deal architect

The State of S4 HANA

At SapphireNow next week, SAP is expected to provide much more detail around its next-gen, S4 product.

It’s been a quarter century since the predecessor R/3 product was designed. So much has changed in the world since. The shop floor is dotted with robots and wearable technology. Utilities are evolving to smart grids. Auto insurance is more about telematics. Retail and banking are about omni-channels. The connected car and home are realities and shaping expectations of enterprise application experiences. Global growth is coming in BRIC and other emerging markets. I could go on. Will S4’s functional footprint reflect this new world and by when?

So much has changed at SAP itself in that quarter century. It was a sleepy, rural German company with one major product, R/2 moving to R/3. Today, there is the core ECC. There are industry variations.  There are acquired BusinessOne and Business Objects customers. There are more recently acquired SuccessFactors, Ariba, Concur, Hybris, Sybase and other customers. There are ByD  and All in One customers. Will S4 be a “rainbow coalition” of these conflicting interests or will some customers feel orphaned? 

In that quarter century, countless other enterprise software vendors have attempted next-gen products. Mainframe and AS/400 vendors tried to move to open platforms. Many client/server vendors have tried to move to the cloud. Many vendors disappeared in trying those transitions. Customer bases have suffered through many long “forced marches”.  In contrast, newer vendors like Workday can migrate customers to  newer releases in a matter of hours. Will S4 offer automated migrating and testing or will the 1.5 million strong “union” of outsourcing, customer and SAP staff continue to grow?

The expectations and the caution around a product like S4 are astronomical. The pressure within SAP itself is tremendous. Dr. Hasso Plattner has said "If this doesn’t work, we’re dead. Flat-out dead. It’s that simple," Since S4 was announced in early February, the questions I have heard are many but they can be distilled down to dollars and euros. Where will S4 show business benefits – not just the vague “speed” and “simple” talk from SAP? When? And what will it cost to get there?

I plan to address the questions in a relatively short eBook. I will listen to what SAP has to say at Sapphire to supplement my on-going research, and hope to have the eBook ready for summer reading.  Stay tuned for details.

In SAP Nation, I had classified customers into four categories – Un-adopters, Diversifiers, Pragmatists and Committed. The eBook will look at S4 from the perspective of each of these groups. For some customers, it will mean they should accelerate their move away from SAP. For others, it will mean asking for much more detail about S4 from SAP and its partners and making careful, detailed financial and migration plans.

If you have not read SAP Nation come get your free copy at a reception Rimini Street is hosting during Sapphire (register here). Or get your copy on left for your trip to Orlando.

The book documents the $ 200 billion annual burden on SAP’s customer base. The hope is S4 will dramatically shrink the burden. Will it? The eBook will explore the promise and the challenges as SAP opens its next chapter.

UX expectations grow

Enterprise UX has taken giant strides in the last couple of years. On New Florence, I have profiled design innovation at Microsoft, Oracle, Infor and others.

Yet, in many ways, future benchmarks may not come from each other but other industries that many users are experiencing in their daily lives.

Places like DisneyWorld where the UX has been dramatically transformed. FastCompany has a long article on the MyMagic+ project and the risks Disney took.

“It would push the boundaries of experience design and wearable computing, and impact everything from Disney’s retail operations and data-mining capabilities to its hospitality and transportation services”

It was a $ billion makeover with the credo  of “it better work”"

Or much closer to home in our cars. Consumer Reports has cameos of infotainment projects at all the major auto brands. While Tesla and BMW get plenty of kudos, even humbler Fords and Hyundais are sporting digital makeovers.

The big difference is Disney rethought the  park experience – how guests entered the park, how they unlocked their guest rooms, how they paid for stuff, how they waited for rides – then applied mobile, RFID and other catechnology to improve it. Many enterprise vendors are just presenting prettier retina display versions of earlier screens.

When it comes to automakers, they are not just focused on visual UI. They  are incorporating audio, haptic and other UI. They have long been preparing for driverless cars with sensors, cameras, radar and other technology. Enterprise vendors mostly still design with the finance or order entry professional in mind, not look at how to automate the manual entry process with scanners and other data capture and machine learning technology.

