deal architect

Enterprise Software Spring Training

Throughout March, in NDA settings and at more formal events, I am getting a chance to talk to executives at E2Open, Infor, Microsoft. NetSuite, Oracle, Plex, Rimini Street, UNIT4 and Workday.

As with all the spring games being played all around my hometown, there is optimism and experimentation. Everyone senses customers are ready for change, and each of the vendors is sharpening industry and geographic focus.

Over the next few weeks I will have more fodder for the “market churn”  series I have been running.

Hope to see some of you at the events. I will bring the Cracker Jack.

Play Ball!

Unfortunate timing? Au contraire

John Appleby posted this review of my book on Amazon

“SAP Nation tells the story of SAP, with some customer stories. Whilst most of the information is in the public domain, Vinnie shares some amusing anecdotes.

Unfortunately the book tails off in the chapters around the customers that are committed to the SAP roadmap (which is a shame, because the failure stories are well told) and fails to deliver a clear call to action.

In addition, SAP announced its 4th generation S/4 HANA platform right after this book was launched and so there is no analysis of S/4 here.”

I posted this response

“John, thanks for the review

The timing is actually opportune. The three groups of case studies in book (you refer to fourth) - the unadopters, the diversifiers, the pragmatists -are actually pretty restless and if S4 is years out, many are going to emulate their peers I profile in those case studies.

BTW I gave SAP a chance to contribute 10 pages unedited on how things would be different going forward. They promised to contribute but had not till November so I had to release the book. To me they could have easily summarized S4 in that section. Clearly, they had not fleshed it by then. In Feb when they announced it it was still pretty high level. You, me Brian Sommer and several others have raised a ton of questions. Not sure what they will announce at Sapphire in May.

And when and if they do, I expect to release a follow up eBook with an update.

But for now, S4 is a statement of direction and I see many SAP customers strategizing along the lines of what this book outlines.

BTW the book in 3 months has been the most successful of the 4 I have written. Amazon sells the Kindle and the paperback version. The hardbacks which are only sold in bulk - orders of 25+ - directly by my company are about to enter their second print run. The first run was sold out within a couple of weeks, so the timing was actually pretty good.”

Thanks, John, you allowed me to pre-announce my next book

Advantage SaaS: Game, Set, Match

My  friend Josh Greenbaum writes Implementing SaaS: If it’s easy, it’s because you’re not trying

He makes the case SaaS is an complex as on-premise, may be even more so. He cites

The other way you can tell that complexity and SaaS are now synonymous is the growing quantity of deals gone bad. SuccessFactors has spent a tidy seven-figure sum of late remediating troubled implementations, and to be fair, the offending SIs have run the gamut from boutiques to the global SIs.

I share his concern. I have had conversations with several SaaS vendors that the  hordes of on-premise consultants are headed their way and they need to be more vigilant.

But Josh is focusing on the implementation project, not the life cycle. The major difference between SaaS and on-premise is SaaS takes over hosting, apps management  and upgrades which multiple service providers did in the on-premise world. That’s huge.

In my book, SAP Nation, Chapter 4 described the many implementation project overruns in the 90s. But Chapter 5 describes the highly inefficient data centers the hosting providers ran, the armies and lack of continuous improvement at the application management outsourcers (many offshore) and the multi-month,  multi-million $ upgrades. 

The TCO exploded post-implementation. As I wrote

“The problem is back in 1996 we did not anticipate that the systems integration cost, bad as it already was, was just the tip of the iceberg. As SAP customers went into production, they outsourced their hosting. They had massive upgrades every few years. As they consolidated and put shared services around SAP their network needs grew significantly. They outsourced their application management to the Deloittes, and then to offshore vendors like TCS. The ecosystem around SAP grew and grew and grew and every Sapphire we would dance around the topic and SAP would keep talking about certification of SIs – which only focused on the implementation cost, and not much on the other layers I describe above.”

Guess what? SaaS has dramatically collapsed the hosting, apps management and upgrade cost. DRAMATICALLY. And with Amazon aggressively tackling connectivity costs many SaaS implementations are already starting to see network costs decline nicely.

