deal architect

SAP Nation 2.0 Excerpt: S/4HANA questions

In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.

2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 3 over nearly 30 pages grades S/4 and identifies areas for improvement.

- Albert Einstein has been credited with the enigmatic quote of “Everything Should Be Made as Simple as Possible But Not Simpler!’ In keeping with its new “Run Simple” branding, perhaps SAP was trying to keep the S/4HANA messaging simple. This chapter will explore the many questions that still need answering:

• When will SAP catch up to functionality that reflects dramatic changes in every industry?
• When will SAP environments be truly “simplified”?
• When will the SAP cloud become world-class?
• Will Fiori be able to keep up with rapid advances in UX design and expectations?
• What are the economics of moving to S/4?
• What will SAP do about all the sprawl?

SAP Nation 2.0 Excerpts: The S/4HANA launch

In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.

2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 2 looks over 20 pages on the launch in New York and subsequent updates in Orlando and elsewhere.

- As an innovation author, I find one of the most enjoyable topics to write about is the birth of new products and initiatives. Product launches have become increasingly sophisticated. You have to marvel at how Apple managed the launch of the 3G version of the iPhone in 2008. It was launched in 22 countries, followed by 50 more countries over the next few months. The logistics of producing tens of millions of units with its contract manufacturer, Foxconn in China, then shipping them around the world via FedEx and coordinating with hundreds of country- specific phone companies has raised the bar for complex yet well-coordinated product launches.

I have also written about new versions of humbler products like Lexmark printers, more complex products like Boeing planes and breakthrough data centers like those at Facebook. I like to talk to the designers marketers and project managers about how they decided on which features to include, the engineering challenges they faced, the launch logistics and the risks they balanced.

So when McDermott announced a next-generation product in February 2015, “our biggest launch in 23 years, if not in the entire history of the company,” I was excited and went back and re-read some of the case studies in my books and the questions I had asked of each.

- On that day in New York Dr. Plattner and Leukert only had 45 minutes for their presentation. However, they have elaborated their passion for in-memory computing in a 300-page book, The In-Memory Revolution: How SAP HANA Enables Business of the Future. The book (with the obligatory disclaimer that it is not “official SAP communication material”) describes the genesis of the S/4 product starting back in March 2012 and internal debates at SAP on how best to design a “nondisruptive” next gen product.

- Maybe we have all been spoiled by Apple product launches, and in particular by Steve Jobs’ signature “one more thing” portion of the speech where he usually introduced something spectacular. McDermott’s “one more thing” (at SAPPHIRE in Orlando) came across as odd. He chose to have his staff demo the Concur (a 2014 SAP acquisition) travel expense management product. Now, travel administration is a nuisance in most companies, but from the largest application vendor in the world you expect bigger initiatives.

- I asked an executive at a flagship customer in one of SAP’s major industry groups if he thought it would be ready to move to S/4 by 2020. His response: “I think 2020 is too aggressive. SAP’s 25 industry groups will massively compete with each other for R&D investment dollars...”

- If you analyze Enslin’s comments, the S/4 adoption to date is modest. Simple Finance has been talked about for over a year and you would expect more customers to be live. Logistics functionality will not be available till later this year, and it is not that interesting to many of SAP’s customers in banking, services and other industries. Many of the early adopters like Shell are trying out multiple projects—so, the “137 running projects” Enslin mentions are at a small fraction of the 900 plus customers who are supposed to have bought S/4.

- The SAPPHIRE event in Orlando, three months later, did not shorten the list of questions and it looked like SAP would have to keep clarifying the scope of S/4. When you are dealing with complex enterprise software that is not totally unexpected, but it sounded more like a “rolling launch” where the final shape of S/4 would not be known for months, or even years.

Robots and our jobs

Nice, and fairly comprehensive research by Forrester analyst JP Gownder. I like his balanced tone, not the Chicken Little tone so many recent books have taken

“We forecast that 16% of jobs will disappear due to automation technologies between now and 2025, but that jobs equivalent to 9% of today's jobs will be created. Physical robots require repair and maintenance professionals -- one of several job categories that will grow up around a more automated world. “

Add to that the efficiency of robots and machines should reduce waste and increase average disposable income of most citizens, likely leading to other economic growth and jobs.

JP, however, focuses mostly on IT/digital technologies. So many new careers are opening up in healthtech, cleantech, nanotech, biotech, space research and other STEM influenced fields.

