deal architect

Enterprise Software Churn: Microsoft momentum

This continues a series about customer moves to reshape their enterprise software landscapes. When I was researching SAP Nation, I was impressed with how many customers are swapping out software, moving to third party maintenance, “ring fencing” the core solution with specialist tools, and implementing two and three tier strategies – different solutions for headquarters, large and small subsidiaries.  I presented a sample of case studies in the book. While those were in SAP settings, similar moves are happening around other solutions. Last week I profiled UNIT4’s successes in the UK local government sector.

In the book, I had presented several examples of Microsoft “two tier” successes – Delta (on its planes), Microsoft (in its stores and elsewhere) and at Würth Group.

At the Microsoft Fall analyst meeting, I had heard an executive from Kodak Alaris, a spinoff from the Eastman Kodak Co, a long time SAP customer, describe their decision to go with Microsoft Dynamics and its Azure cloud. Microsoft has since shared other customers where they have replaced SAP. These include Comptel, the Finnish telecom vendor; Piaggio Aero, the aerospace company based in Italy and Sapa Group, the Norwegian maker of extruded aluminum profiles. Dentsply, the dental equipment company, has been standardizing on Microsoft, moving away from SAP, Oracle and Infor at several locations. Other than Comptel, the others are all multi-billion $ entities in SAP’s sweet spot.

Microsoft has also showcased other “two-tier” successes. Hunter Douglas, the home furnishings company has been running Dynamics AX in its European operations and is now rolling it out across most of its manufacturing and fulfillment sites across S. America. Invatec, a medical devices sub of Medtronics has implemented Dynamics at five its design and distribution locations in the US and Europe.  Dell, which has Oracle as its HQ ERP system, has Dynamics AX in place its eight manufacturing facilities. 

Individually, you could dismiss them as small cracks in the frozen tundra, but there are many such cracks if you use a wide angle lens. Over the next few weeks I will profile other such “snapshots” and show why I believe they are an indication of  coming significant churn in the enterprise software market.

Big Data Misses: Auto Insurance

On New Florence, I have been cataloging impressive use of advanced analytics for a few years now. Nowadays, it is jarring when you see scenarios which do not leverage the deluge of data available at reasonable cost to most enterprises. First in a series of such posts.

I comparison shop for auto insurance every couple of years, typically via an agent. Recently I decided to do it via the Progressive Insurance website.

Miss 1: I came to a screen where it wanted dates of moving violations, accidents etc. I did not have that data. So I saved the on-line application and switched to a call. The agent asked the same questions. I told him surely Progressive has access to those records from various authorities, services like CarFax etc.  I may have misheard the agent but he said “We do, but we would rather not pay for them. We prefer to collect this data from each customer.” For each driver in the family. Going back several years. Who has that data handy? More importantly, surely Progressive checks what consumers tell it, so why not rely on its own data and streamline the application process? As one of the largest auto insurers surely it can get the data for each application at pretty reasonable cost

Miss 2:  The agent explains how Snapshot, Progressive’s telematics tool, can save us money if we allow it to track our driving patterns. Sounds fair, but the agent did not offer a trial before we switched. Even better, he could have been equipped with data like “32% of people in your city have qualified for 23% savings with Snapshot tracking”. The pitch was more on the lines of “let us collect your data, and we might, maybe give you a discount”.

Miss 3: Good use of Big Data could have prompted the agent to ask some customized questions. Do you use the Hyundai Blue Link mobile app? It can be used to track a stolen car, and even "kill" it. Would your kids agree to geo-fencing?

Miss 4: I told the agent his quote was not competitive. He did not bother to ask by how much. Progressive ads claim they help comparison shop. Wonder where they get their data about competitive pricing – you think it would be through detailed win-loss analysis from customers like me.

Having said that, my incumbent insurer, GEICO does not appear to be much better. When I asked them if I was being credited for Blue Link above, they gave me an evasive answer about specific auto features being recognized by their premium rating system via a car’s VIN number.  How does a VIN code tell them about a mobile app? When I asked them why rates were not going down even though the kids are not teenagers anymore, they talked about accident forgiveness. It would be so much better if they provided specific benchmarks and explanations. In our age of Big Data, I think most consumers are ready for more transparency.

Throwback S4HANA

When SAP launched S4HANA a few weeks ago, an executive emailed me to ask if it reminded me of 2006?

2006 as in the Oracle “Halfway to Fusion” announcement. Today Oracle alum and even some at the company chuckle about how premature the announcement was. And Oracle said it was blending acquired functionality from PeopleSoft, J. D. Edwards etc. SAP did not discuss how Ariba. SuccessFactors, Concur would fit into S4HANA. In fact, it specifically left out  vertical extensions from short term S4 plans.