GAME SaaS

Josh also makes the point SaaS being functionally siloed leads to more integration costs. He cites

“So imagine, like one relatively small company I know, having a cloud backoffice consisting of 80 cloud apps. Each one upgrades on its own schedule, with little or no awareness of what the other 79 are up to. The company in question was actually considering getting a DNA graft and moving a ton of functionality to a single on-premise ERP system.”

I would love to see the 80 apps he is talking about. They sound like features, not modules. And I would like to  see which ERP package replaces those 80 items, and I  bet I could find him a more complete SaaS package or two which would deliver the entire wish list.

Josh is perpetuating the myth that on-premise was more functionally complete.  If it was the case why have SAP and Oracle spent tens of billions beefing up their footprint in the last decade. And btw where is their integration? As a customer asks in my book

“SAP used to publish A0-sized wall posters with the R/3 data model (entity relationship diagrams). How about similar for the existing SAP portfolio? Integrating even among 100 percent SAP assets must increasingly be a
nightmare.”

Frankly, most reasonable IT execs have the view Shobie Ramakrishnan, CTO at AstraZeneca expressed in my book

“IT has always had to deal with integration issues; it’s just that the flavors have become more much hybrid and nuanced. So, in my view, the acronym CIO is becoming more Chief Integration Officer.”

And if the on-premise vendors were so complete, why are so many customers “ring fencing” around them with Salesforce, e2Open, Workday, Plex and other functionality?

SET SaaS

Finally, Josh pays no attention to advantages SaaS has brought which on-premise vendors cannot even understand because it has never been possible in their world. Instead he says

So if you’re doing enterprise SaaS because you want your IT life to be more simple, think again. The game is rigged against simplicity, and always has been, for the simple reason that business is complex, and always has been.

Let me respond with two examples on how SaaS actually reduces complexity

Example A from Workday Rising

An executive from Equifax gushed about the bi-annual upgrade process - how painless it is and just as importantly the comfort he got from the fact that his peers were testing the same release at the same time, and how he could benefit from the wisdom of that crowd.

Example B from Jason Prater at Plex in my book

“…if we see that there are pieces of functionality that no longer serve a purpose to our customers, we can easily prevent code bloat by removing those lines of code from the entire solution. In the last year alone, Plex’s developers have removed what amounts to approximately one-third of the code within The Manufacturing Cloud.”

MATCH SaaS

The Devil’s “Square”

Michael Krigsman at ZDNet and others like to use the term “Devil’s Triangle” to explain how software buyers, vendors and systems integrators are all to blame for failed ERP projects. In SAP Nation, I dedicated a chapter to the stunning list of failures in that economy, and a chapter to each of those stakeholders in chapters titled “SAP”s Illusions”, “Partner Collusions” and “Buyer Permissions”.

I added, however, another chapter on “Marketwatcher Omissions”. Frankly, I was stunned how so many who should have cried wolf stayed quiet for years. I encourage you to read Chapter 11 in its entirety especially as we enter a new era of hype and promises in enterprise software,  but here are some excerpts:

Regulators

SAP clearly benefits when regulators drive demand for initiatives. In contrast, regulators have not scrutinized SAP much. The EU has gone after Microsoft, Intel and Google for anticompetitive complaints. It has even gone after European telcos around mobile roaming charges. In Berlin, Sigmar Gabriel, the German Vice Chancellor and Economics Minister, “is investigating whether Germany can classify Google as a vital part of the country’s infrastructure, and thus make it subject to heavy state regulation.” None of those vendors have had the financial impact on corporate customers that SAP has had. European regulators have, however, stayed away from SAP, even with its dominant — estimated at 50 percent — ERP market share in German-speaking Europe.

User Group Network

SAP maintenance, which has drawn more of the recent user group focus, only accounts for roughly $10 billion out of $204 billion a year in our SAP economy model in Chapter 3, Neither ASUG nor DSAG have focused much on all the additional “surround costs” in the SAP economy.

Industry Analysts

I was at Gartner then, and we thought Cameron was being sensational for asking customers to exit R/3 even before they had deployed it. Looking back, it was a brave statement on his part. In contrast, now even with the runaway SAP economy, it is surprising how few analysts call for an exit strategy.

Contrast this with a couple of “internal analysts” I know in the technology industry. They work in competitive/sales intelligence for vendors. One is constantly pulling out nuggets from a knowledge base with over 15,000 documents he has been creating since 2000 from public sources. Talk about a “memory” to fact check and help your field. Too bad these “analysts” are not available to the average customer. In my conversations with them, they are frequently appalled at the poor industry analyst coverage they see of SAP and other enterprise software vendors.

