focus on process sectors. In SAP Nation, I profiled Inteva which has replaced SAP upon its spin off from Delphi and reports significant economic and functional benefits.

There was plenty of cloud computing talk in both settings – but a nuanced version of cloud. UNIT4 emphasizes “cloud your  way” sensitive to privacy settings in its target government sector. FinancialForce is built on the Salesforce platform and is much more vocal about that cloud. mobile, social technology. With Plex, the conversations easily drift into next-gen shop floors with wearables, robotics and 3D printing,

The UNIT4 gathering was impressively global with just about every European accent and plenty of UK/US representation in its FinancialForce unit. Plex showed off a graph about customers who have deployed its software in plants and other locations in 20 countries.

Beyond the “rip and replace” opportunity both chase, I was pleased to see both also talk about “two-tier” and “surround” opportunities. UNIT4 told me of several installations of their T&E and consolidation tools. HP, Lexmark and several other companies have implemented FinancialForce’s Professional Services Automation while continuing with older ERP for other functions.  Plex described couple of large customers who are deploying its functionality at plants while continuing with other ERP for corporate functions.

In both cases, I also saw a new breed of investor. Both have private investors who have allowed them to invest heavily in product development and in expanding their field.    

Both also have savvy CMOs. Ivo Totev of UNIT4 coached his sales team to become better “social ambassadors”. Heidi Melin of Plex is one of the most analytical, digitally savvy CMOs I know off in the software industry with all kinds of lead gen, and other sales funnel metrics.

I also got a much more realistic sense of partnering from both sets of executives. They are cautious about systems integrators, outsourcers and hosting firms which ran previous generation ERP. Both have seasoned services executives in their leadership teams and that should help insulate customers from the excesses of the past. 

Neither of them has the brand advantage of their Silicon Valley SaaS ERP brethren, but their vertical and geographic reach make them formidable competitors.

In December,  I wrote a Sand Hill column “There will be churn”. I doubt the audiences either in Madrid or Troy had read my column, but the enthusiastic vibe in both validated the theme of my column.

It’s going to be a really exciting 2015 for the ERP marketplace. 

The SAP “Fort Knox”

Andrew Nusca at Fortune interviews Bill McDermott, CEO of SAP here.  What’s striking is Bill talks incessantly about the “new SAP” : HANA, Ariba, Concur, SuccessFactors, Hybris, Fieldglass, Sybase. The stuff is not exactly new – most of the products are decades old, but they are new to SAP and Bill is clearly enamored with them.  He looks forward to taking a piece of the network economy each represents. His CFO has been quoted as saying

“For me, the big charm comes in scaling the network. We can make money while we sleep and I like that model a lot.”

This is so different from what I heard from his customers as I interviewed them for SAP Nation. They mostly talked to me about the “old” SAP – their investments in BusinessSuite,  Business Objects, Business One etc. Several told me they felt abandoned – as they mostly heard SAP talk about “new” products.

They told me they were finding it increasingly difficult to ignore benchmarks they were hearing from peers. Peers like Inteva which decommissioned SAP and went with a SaaS alternative  and reduced its IT costs as percent of revenue by  60%. Peers like Embraer which went with  third party maintenance and reduced costs and improved service levels. Peers who have moved to cloud infrastructures and dramatically reduced their hosting costs while improving the quality of their  data  centers. Peers who have moved to SaaS application support models  and dramatically lowered the headcount of their previous offshore application management firms. Peers who are reporting SaaS upgrades in hours and painless compared to previous risky, month long projects. Peers who are reporting  a new wave of cloud integrators.

Worse, these customers told me SAP does not even seem to be aware of all the benchmarks they want it to perform against. SAP keeps promising “simplification” if only customers adopted HANA as also their transaction processing backbone.  With few benchmarks to support the position. “Trust us – we are your trusted advisor” is the response.

As Bill tells Andrew

“SAP will remain ever strong in the core. There are many customers that run very sophisticated global businesses on that core. They’ve invested heavily in it. ….That core is rock-solid. I call it Fort Knox”

Seriously?

I describe 12 “simplification strategies I heard from SAP customers in the book. I summarized “The customers profiled in the book are the “canaries in the coal-mine.” For every one of these risk-takers, many other customers continue with business as usual. When these customers finally get ready to optimize their environments, they will thank McNamara, Daru and other pioneers.”