My reaction was it reminded me more of 1997 with all the press releases from its accounting firm heritage partners.  Back in those heady days, they were “halfway to reengineering nirvana”

Now, I read Dr Hasso Plattner invoking IBM : “Since I worked once for IBM I take announcements very seriously.”

That actually takes me a further decade back to 1987 when IBM announced its major SAA initiative. As its website says: “Systems Application Architecture, which is designed to make application programs look and work in the same manner across the entire range of the company's personal computing systems, midrange processors and System/370 processors.”

I suspect to some it invoked memories from the 1970s. I cannot relate to much in tech world then. The 70s to me bring out images of disco jeans, SNL and Bob Woodward 

Seriously, given the track record in the enterprise world, what can we forecast about S4 availability?

And should a next-gen product really make you look back?

Enterprise Software Churn: UNIT4 in UK local government

The general presumption in the enterprise software marketplace is customers stay loyal for lifetimes – the more realistic thinking, of course, is they stay loyal for long periods, but not that long.

When I was researching SAP Nation, I was impressed with how many customers are swapping out software, moving to third party maintenance, “ring fencing” the core solution with specialist tools, and implementing two and three tier strategies – different solutions for headquarters, large and small subsidiaries.  I presented a sample of case studies in the book. While those were in SAP settings, similar moves are happening around other solutions.

Over the next few weeks I plan to showcase more examples of the churn that is happening in enterprise software. Let’s start with something I learned while spending time with UNIT4 execs in Europe last month. They showcased a nice run where UK local governments are swapping out SAP and Oracle with their Agresso product.

Most of these customers are doing it for fiscal reasons. Steven Fletcher, Corporate Program Manager of Middlesbrough Council, profiled in SAP Nation, said it was part of an initiative to reduce IT spend by £75 million over five years. Coventry City council reports £3 million savings over 2 years as they move away from the Oracle suite.

Beyond the savings, the customers also report improved process workflows, better financial transparency,  and in many cases much happier end-users.  Fletcher is quoted in the book

Many processes for calculating sickness and leave entitlement, or filing for mileage were complex or not customized for us. Probably unfair to SAP, but what Middlesbrough saw of it has led to a fairly intense dislike for the application.

Here are some (of a longer list) of UK government customers UNIT4 shared with me

Bristol City Council

•Finance & Procurement

•In house replacement

London Borough of Tower Hamlets

•Finance & Procurement

•JD Edwards replacement

Lincolnshire County Council

•Through SERCO, an outsourcer

•Full ERP

•SAP replacement

Wolverhampton City Council

•Full ERP

Individually, you could dismiss them as small cracks in the frozen tundra, but there are many such cracks if you use a wide angle lens. Over the next few weeks I will profile other such “snapshots” and show why I believe they are an indication of  coming significant churn in the enterprise software market. 

The art of the possible

The Preface to SAP Nation starts with

“I first thought about writing this book five years ago.”

In the weeks since the book has come out, I have had a chance to spend a bit more time on my innovation blog I have come to realization I likely could not have written SAP Nation in 2009.

To start with very few of the case studies in the book would have been able to contrast their lives with Plex, Rimini, Unit4, Workday and other options they have experienced versus life with SAP.

More importantly those five years allowed me to catalog 3,000 innovation blogs and interview hundreds for The New Polymath, The New Technology Elite and The Digital Enterprise.  

That exposed me to the art of the possible. I got to talk to folks at Google, Microsoft and Facebook as they were pushing data center boundaries. Folks at Amazon on how they were reinventing cloud connectivity. I got to see 15 Workday releases in those five years – a sure sign their strikingly easy upgrades were not just a fluke. I got to see Infor leverage AWS and better utilize its capital for industry specific functionality. I got to see multiple projects where Appirio is redefining how to do IT projects.

I got to see how many German manufacturers are shaping the country’s next revolution, Industrie 4.0. I got to see many facets of GE’s Industrial Internet. I got to talk to deep supply chain thinkers at UPS and HP.  Insurance companies that are launching new Big Data enabled new products. Several executives about their technology enabled business model and customer facing changes.

I could go on, but the last 5 years have exposed me to innovative thinking in just about every industry and in over 50 countries. I have been blessed to have access to practitioners like Marc Benioff, Malcolm Frank and many others who take creative thoughts and turn them into reality.

That is a good lens through which I could evaluate SAP Nation. Every statement I heard from SAP or its partners I could benchmark against the art of the possible in the tech industry. BTW, that is also true of Oracle, IBM, other enterprise vendors.

Consumer tech with UX, mobile ecosystems, ability to rapidly deliver new features, scale to unheard of volumes in users and device counts and SaaS world with its business model innovations have raised the bar for enterprise world.  

I am glad I am getting a chance to spend a bit more time again in that world.

Even more importantly, if customers in SAP Nation plan to spend another $ trillion on back office functionality over the next five years as they did in the past five, I hope I can talk with more credibility what many of their peers have shown possible.