Technology Journalists

But, even Kanaracus does not spend a great deal of his time focusing on the SAP ecosystem, other than when they are involved in failures. He says, “Maybe we should also focus on the channel, but IDG has asked me to focus more on SAP and its customers.”

German media is very interested in SAP given its headquarters there, but tends to focus more on its executives and its financial results, rather than its customers. It also reports negatively at times on the growing globalization at SAP. Anexample of that comes from a blog comment by Peter Färbinger

SAP Mentors

In general, though, the Mentors tend to focus on technical topics over economic ones. As Spath says, “I am not the designated negotiator for my company.” Besides, only 20 percent to 25 percent of the Mentors work for SAP customers. The rest work for consulting partners or are bloggers who track SAP.

Bloggers

As we mentioned earlier, SAP was a pioneer in conversing with independent bloggers like the Enterprise Irregulars (the author is a member of the group). The growth of social media has created plenty of content especially in the SAP Community Network. Many of the blogs, however, come from SAP partners, which is hardly independent analysis. Many of the bloggers who follow SAP bring little retrospective and many parse and parrot, and tweet statements from SAP executives. So, the simplification messages that came out of Sapphire Now in 2014 were not met with cynicism about the countless previous simplification statements we pointed out in Chapter 9.

Academic Research

With an annual economy in the range of the GDP of countries like Ireland, and with investments in SAP one of largest categories of corporate capital expenditures, I had expected to find plenty of academic research around SAP.

He listed prior papers he had found in his research — in Figure 2 — and, as we can see, most focus on the impact of an announcement of ERP investments on stock performance, not after the fact analysis of business value from the investment.

The End of the Beginning, and the Beginning of the End

I enjoyed this interview with Zach Nelson where he says we have come to the end of the beginning of the move to cloud computing.

I also hope we are seeing the beginning of the end of a dark era of IT

a) The end of massive IT waste

The interview reminded me NetSuite, Salesforce and other cloud pioneers date back over 15 years now. In just the past 5 years, I estimated in SAP Nation its customers spent a trillion dollars. Extrapolate that by 3, and add to other on-premise environments and as an industry we have pissed away some real money, and we continue to be lulled by many of the larger vendors the old way is more “secure” and “better”

b) The end of wimpy market analysis

Zach was well behaved in this interview. He did not take many potshots at the competition. My view has been he has in the past spoken out because analysts have not done often. Shame on us. We need to do our jobs and let him do his running the company. Time for our silent conspiracy to end. Trillions have been pissed away.

c) The end of purely tech talk

It’s good to see Zach talk about commerce and merchandising. NetSuite has verticalized for retail and distribution environments.  His peers Jason Blessing at Plex and Jose Duarte at UNIT4 are similarly talking “shop floor” and “efficiency in government”. It’s time for the enterprise software world to start talking business language again not just speeds and feeds.

No doubt we are into a new era of enterprise software. My continuing series on “market churn” just provides more proof points to Zach’s theme we are in a massive, and much needed, transition.

The spotty technology globalization record

I read a few tweets today about how SAP does “global well” and how SuccessFactors reflects it. My reaction was technology vendors, not just SAP, are actually inconsistent when it comes to global matters compared to companies like Unilever or Coca-Cola or Siemens.

Every few years I will get a jarring reminder. In the mid 80s, I was on a project implementing a US HR and payroll product in Saudi Arabia. Customizing for “multiple wives” and the varied benefits for each class of expat there was challenging to say the least. In the late 90s I worked on an SAP R/2 project in the UK. Back then doing so without German speaking colleagues was suicidal given very little of the documentation was in English. At Gartner, in the late 90s, I got to see the trajectories of Baan, J.D. Edwards and others as they expanded outside their home markets. Over the last decade as global outsourcing took off, I have been surprised how unsophisticated IBM and other “global” firms were and how in turn the Indian firms struggled to move to “global delivery” beyond India. Hardware supply chains at HP, Apple and others have evolved pretty well globally, but software and services have been much tougher to consistently globalize

SAP had a phenomenonal sales track record in many global markets particularly from 1995 to 2010. But delivery wise, it has not been that impressive.

a) Countless customers have adopted two-tier strategies – deliberately avoiding SAP implementations in many markets

b) SAP’s struggles in coordinating R&D between Walldorf, Palo Alto, Bangalore and other centers are well documented

c) SAP showed little ability to manage its Indian partners. The impressive delivery and continuous improvement record that customers like GE had taught those firms in the 90s, were almost completely lost in SAP world in the next decade

d) Compared to the global network of data centers Amazon, Google, Microsoft and others have been pioneering in off the beaten path locations, SAP and its hosting partners have lagged both in scale and sophistication.