SAP and its partners better start focusing on optimizing the “old economy” or customers will continue their own simplification efforts and move their bricks of gold out a small pile at a time from this Fort Knox.

The Real Deal: Bruce Richardson on Why Salesforce Nation is very different

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

This time it is Bruce Richardson who joined Salesforce in 2011 as the Chief Enterprise Strategist.  He may be best known for his coverage of the enterprise applications market during his 20-year tenure as Chief Research Officer at AMR Research (now part of Gartner).

In his new opus SAP Nation, Vinnie Mirchandani makes a compelling argument that SAP’s reliance/overt dependence on system integrators and partners has resulted in deep estrangement from customers. After SAP sold the licenses, it let a host of third parties assume responsibility for new implementations, instance consolidations, ongoing support, and upgrades. This created an irreparable chasm between buyer and seller.

In following the accolades and comments around the new book, some readers have asked whether other vendors are also at risk of losing touch with their customers. Some have even questioned whether Salesforce and other cloud leaders may be destined for that same fate.

While it would be fun to offer a personal spin on SAP’s past, present, and future, Vinnie has already done that with his book. Instead, let’s look at five reasons why Salesforce is different, and why it’s not destined to slip down the worm-hole.

1. No painful technology transition. The current ERP leaders took advantage of the last major tech shift in the early 90s by being the first to offer client-server apps that worked across different hardware platforms and databases. Seemingly overnight they crushed the mainframe and minicomputer vendors who failed to move fast enough to “open systems.”

Fast-forward to today and there is a similar technology shift. The ERP vendors are now in the same deathtrap as their mainframe/mini brethren. They can’t move fast enough to meet the demand for cloud solutions. Ten to fifteen years ago, they were the beneficiaries of customer demand for a single, integrated solution that spanned the whole enterprise. Now, they are trying to distract buyers with a crazed story about a hybrid architecture of on-premise software, private clouds, and Franken-app acquisitions.

Contrast that with Salesforce. When the company was founded in 1999, one of the primary design goals was to build a public, multi-tenant cloud. This commitment continues to drive out cost and inefficiencies, and makes it easier to secure.

2. Creating a unique user experience. Salesforce was the first to make using enterprise software as intuitive as ordering a book from Amazon. This ease-of-use was extended to the payment model. While subscriptions are standard today, it was a departure from how almost all enterprise software was sold at the time. It wasn’t that long ago that first time buyers were pushed to buy more software than they needed (resulting in extensive shelfware), forced to pay an annual maintenance tax of up to 22% of the software license cost, and later subject to costly upgrades every 18-36 months regardless of whether they needed any of the new features.

3. Open up the platform: ERP vendors were never good at partnering, preferring to create their own applications regardless of whether they had domain expertise. The rare exception was the “purple squirrel,” an ISV that provided a unique piece of code for a small, niche market. Salesforce took the opposite approach. The company created a “customer success platform” with shared platform services and open APIs, and allowed any and all third parties to build on top of it, including ERP vendors. Today, the Salesforce AppExchange includes more than 2,700 partner apps (nearly 3 million installations). The overall ecosystem numbers more than 1.8 million independent developers. Customers have embraced the open platform, too, creating more than half a million custom apps. Many are building new cloud apps that had been running on their on-premise ERP system.

4. Actively invest in future tech stars: Over the last five years, Salesforce has helped fund more than 100 new ventures. If you saw the recent interview with John Somorjai, SVP, Corporate Development and Strategy, the company is looking at new opportunities in machine learning and intelligence, wearables, industry-specific applications, and mobile. Salesforce’s “mobile-first” development strategy was the catalyst behind the formation of its Salesforce1 fund last fall. The company has seeded it with $100M.

5. Stay laser focused on customer satisfaction and retention: Renewal rates/attrition and customer satisfaction metrics are closely tracked at Salesforce. In a recent survey conducted by a third party research firm, 98% of customers said they will continue to use Salesforce in the future. To drive up retention, Salesforce has long offered its “Customers For Life” program whereby buyers had access to resources to make sure that they were getting the most out of their Salesforce investments. This was a first in the industry, and became an incredible success for both customers and the company.

Here is a summary of the lessons learned over the last 15 years:

· When technology is in flux, you need to make the right bet on the future. Being late to a tech shift can be fatal.

· Create a unique user experience based on ease of use and management.