NASSCOM: More Moore, less ABAP

My friend Phil Fersht was at the annual Nasscom event in Mumbai last week and wrote “More MBA, less ABAP is the recipe for India’s digital success”.

There is much to like in what he says, but I would go further

a) Much Less ABAP

My book SAP Nation shows a $ 200 billion a year ecosystem ready for disrupting, even collapsing. Part of it can come from Indian firms cannibalizing their own services in that market. Much more could come from Indian firms diversifying to SaaS vendors that SAP customers are migrating to and providing  third party maintenance to SAP customers. Unfortunately, many will just tell their customers to wait and see how SAP’s next-gen product, S4HANA matures.

b) Digital with Big D

As I wrote in this post, Digital Transformations require a wide portfolio of skills. “There are so many opportunities to digitize products, channels, shop floors, logistics, business models etc.  So many legacy systems need to upgraded and integrated to. The portfolio of skills needed to build a vibrant Digital Enterprise is very wide.”  Many Indian firms have some of these components in place, but many need to acquire digital agencies, product centric/R&D focused practices, and as Phil says maybe even some MBAs for digital strategy and business model transformation.

c) Refocus on Moore’s Law

This is probably the biggest change Indian firms need to make. They have to quit leading with labor intense models. A blend of symbiotic man-machine skills is key. Indian firms should have been leading the automation of knowledge work. They missed the last wave where Google, Amazon, Microsoft and others have shown the art of the possible. Plenty more to be done there. And even where the model is labor heavy they need to dust off their CMM and Six Sigma disciplines they religiously applied 10-15 years ago. As I wrote here, Moore’s Law is back in the enterprise, and to offset the wage and real estate inflation that plague India, Indian firms need to become even more acutely focused on continuous improvement.

d) Become geographically agile

When I interviewed Mike McNamara, CEO of Flextronics, the large contract manufacturer last year, I was struck by his comment that they moved a quarter of their physical plant across borders. Manufacturing has become agile – to take advantage of changing US energy economics, to be closer to emerging middle classes in Indonesia, Brazil or wherever and other trends.  If physical plant can be moved quickly even with all the logistical challenges,  there is no reason why labor pools cannot be similarly agile. Indian firms need to evolve the delivery model – doing the bulk of the work in India may not be the best way any more to service clients in the throes of complex digital transformations.

SAP Nation Excerpts–The Simplification Illusion

As I have done with my other books, I am excerpting about 10% of the book for my blog readers. Previous excerpts have been from the case studies in the book. The next few will focus on historical trends presented in the book. Since SAP has raised the volume on its Run Simple message, let’s start with a section from book  about its previous simplification initiatives

“  At the Sapphire Now conference in Orlando in June 2014, Dr. Plattner introduced the concept of “Simple Finance.” He called HANA “minimalist.”…The company changed its tagline from “Run like never before” to “Run simple.” Prof. Clayton Christensen, widely known for his theories on industry disruptions, joined Dr. Plattner on the stage as if to validate that SAP was truly serious this time about disrupting its past.”

“The repeated simplification talk brought snickers from some in the Sapphire Now audience. That’s because SAP executives have repeated the mantra for years, probably to atone for a statement attributed to Dr. Plattner in the 1990s:

“The more complex the better. We Germans would never
invent something as simple as Coca-Cola.”

Here is a sampling of the simplification-talk track record:

1998:

Dr. Plattner in a press release:

“Our EnjoySAP initiative is focused on simplifying the software and making it even more intuitive, so that it forms a natural complement to the user’s working environment.”

Late 1990s:

“There was a team called the Simplification Group, based in Palo Alto and part of SAP Labs. Their mandate was defining methods and documentation to reduce custom configuration in the field, thereby reducing implementation time.”

2002:

Dr. Plattner in InformationWeek:

“We still need to hide complexities.”

2006:

Bullets in an Agassi presentation at Sapphire:

Simplicity at the Core:

· Simplicity in Usage

· Simplicity in Ownership

· Simplicity in Deployment

 2009: 

Apotheker in The Local:

“The ultimate goal is making SAP products simpler and faster.”

 2011:

McDermott in Forbes:

“I’ve tried to simplify everything. That’s the big thing I’ve done.”

2012:

Then-Co-CEO Jim Hagemann Snabe in Computerworld:

“We can simplify the pricing…We want a more solution oriented price list.”

2014:

Chief Marketing Officer Jonathan Becher in USA Today:

“We want to make the S in SAP stand for “simple”….We haven’t gotten there yet.”

Dr. Plattner in a blog post:

“Only with HANA, SAP found a way to really simplify the architecture dramatically.”

Tagline in SAP branding campaign launched in October 2014:

            “What the world needs now is Simple”.

Was the S4HANA launch rushed?