Disney did not turn to SAP or Oracle – it used Frog, the design agency. Some of the automakers may turn next to Google or Apple for next-gen UX.

Enterprise UX has for three decades been influenced by the “consumerization of technology”. Microsoft, Apple and others were the big influencers. In the future, the connected home, car, bank, store, park will be just as influential.

What we use on Monday morning better be as good as what we experience Sunday morning and evening.

Why does every sector underestimate Amazon?

Amazon finally broke out AWS revenues – it has an annual run rate of $ 5 billion with growth accelerating, and that is profitable. Lots of people are shocked Amazon has built a solid business in yet another sector – this time against titans like IBM, HP, Oracle and many other outsourcing/hosting firms.

Not surprising to me at all.

Amazon goes into inefficient sectors, makes big investments in automation and patiently grows the business. I have seen it first hand with my books. SAP Nation on the Kindle is priced at a quarter of what Wiley priced (and has not bothered to reduce after years) two of my earlier books, and my royalties are twice as much as what Wiley pays me even at the higher prices.

Think about that – readers and authors both do better. How? Amazon has squeezed out plenty of inefficiencies in between and automated the commerce and delivery of eBooks. In the paperback version, though not as efficient as the eBook format, its subsidiary CreateSpace brings similar print-on-demand automation and again does better for reader and author.

When it comes to the cloud infrastructure business, there have been visible clues of its intentions for over a decade now.

As I wrote in The New Polymath

“Actually, IBM may have had a clue. It had sold Amazon a mainframe that could not scale to its fast - expanding retail volumes. Amazon ’ s CTO, Werner Vogels, chuckled in a presentation when he said, “This is an Internet company in 1999 and we bought a mainframe. ” That debacle pushed Amazon into the world of what, in the industry, is called service – oriented architecture (SOA). “ We were doing SOA before it was a buzzword, ” said Vogels. Each Web page calls specific services designed to do specific tasks. Some of the pages call as many as 150 Web services. Having invested in these services and found a much cheaper and scalable Linux - based infrastructure, Amazon decided to “ externalize ” the Web services starting in 2002. “

Amazon understands quite bit about big capex - their network plans, distribution centers, automation in the DCs have always required big thinking.  From The New Technology Elite

What distinguishes Amazon even more is its savvy with physical logistics, which was tested from the beginning by competition with Walmart and other retailers. As it has consistently used discounted shipping as a competitive advantage, it has been sophisticated in its design and location of distribution centers. It has innovated with “postal injections,”in which it uses its own trucks or independent carriers to drive truckloads of orders to local postal depots from Amazon warehouses.The procedure eliminates processing steps for the U.S. Postal Service.”

So from that to investing and managing billions of $$ in data centers has actually come somewhat easily.  Besides, it has been going after an inefficient set of outsourcing competitors

Mark Thiele is EVP of data center technology at Switch SUPERNAPs, which boasts ultra-efficient and extremely power-dense Tier IV (Elite) data centers like its 525,000-square-foot facility in Las Vegas. His view on the state of the hosting market from SAP Nation:

“Many of the traditional, large, managed service providers(HP, IBM, etc.) have a significant legacy footprint of data center capacity. This older footprint is comprised of millions of square feet of data center capacity that is built with legacy design characteristics like raised floor and single-method cooling solutions like the old CRAC cooling on the floor.Each of the big MSPs has a few data centers they’ve built in recent years that demonstrate innovation in design, but overall these “showcase” data centers comprise only a fraction of their total footprint.”

Worse, these providers tried to keep their customers locked up at obscene rates in multi-year contracts. In contrast, Amazon has been reducing prices just about every quarter. The response of the outsourcers for a long time was  “Amazon is not enterprise class”. Tell that to Netflix which depends on AWS for its global audience which  each night accounts for a sizable portion of web traffic. And many other customers.

Having been born in the low-margin retail business and forced to scale up quickly against the likes of Walmart, being able to squeeze out inefficiencies of publishers like Wiley and outsourcers like IBM has been relatively easy.

What’s more surprising to me is why analysts who track outsourcers and publishers have not been pestering them why they have not become far more efficient and competitive for a decade now.