Five years ago, in The New Polymath, I had highlighted the list of 14 Grand Challenges developed by the National Academy of Engineering. Look at the NAE site even today and they remain challenges – think what new career paths await as we solve these:

_ Make solar energy economical

_ Provide energy from fusion

_ Develop carbon sequestration methods

_ Manage the nitrogen cycle

_ Provide access to clean water

_ Restore and improve urban infrastructure

_ Advance health informatics

_ Engineer better medicines

_ Reverse - engineer the brain

_ Prevent nuclear terror

_ Secure cyberspace

_ Enhance virtual reality

_ Advance personalized learning

_ Engineer the tools of scientific discovery

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SAP Nation 2.0 Excerpt: The Sprawl

In time for Labor Day weekend reading, Amazon is launching 2.0 on Kindle today. It is starting to show up in book stores (print on demand at CreateSpace ). As with previous books, I will be excerpting 10% of the contents over the next few weeks.

2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 1 looks over 10 pages on the SAP landscape in which S/4 was introduced

- SAP’s runaway success in the ‘90s came about because its R/3 product dramatically reduced enterprise sprawl…Today, SAP’s cloud competitors are using that very argument against it. Dave Duffield, co-founder of Workday likes to describe having customers on a common code base as the “power of one”. Zach Nelson, CEO of NetSuite touts “one product for many industries”.

- SAP’s product portfolio has exploded, and in the last decade there have been nearly 50, seemingly disconnected acquisitions. That has led Mark Hurd, CEO of competitor Oracle (itself very acquisitive), to sarcastically observe,”I guess we could buy a Dairy Queen.”

- Next, there is the sprawl around SAP’s core applications at its customers. According to Panaya a tool vendor “More than 50% of SAP shops have 40+ satellite applications. Of these less than 10 are SAP applications.” CAST Research Labs has analyzed customizations at several major SAP customers and found most of the customizations were sizable, with many of them high-risk, according to its benchmarks.

- Finally, there is significant growth in the partner ecosystem. At its Global Partner Summit this year, SAP announced it now has 13,000 partners—a five-fold increase in the last decade

- The wide diversity in SAP’s portfolio and its customer base is vividly on display in its advertising budget. This runs the gamut from radio spots promoting the Concur product to small businesses, SuccessFactors billboards at competitor events, corporate branding at hockey stadiums, three-page spreads in The Wall Street journal, hot air balloons and HANA commercials which ask “Can a business have a mind, a spirit, a soul?” It would appear every taxi driver, sports fan and New Age practitioner who can influence software decisions is being targeted. This marketing carries over to social media where SAP executives and fans rave about individual products as if they represent the whole SAP economy

- On this side of the pond, in a patriotic July 4 (U.S Independence Day) guest column titled, “A nation of underdogs,” McDermott wrote:

“From equal tights activists to entrepreneurs, our nation’s history is rife with stories of people who believed the impossible was possible. Indeed, a notion that an underdog can win—whatever his definition of winning may
be—is part of our country’s DNA. It’s a truism I know firsthand.”

- McDermott could inspire the “underdogs” in SAP Nation to tackle the sprawl challenge. With his sales background, he has proven his ability to generate new revenue. The SAP economy, however, does not need more selling. The economy needs "un-selling”—delivering on previous promises, lowering prices to reflect new market realities, and more predictable results. If McDermott can pull that off it could be his lasting legacy at SAP. Dr. Plattner has certainly raised expectations with his own “end of history” statement. After introducing the next-gen product, S/4HANA in early 2015, he told a journalist, “If this doesn’t work, we’re dead. Flat-out dead.”

The Technology Dark Ages

While The New Polymath was overall wildly optimistic, I had a pessimistic chapter about the state of IT, healthcare, sustainability etc.

Five years later the contrast is even more stark.

I see Gartner’s hype cycle on new technologies and it’s good to see convergence of infotech, healthtech, biotech, cleantech in a variety of trends like autonomous vehicles, bioprinting and brain computer interfaces. I see a very nice polymath panel at Popular Science discussing progress in astrophysics, disease mitigation, programming languages and many other STEM disciplines. It is good to see Bill Gates continue to invest in global health progress, Elon Musk push the boundaries of electric cars, space travel and more, Google/Alphabet invest in a wide range of breakthrough areas, Amazon pioneer with robots and drones, Apple with wearables, GE with all kinds of smart industrial machines and so on. Plenty to be optimistic about.