As SaaS vendors go, SuccessFactors has had a fairly successful global run. To say SAP helped make it global is actually a bit unfair to its early leadership.

Enterprise Software Churn: E2Open “Ring Fence”

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.

I have been running a series of blogs following up on the book research - see earlier posts on I UNIT4’s successes in the UK local government sector Microsoft in two-tier setting and Rimini Street for third party maintenance.

While many of these strategies are cost driven, the “ring fence” strategy is often motivated by inadequate functionality from SAP. As the book describes, SAP has been distracted with its HANA focus and its acquisitions that functionality in many of its products has lagged over the last decade.

I recently re-connected with Michael Schmitt, CMO at E2open (I knew him earlier at J.D. Edwards and Ariba). He told me the company’s Supply Chain Cloud applications for Collaborative Planning & Execution surround SAP solutions in nearly 100 customers.

Examples include HP, which I had profiled in the book for ring fencing SAP with Salesforce, Workday, and other SaaS tools, uses E2open for Order Promising and Response Planning, as well as deploying its Supply Chain Planning to synch components from suppliers with its contract manufacturers. Avnet, the large distributor of electronic components (think 5 million+ parts), replaced SAP’s Global Available to Promise with E2open’s E2PR for Order Promising and Response Planning. Avon which sells 4 lipsticks every second and has been attempting to roll out SAP, uses E2open applications for supply chain visibility and management of contract manufacturers. L’Oreal, another large cosmetics company, uses collaboration tools from E2open for supply planning, inventory and order management around SAP’s modules.  Shell, a large SAP customer, uses E2open to provide Supply Chain Visibility for “track and trace” of materials that go into oil rigs.

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.

For National Reading Month

March celebrates reading. Can I recommend for your reading list the book on left which is a comedy, a tragedy, action genre title about the technology business?

Seriously, not every one is a book reader, but in the spirit of  the month at least check out a synopsis in one or more of these media reviews from around the world.

Thank you to so many journalists and bloggers for their reviews. Here’s wishing you a prolific March.

· CIO Connect – page 7 of magazine

· CrowdChat

· Diginomica

· Forbes

· Forbes (guest column)

· Goodreads

· ISReport.de

· Medium.com

· Sandhill

· SAP Community Network guest post

· Supply Chain Matters

· Technology Evaluation Centers (TEC)

· Yahoo News

· ZDNet Enterprise Software

ZDNet IT Priorities

Enterprise Software Churn–Rimini Street keeps rolling

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.

More recently, I have been looking at more examples post my book research. Last week I profiled UNIT4’s successes in the UK local government sector and Microsoft in two-tier scenarios. This time it is about Rimini Street and their third party maintenance services. In the book, I had highlighted Embraer, United Biscuits and Color Spot Nurseries and how they report significant savings, improved service levels and postponement of forced upgrades.

Since I finished research for the book, Rimini has signed 70 new clients in 4Q. I expect them to pass their 1,000 client milestone this quarter.

Some of the other clients Rimini recently briefed me about include Univar, a $ 10 bn global chemical distributor where Rimini is supporting their SAP ECC ver 5.0 and 6.0 environments. TT Electronics, $1B+ UK-based electronics manufacturer, blends Rimini support while continuing to buy new SAP licenses for their ECC 6.0 environment. Valspar Group, a $4B global paints and coatings maker, uses Rimini to support Oracle EBS EBS 11.5.10. Brandeis, the private university near Boston,  has moved its PeopleSoft support to Rimini.

Upgrades – either to avoid them or to reduce costs after the event – have been a major driver for moves to Rimini. SAP’s S4HANA moves could open the floodgates for more customers to at least look at Rimini.

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.