NetSuite deepens focus

I do not often listen to quarterly earnings calls. I did to NetSuite’s 1Q call yesterday. It was a good primer to SuiteWorld coming up in a couple of weeks.

Besides CEO Zach Nelson is always entertaining. Zach did not disappointment with statements of competitors “cloudwashing” and the need to put some “out of their misery” and a quip about an executive just hired from a competitor “certainly knows what not to do now”. He is also a huge sports fan and his excitement at doing the call overlooking the Durham Bulls stadium near Raleigh, NC was palpable.

The results did not disappoint either. It is the eighth consecutive quarters of 30%-plus revenue growth. The call transcript is here

I liked two major themes in the call which deepen NetSuite’s differentiation I see in the cloud ERP space.

NetSuite continues to do well in two-tier ERP situations. HP Software ($ 4 billion division of HP) has finished a 6 month NetSuite deployment supporting 15 countries. HP is  a major SAP customer and partner and as I described in SAP Nation “Tiers of Joy” is a strategy a number of SAP shops are looking at.

NetSuite continues to do  well in “omni-channel” retail and distribution sectors as I have written before. As Zach said “we are seeing number of large retailers walking through NetSuite’s doors for customer visits”.

They also announced the acquisition of Bronto, a marketing automation software vendor focused on that vertical.. Zach called it “the most widely used email marketing platform in the Internet retailer list of top thousand retailers.”

As Zach said it will give NetSuite a chance to “seamlessly combine customer transactional history with rich behavioral data.”

I look forward to hearing more on each of these focus areas at SuiteWorld.

Why “Good Enough” is often Better

Verizon announced it lost last quarter over 100,000 mobile phone subscribers to aggressive pricing from Sprint and T-Mobile. No matter – it is not about to start discounting. Instead, it has ramped up an aggressive ad campaign about how it has the most “reliable” network. The ad usually ends with whoever is not on Verizon in some less than pleasant situation.

Google introduced yesterday a wireless service (Project Fi). In many ways, it is promising reliability by leveraging over a million hotspots and excess 4G capacity from Sprint and T-Mobile - not relying on a single point of failure. And it promises price points and plan flexibility which would make Verizon cry.

Except that Verizon will not cry, it will scoff at the Google concept. It will say Google is a bit player (even with its previous successes with Voice and increasing Fiber footprint). It will dismiss the fact that UPS has for years now equipped its drivers with network swapping capabilities, Apple has a SIM card which allows users to do the same.

This is ingrained in the Verizon culture – we have been customers for over 30 years and have seen this play out in home service, global long distance, calling card, DSL and just about every service they offer and they keep losing that business. You see Verizon refuses to accept connectivity is a utility, not a luxury, and that for most consumers good enough is well, good enough.

In the enterprise software world, many on-premise vendors behave like Verizon. They scoff at half off maintenance Rimini can provide (and with better customer service). They refuse to acknowledge that a Workday or NetSuite can deliver a function point at a fraction of the cost their bloated partners charge.

For years, SAP ran its version of “reliable network” with its “Run Better” ad campaign. With its next-gen S4 it will emphasize speed and run campaigns about “simple”, without showing it is actually collapsing the $ 200 bn a year ecosystem around it. The concept of “good enough” for back office functionality seems foreign to it. That journal entries and purchase orders are utility, not luxury, for most companies. Ditto with IBM when it comes to data center services. AT&T when it comes to MPLS circuits. And on and on.

Don’t blame them, blame the enterprise buyers. As consumers, we reward luxury brands with single-digit market shares. We love to splurge occasionally on a weekend at the Four Seasons, but “make do” at Hiltons and Holiday Inns most of the time. We may have a Tesla in the family, but we balance it out with Toyotas and Fords. 

In the enterprise world, many of the luxury brands have 10-15-25% market share. No wonder, disruptive offerings often come from the consumer tech world from players like Google, Box and Amazon. They are usually much more aware that their “good enough” is actually pretty damn good.