· Offer an open platform. This attracted thousands of partners who helped build out the product suite and increase sales and marketing coverage.

· Continue to invest in new ideas, technologies, and people.

· Create and retain happy customers. This simple strategy and subscription model gives Salesforce executives a clear view into the future. As a result, the company has issued FY16 guidance of $6.45B to $6.5B in revenues.

SAP Nation–Case Studies

Nearly half the book is customer case studies. They profile 12 strategies across four groupings of customers A) Un-adopters B) Diversifiers C) Pragmatists and D) Committed.

They include perspectives from C-Level executives of leading enterprises including:

• ABS-CBN
• AstraZeneca
• Big Hearts Pet Brands
• BP
• British Gas
• Burberry
• CLP Group
• Color Spot Nurseries
• Deere
• Delta Airlines
• DeVry Education Group
• DigitalGlobe
• Embraer
• Endo International
• Flextronics
• GE
• HP
• Inteva Products
• Jefferson County, AL
• Lexmark
• Middlesbrough Council, UK
• Schneider Electric
• United Biscuits
• Würth Group

On New Florence I have excerpted 6 of the 12 strategies, and will profile the rest over the next few weeks. They include:

Flip it off

“Ring Fence” with clouds

Keep Relationship Analytical

Align with SAP’s Future

Freeze and Shrink

Change the Talent Model

Rip VAR Winkle

Business Solutions magazine, focused on VARs, showcases its annual “Best Channel Vendors” list in its January issue.

If Rip Van Winkle were to wake up from his 20 year slumber he would be shocked to not find IBM or Great Plains in the lists. Instead there is a whole new range of vendors from Allworx to Epson to Seagull Scientific to Vembu Technologies in new set of technology categories – Data Collection, Labeling Software, POS Hardware, Payment Processing, Video Surveillance, VoIP – and a whole.

It’s good to see SMEs benefit from so many solutions across the spectrum of their operations. 

The Rise and Rise of the Corporate CTO

The CTO role is a critical one in most technology vendors. Not so much, if you ask executive recruiters, in the corporate world. To me, it is a case of poor titling. The CTO is the VP of R&D or Product Management at many a corporation as they increasingly embed technology in their products and services

I noticed that trend at The International Consumer Electronics Show (CES) in Vegas in January 2011 and it inspired my book The New Technology Elite. I wrote then

Lost in the excitement about iPad killers and iPhone rumors at
the show was an even more significant nugget—the list of exhibitors included companies from just about every non-technology vertical industry.There was Walgreens—yes, the pharmacy chain—showing off its Refill application …Whirlpool showcased its Duet washer/dryers with LCD screens and various laundry apps …Nike introduced a GPS-enabled Sportwatch developed in collaboration…Ingersoll Rand showed off tech innovations around its Schlage home security and Trane thermostat products…Ford chose to unveil its all-electric Focus at the CES show rather than at the traditional car launch showplace, the Detroit Auto Show, which was only a week away.

The book went on to describe how most technology buyers were becoming technology vendors and noted the growing tech budgets being allocated to the VP of R&D – the “CTO in disguise”

Four years later, at CES last week, the trend was amplified as a record 10 automakers showed off their innovations. The booths showed products across the industry spectrum – energy management, health and biotech, digital finance, nanotech, robotics, security and wearables among them 

Of course, CES mostly attracts B2C focused product companies. You have to go to GE’s annual Mind and Machines event to see all the software, sensors, satellites and other technology that are reshaping B2B products – aircraft engines, wind turbines, locomotives and other industrial equipment.

It’s extended way beyond products. “Smart services” are everywhere – telematics driven auto insurance, mobile payments reshaping banking, proximity sensors and other tech reshaping retail. Disney is a company where the CEO is the CTO as it leverages technologies for services delivered at ESPN, Pixar, Marvel, LucasFilms and its own parks.

Plenty of marketing execs are positioning themselves to become Chief Digital Officers. In my view, product tech centric execs – the CTOs – are far better candidates for that title. And no matter what the title, some of the most strategic executives a company needs to develop and recruit.

Sikka and the state of outsourcing

Vishal Sikka, the new CEO of Infosys, has some candid commentary on the state of the IT services market

"It's like a treadmill of increasingly lower cost, hiring people faster and faster, from more and more mediocre places, training people less and less, putting them into job faster and faster. I think that is a wrong direction."