As I listened to the SAP launch in NYC of its S4 product I told a few folks I was struck how high level the presentation was. That they should have field tested and matured the pitch with many customers and presented a more mature version at Sapphire 3 months from now.

I went back and looked at the many customer comments and questions as I interviewed them for SAP Nation last Fall. Those are the burning questions  SAP should be addressing with the new product not just talking about “simple”. In a Forbes column this week, I highlighted many of the questions. With nearly 10,000 views in three days, the questions have clearly touched a nerve.

Josh Greenbaum has other commentary here and he has promised more in later posts. He says “SAP needs to make sure every customer understands how the versions of SAP they are running today will lead them to S4 HANA, in what time frame and at what cost.”

Brian Sommer has an even longer list of questions at Diginomica and a telling comment “This is a constantly moving target so don’t expect the list to get any shorter!”

After the launch, Dr Hasso Plattner told a journalist

"If this doesn’t work, we’re dead. Flat-out dead.”

While that is a brutally honest statement, I am not sure Hasso or SAP know what “this” should be, let alone whether it will work. Defining the “this” means answering many, many questions customers and analysts have.

Like I said, I think the launch was rushed. 

Digital with a Big D

One of the most invigorating projects I have worked on in recent years was helping Karl-Heinz Streibich, CEO of Software AG write his book, The Digital Enterprise. It conveyed his passion why every enterprise, irrespective of the industry or the geography in which it operates, needs to become a Digital Enterprise. The book included 22 guest executive perspectives and more than 300 innovation cameos representing more than 20 industries in more than 25 countries. Coca Cola Enterprises talked about how mobile technologies have reshaped their go to market, GE talked about its industrial equipment has become smarter with software and sensors, Daimler about next-gen factory concepts, Allianz about how analytics are reshaping insurance, Statoil about how digitizing has influenced safety think in the oil industry and on and on. 

So, I was pleased to read a recent McKinsey article which says “digital transformation is uniquely challenging, touching every function and business unit while also demanding the rapid development of new skills and investments that are very different from business as usual. To succeed, management teams need to move beyond vague statements of intent and focus on “hard wiring” digital into their organization’s structures, processes, systems, and incentives.”

Contrast this with narrow focuses many so-called Chief Digital Officers are bringing to their enterprises. They focus on digital marketing or e-commerce or 1-2 potential areas of transformation. While that is necessary, it is often not sufficient. There are so many opportunities to digitize products, channels, shop floors, logistics, business models etc.  So many legacy systems need to upgraded and integrated to. The portfolio of skills needed to build a vibrant Digital Enterprise is very wide.

I am reminded of the promise of reengineering in the 90s. Way too many companies ended up with small “r”  reengineering – just implementing “best practices” in off-the-shelf software when they should have radically rethought business processes. We run a similar risk with expedient, small d, Digital Transformation.

I like what McKinsey says in that article - Be unreasonably aspirational.

Hello again, Moore’s Law

There are rumors of massive layoffs at IBM. True or not, there is no denying the company has had years of consecutive quarterly revenue declines. Poor Ginni Rommety gets the blame, but my view is IBM forgot about Moore’s Law and continuous value improvements as it diversified into software and services over the last two decades. Indian outsourcing vendors should have brought IBM to that realization much earlier but they themselves forgot their own version of CMM Level 5 and Six Sigma driven continuous improvements.  Recent cloud infrastructure price trajectories from Amazon has woken the market again to a core tenet of the technology sector which Moore’s Law first dictated in price/performance of chips. And IBM has to make up for a long stint of forgetting  about continuous improvements.

Unfortunately, IBM is not alone in the enterprise space. Most of us proudly talk about Moore’s Law and have enjoyed it in our gadget/device pricing but have not delivered its equivalent to customers.

Next up is SAP and its ecosystem. In a surreal twist, even as it announced S4HANA, SAP surrounded itself with partners which have not delivered much in the way of improvements since the 90s. If the product is truly revolutionary, SAP should be  parading a new generation of cloud integrators, data centers, crowdsourced communities etc. Instead it risks a similar fate as IBM.

While many enterprise vendors play lip service to Moore, it is good to see other sectors benefit from it. Consumer Reports, not normally prone to giddy outbursts, recently described the state of the US mobile services as

“The good news is that the cellular-service industry has changed in the past two years. Big providers are offering new plans that decouple the cost of monthly service from the cost of the handset, and they are competing to steal each other’s customers. Meanwhile, smaller providers are pioneering new ways to keep costs down—and winning fans as they do it.”

The auto industry is showing remarkable price/performance improvements as I describe here.  Features only available just a couple of years ago in Teslas and BMWs are showing up in much more affordable brands. The pace of innovation and value for dollar improvements is impressive.

Time for all of us in the enterprise space to wake up and evaluate if we have been delivering continuous improvements to our customers. It may take lots of delayering of deadwood as IBM is finding out.