“Empty calories” at IBM

The WSJ profiles IBM CEO Ginni Rometty after its 12th straight quarterly decline in revenues and she calls some of her divested hardware units “empty calories”

“These units were producing revenue but not profits”

The WSJ adds a chart where they point out other businesses IBM has moved out of and markets IBM aspires to

What the graph misses is a big fat belly that customers, not Ginni, would call their “empty calories”. Notes, Tivoli, Websphere, DB2, SAP consulting, outsourcing from Cold War era bunkers called Data Centers – by my estimate 2/3rds of IBM revenues still come from products and services 10, 20, 30 years old.

She has shown little willingness to work out that layer. Tough to do with an executive team most of whom proudly show off gold watches for 25 years of service.

Also difficult to see how that leadership and a mostly people-intensive services oriented team can provide leadership for the top line in the graph.

Any customer doing due diligence on the top line is likely to go visit with Google and learn about their “Deep Learning”, for clouds to Microsoft or Amazon, for Business apps to vendors like Oracle and Infor for deep vertical apps, for cyber security to players like GE’s Wurldtech, for personalized health to Apple, Microsoft and others.

IBM still lives in the world of HP, EMC, Accenture and TCS. Ginni has ways to go to change that world.

These are the good old days

It’s hard to argue with Buck Showalter when he says in this MLB promo "These are the good old days" “These are the best 750 players in the world that the world has to offer” and “The game’s being played better than it ever has in the history of it.”

The quality of players from around the world, the analytics, shifts and other on-field strategies, technologies at the stadium and at home certainly have raised the quality of the game.

You know you can say the same of enterprise software today. As I wrote SAP Nation, I was taken aback at the choices customers have today – they are replacing or “ring fencing’ with cloud solutions, they are moving to third party maintenance, they are tiering solutions for subsidiaries, they are insourcing outsourced application support, they are leveraging massive cloud data centers at Amazon and Microsoft, they are deploying their own data capture technologies and UX, they are visualizing data in amazing new ways, they are leveraging data as a service and all kinds of machine learning,  

The quality of the professional in the industry is also improving. There are more data scientists. There are design agency quality UX professionals. The marketers are more digital. The salespeople are being schooled in “Challenger" techniques. There are people constantly thinking about shared services, data center thermodynamics and network latencies.  There are process experts who can talk to business executives. There is more sophisticated value engineering analysis.

I find it funny when folks at larger vendors tell me the book was too nice to Workday or Plex or  Rimini or Cognizant or Appirio. Hey, I would not give them much ink if customers were not talking to me about them.

It’s a new season.  Small city teams like Buck’s in Baltimore can generate plenty of excitement. Long suffering Mets and Cubs fans are alive.

Yes, it is also the good old days for enterprise software. Enjoy the bounty  of the smaller teams and the innovative shifts and pitcher rotations. Time to move away from your Dad's software industry.

 

Workday–time for a fork?

Workday has a ritual it plays out twice a year. It does an hour long webinar to summarize features in its latest release. Stan Swete used to MC the session three times a year. Now,  Leighanne Levensaler does it twice a year, as she did yesterday introducing Workday 24.

I am a big fan of how efficiently they use that hour – they cover new features, include demos, provide updates on customers etc.

It’s been poetry to watch every few months feature lists expand, upgrade times drop, customer satisfaction ratings improve and country coverage expand.

Last couple of times, though, I have wished they had a second hour focused more on verticals and geographies. I say last couple of times because in the last year as I interviewed a number of CIOs for SAP Nation, many asked me when Workday would move into their regions and industries, way beyond the HR and finance footprint.

Workday has been very disciplined about committing to new markets – let’s face it, they have barely scratched  the market for replacement of financials. But as Leighanne pointed out they have found creative ways to globalize their payroll offering - total number of countries with certified intgrations in Workday Global Payroll Cloud is now up to 85.

I would like to see similar creative thinking with verticals – partnering with serious charter customers (design partners in Workday parlance), systems integrators with deep vertical knowledge (caveat – many talk a good game and are horizontal specialists with clients in specific industries), recruiting of industry specialists.

Two risks for Workday continuing on its current path:

Some customers are starting to call Workday  “PeopleSoft updated for the cloud”. The PeopleSoft footprint of the enterprise in the 90s was relatively small, and the enterprise has grown so much bigger since with digital marketing, far more automated shop floor, smart product R&D, predictive asset maintenance. telematics in insurance, mobile banking, omni-channel retail, smart cities with sensors everywhere and so much more. There is significant fatigue with the current crop of  “strategic” tech vendors, and Workday could well move into that vacuum, but not with its current small footprint.