Problem is someone like him should have been sounding the alarm bells years ago. The comments I heard during interviews for SAP Nation showed significant customer and market watcher disappointment with systems integrator/outsourcing performance

Here are some of those comments from the book:

Chris Day, AstraZeneca’s VP of IT Transformation which is looking to revert its 70/30 outsourced/insourced model

“Outsourcing leads to a culture of generalist service and contract managers on both sides who don’t understand the technologies they are accountable for — so everything is “we’ll get back to you” as they seek out those that do understand, which is especially painful when issues cross supplier boundaries. The end result is service is put at risk with costly, non-agile project delivery and no improvement in user satisfaction scores. Any idea that outsourcing partners are able to drive down ticket volumes and raise user satisfaction scores without considerable involvement and expertise from AZ is now long gone.”

Ben Stewart, at Inteva, discussing SAP outsourcing

“The SAP partner support experience was even less appealing. We had offshored application management to TCS, hosting to HP and had a program manager in CSC. In a crisis situation, it took half-an-hour to figure out who everyone was and what they did before we could even get started.”

A customer  describing a SAP data center of one of the larger outsourcers

“I would grade it as a Tier 1 data center (Tier 4 being most robust). The disaster recovery site was only about ten miles away — not exactly comforting from a redundancy perspective. For a multitenant setting, there appeared to be too much glass to feel comfortable. Several portions of the center did not have a raised floor. And, it appeared very quiet for the suggested customer count or related support staff.”

Amit Bendov, describing upgrade project experience while at Panaya

“SaaS vendors do have the advantage of being able to upgrade their core at thousands of customers at one go. In the SAP world, the upgrade was one customer at a time….Most SIs who chased after upgrade business viewed it as a loss leader, a stepping stone to other business at the client or a way to preclude other firms from getting in the door.”

Shaun Snapp about the numerous project failures and unwillingness of outsourcers to fess up or fix things

After reading a number of articles on SAP project failure, I have noticed a consistent theme in much of the coverage. This is another example of how every time an SAP implementation goes sour, it seems as if the official publications put more of the blame with the clients

On the conflicts of interest in the services sector

“In many ways, SAP’s relationships with accounting firms grew even more complex. As an example, Deloitte auditors opined on internal controls around SAP systems, their consultants helped implement SAP software, and their advisors helped clients evaluate competitive BPO and offshore services around SAP. So, the conflicts of interest grew even more thorny.”

On business models that need to evolve

“Clearly, SAP partners were not ready for the utility computing
model in 2006. Heck, Nicholas Carr would not write his
best seller on the topic, The Big Switch, till 2009. As I researched this book, I asked several outsourcers if they offered the model today. More are starting to offer managed clouds, business process, and HANA-as-a-service, but there are still only a few customer references for such offerings.”

and

“Consultant travel continues at staggering levels even as telepresence has improved and many project phases should be done in “factories” — not at client sites.:

It’s not all negative. The book describes some of the pioneering work Appirio has done around cloud projects, the “outcomes based” implementation Cognizant did for British Gas and the low-fuss, low-cost way DeVry implemented SAP at several Brazilian locations with a local firm.

There is considerable coverage of how cloud data centers and SaaS vendors are showing how a new form of “outsourcing” which leverages automation and innovation.

In many ways, SAP/ERP are “old services markets”. There are many new ones with vertical apps which leverage mobile, social, analytical, wearable, sensory, robotic and other technologies.  There are digital transformation opportunities.

But Vishal is correct – the tendency of  the industry is to keep building pyramids of staff. Not automate. Not continually improve. Not surprisingly, the SAP economy model is 70% labor related costs.

He is right to “cry wolf”. The question is how many of his peers are willing to acknowledge the industry has many challenges. The bigger question is whether it is too late for many customers.

The mind boggling evolution of Gutenberg

On New Florence, I have run a series on all the technologies which are available to a modern-day author to deliver content in a wide range of formats.

The eBook version

The on-demand, paperback version

The hard cover version with dust jacket

The design technology across all of the formats above

The role of the USPS in delivering printed copies

Crowdsourced reader feedback

Truly amazing how far we have come in six centuries since the first use of movable type:  “Not even Gutenberg could have imagined that he would have to conquer not only time – making more than one copy of a book – but space as well – making books “fit” on every possible device, in multiple formats for multiple vendors”