But you look at the state of IT and shake your head. Still way too much spent on infrastructure and back office when companies are screaming for money for digital products and front offices. Dumb security weaknesses. Medieval behavior by many IT vendors as they continue to use trickery and threats to cling to older revenue models. Poor user satisfaction.

Ditto with healthcare. Still too slow drug and device approval and global availability cycles. Big bureaucracies on the payor and provider world.

Ditto with sustainability. Cheap oil, idiotic politicians, short term focused capital markets all conspire to  hold back needed progress in alternative fuels, water sources and many other areas.

Over the last year I have been fairly pessimistic as I have written two books on SAP Nation and spent much time talking to customers about back office IT. I need to keep reminding myself the European Dark Ages were followed by an amazing Renaissance. Cannot wait for that with our technologies.

The underappreciated stakeholder

I was in a recent discussion about fears of global deflation, and I thought – everyone is worried about the impact on investors, but most customers are loving the cheap gas prices and the devalued and cheaper Chinese imports. Why are we not cheering for the customer? 

My wife, in psychiatric healthcare, was fascinated by the NYT article on Amazon – especially the likely work-related stress issues. I told her Amazon is no different than most driven tech companies. Except that Amazon is benchmarked against retailers and publishers which have traditionally been used to a gentler pace of change.  Besides, why are we not cheering for the customer that Amazon has done amazing things for over the last two decades?

People worry all the time about the impact of robots and machines on jobs. I typically respond that a whole generation of new jobs is coming in biotech, cleantech, nanotech, healthtech and even infotech. What machines are taking over will actually make products and services better. Again, something for the customer to cheer.

Folks often ask me – why two books on SAP Nation? I tell them, it’s not Vinnie, it’s the voice of the SAP customer.  The books are my way of cheering and jeering for those customers.

I find most people side with investors or labor in most debates. Few stand up for the customer.

I have never had that problem, and glad I dedicated SAP Nation this way. 

SAP Nation 2.0 Excerpt: Industry next-gen software experience

In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.

2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 4 looks over 25 pages at next-gen software projects in the industry over the last two decades to provide benchmarks on how the S/4 rollout is likely to progress.

- Floyd Teter has a front row seat for the evolution of Fusion, first as a customer, and now as a consultant. He is also a respected member of the Oracle ecosystem as an ACE Director and active participant in the Oracle Applications User Group (OAUG) and the Independent Oracle Users Group (IOUG). Because of his influential role, Oracle has given Teter sneak previews of Fusion as it evolved.

- A much more sobering next-gen story comes from the JD Edwards experience as it migrated its ERP solution from the proprietary IBM AS/400 platform to the open, client/server world. Through the 1990s, Michael Schmitt held several senior positions at JD Edwards, including GM, Central Europe, and SVP of Sales and Marketing. He described to me the next-gen product experience at JD Edwards.

- Frank Scavo, President of Strativa, a California-based
management consulting firm that helps companies evaluate
software alternatives, commented in an interview:
“None of these acquired products had been written purely with the Microsoft technology stack. Axapta, for example, had been written in its own development environment (MorphX), in its own language (X++), using Oracle as its preferred database. Project Green was aimed at converting the four products to Microsoft technology and unifying to a single code base while retaining the best features of each product”

- Since they arrived in late 2010, Infor CEO Charles Phillips and his team have been reinvigorating the company which Phillips has called the ‘world’s largest start-up”. Infor has over 70,000 customers and over $2.5 billion in revenue and Phillips has invested in rationalizing and modernizing the inherited portfolio. To start with, Infor has chosen to focus on 15 vertical CloudSuite modules (such as automotive, fashion, and food and beverage) and three horizontal ones (including corporate and human capital management). I interviewed Cindy Jutras, President of the ERP analyst firm Mint Jutras.

- The common thread across all the next-gen projects described in this chapter is that in the enterprise world, new products take years to develop and then to mature. In the interim, vendors often meander or waver in their commitments. Customer bases, in turn, take decades to migrate. SAP has a massive development army at its disposal, so the S/4 product creation process may be quicker. Still, the scope is daunting. In the Plattner/Leukert book, they describe the need to tackle 400 million lines of code in the SAP Business Suite.

From Salesforce to Enterpriseforce?

BusinessWeek has a nice article on Keith Block, Salesforce President

“He’s asking software designers to build more products aimed at specific industries, and he’s developed a more rigid, aggressive sales strategy meant to answer any question a big client could have.”