A lesser risk: Every major and minor competitor is focused on financial and to a lesser extent, hcm markets and the cost of sales is likely to keep growing as customer’s expand their initial “long lists”.

I see too many vendors chase after every market. Workday has been the opposite, but the demand for expansion is real – at least in the sample of customers I talk to. With its usual discipline, Workday could pick a handful of industries to invest in.

I, for one, would love to see the second hour in future release webinars.

Update: I was remiss in not pointing out Workday does have a Higher Ed initiative and it did introduce PSA functionality for services markets in this release. Also, "fork" could be read to mean Workday give up on its single code line strategy. I was suggesting a two track strategy - continue its HCM/Finance track and also expand a vertical one.    

What is this life if, full of care…

…We have no time to stand and stare….No time to see, when woods we pass, Where squirrels hide their nuts in grass..

A poor life this if, full of care….

I am feeling poetic today thanks to William Henry Davies. Actually it has been bubbling for a while. The book, SAP Nation, and months of discussions and presentations around it have steeped me deeper into enterprise technology world than ever before.

It is a world of complexity, posturing, dense slides, packed calendars…and in the end, slow progress.

My antidote to that is to stop and admire momentum and simplicity wherever I see it, often in places ignored in the media and analyst world .

I have started a series on New Florence called The Internet of Humble Things – and have posted on Paint Stores,  Kiosks in Post Offices, Mirrors in Cars, Office Supply stores. No they will not make the front page of the Wall Street Journal or Wired magazine, but each represents a quiet march of progress and innovation. 

I hope readers take time to similarly “smell the roses” in their worlds. Lots of good things are happening in so many places at low cost and low hype. Please send me nuggets from your own time to reflect. And hopefully it will make you question things in enterprise life which make little sense but we keep perpetuating.

From my side, look forward to more on the Internet of Humble Things. I like to let my mind drift from the complexity and routine. It inspires my innovation books. It also gives me the inspiration to ask the tough questions I often do on this blog.  

SAP’s Berlin Wall

As we approach SapphireNOW, I notice more comments and blogs from SAP executives and partners which in some shape or form touch on HANA. In many ways, HANA has dominated SAP world for the last few years so it’s not surprising. With S4, HANA will continue to get top billing for years to come.

But from a customer economics pov, does that obsession with databases make sense? In the economic model I built for SAP Nation, non-SAP software costs totaled $ 15 billion a year, so roughly 7% of the annual run rate. That includes database, BPM, testing, virtualization and other infrastructure software.

People are surprised the database cost is so low.  The reality is the Oracle or DB2 or SQL Server software typically supports way more than SAP applications in a shop. And quite a bit of SAP software is shelfware. So the “effective” database cost allocable to SAP function points is actually not as high as might appear on the surface.

The really big costs in SAP world are labor – outsourced and internal BASIS, ABAP, FICO and other talent. Labor makes up 70% of costs in SAP Nation. Some of that labor includes DBAs, but databases have been automated a lot more in the last several years compared to the application layer. 

Just as inefficient are overpriced, outdated data centers and network costs in SAP shops  

The funny thing is SAP hardly ever talks about or picks on those costs. At Sapphire next month you will see the same booths of outsourcers with tens of thousands of consultants. And billions a year in wasteful travel costs. You will see telecom providers who sell MPLS circuits to SAP shops at outrageous price per mbps. You will see hosting firms which have not reduced prices for years, when they should be doing so every quarter.

In the book, I compared SAP’s obsession with Oracle as that of Ahab for Moby Dick.  I wrote “While the whale was fearsome, many readers would say Ahab was actually the villain with his relentless obsession and reckless use of the ship and crew in chasing the whale”

I am tempted to go to Sapphire, and emulate Reagan standing before the Berlin Wall, and say “Dr. Plattner, tear down these massive partner booths”. 

That’s where the massive inefficiencies are in SAP Nation. The database just makes for entertainment as Oracle and SAP continue to take potshots at each other.