The opportunity to expand the wallet share has long been there.   In SAP Nation, I wrote

“The recent wave of cloud challengers — Workday, Salesforce.com, NetSuite, ServiceNow, Plex Systems, Kenandy, Kinaxis and others — are merely nibbling around the edges of SAP. Few have launched a full frontal assault. I have been told that several SAP customers have called and pleaded with these cloud players to expand their functional footprint.”

That’s true as well of Oracle and other enterprise software customers. Salesforce has, however, in the last few years counted more on partners like FinancialForce to develop functionality using its platform. It has expanded its own marketing and other clouds mostly through acquisitions. To meet Keith’s goals, I believe it will need to accelerate its own application development.

The portfolio expansion will be timely as they have hired Vala Afshar as Chief Digital Evangelist. He is an excellent hire, but needs a much bigger product portfolio.

As I wrote last month in Digital Myopia

This is an important reminder at a time when every consultant and tech vendor is talking Digital Transformation. Unfortunately, most of them focus on specific areas like social marketing or digital back office processes. That’s clearly needed but will have little impact unless companies make their products, services and business models digital. That in turn leads to a rethink of manufacturing – in my estimate, 20% of BOMs for smart products are now influenced more by Silicon Valley than by traditional industry suppliers. It may mean turning to contract manufacturers and design agencies the tech industry has used for a while now. It also leads to rethinking global supply chains.

I look forward to the product expansion at Salesforce. And maybe a name change? Or even better, lots of new products for the next few years, then a Google/Alphabet type move!

Why the Fortune 500 turns over so rapidly

90% of the companies which were on the Fortune 500 list in 1955 no longer exist or are no longer independent.

Most of us are loyal to brands so why that much churn?

Because companies do incredibly stupid things to annoy their loyal customers.

I saw that on a recent trip to Montreal – multiple times with brands we have been loyal to for along, long time :

Bank of America and Royal Bank conspired between their charges to sell us Canadian Dollars from an ATM at a rate of 1.15 when the exchange rate was 1.31. Seriously, a 15% conversion charge in this day and age?

Sprint and Rogers conspired to deliver mobile service at miserable speeds. Sprint is making a big deal about allowing its subscribers data roaming in several countries but it only pays to get on the 2G spectrum of its partners. Seriously, in this day an age when a café can deliver to us wifi as part of our cup of cappuccino speeds we have come to expect? (see the speed differences during that visit in the two graphs)

Marriott had a sign in its Concierge Lounge saying more than 2 guests now have to be paid for. Not unreasonable till you analyze that 99% of my stays (and most of its business guests) I have been alone, and mostly used it for a quick breakfast. How many members abuse the privilege and regularly bring in associates or family members? Why be petty about something you designed for your loyal members?

Then I see Consumer Reports has an expose on auto insurance premiums. It has little to do with your driving record and more to do with your credit score, the age of your kids, and other factors. Here’s the jaw dropping comment “Some insurers even salute your allegiance with a price hike”. Few reduce rates for loyalty and safe history. In other words, it pays to shop around every renewal.

Shop around we will, Fortune 500, and churn that list even faster.

Trust, but verify

There has been plenty of scorn about the scolding Oracle’s CSO delivered to her customers for “reverse engineering’ its code to test for security vulnerabilities. While Oracle, as usual, comes across as the “bad guy”, it is challenge most large software vendors face.

Here is the IT reality these days

a) Most IT vendors have made numerous acquisitions in the last decade. Many take years to integrate. Any prudent CIO would and should consider the separately designed, still un-integrated, un-hardened portfolio a potential security vulnerability.

b) Most IT vendors have under-delivered functionality, leading companies to customize, often heavily. Vendor support policies refuse to acknowledge such changes, and pretend their software pristine as it might be when it is shipped, gets implemented that way.

c) Most CIOs are blending hybrid on-premise/cloud models, ring-fencing around large software hubs, doing two-tier ERP, developing satellite apps etc. It is a corollary to b and larger vendors not delivering to their promise of “end-to-end suites”

In that spaghetti,  I do not blame a CIO for trusting “nobody” when it comes to protecting against or investigating a breach. Or to use a Reaganism, maybe trust your larger vendors, but still verify.

It’s not just an Oracle problem. Every vendor better wake up to this reality. The larger ones will just have a tougher time accepting this reality.