deal architect

Super Tech Waste Bowl

Nearly half of next Sunday’s Super Bowl 50 Host Committee's 18 primary sponsors are tech companies — Google, Hewlett Packard Enterprise, Intel, Intuit, SAP, Seagate, Yahoo and Verizon. Lots of corporate parties expected to be hosted by tech companies in the Bay Area this week. Many of the commercials during the game, and in social media before and after will be from tech startups, mobile carriers and auto companies showing off plenty of tech. It is an understatement to say tech will dominate this week for a number of business executives.

To balance out all the marketing they will be exposed to, executives should read sobering feedback about technology and lack of productivity coming out of the recent bigwig WEF event in Davos. BusinessWeek  “Annual productivity growth in the U.S. averaged 1.5 percent from the first quarter of 2008 through the same period in 2014. That’s less than half the 3.5 percent rate during the previous boom, which lasted from 1996 to 2003.” Time : “We all use cool new technologies, and a handful of companies are making out like bandits on them, but we simply don’t see the effects yet on productivity and growth across the board,”

You don’t need to be an economist to see that. You go into a hospital and even though they have spend billions on electronic medical records, you see tons of paper with scribbled hand writing. Try getting much detail on what the hospital allows you to see on line on your own records. Any one trying to get paid by a corporate AP department can see the convoluted processes they follow. Oh, it probably saves them some interest in delayed payments but I am willing to bet the cost of the process inefficiencies way outweighs the savings with interest rates so low. Cloud vendors have delivered some efficiencies but largely in some back office and IT infrastructure areas. They have had little impact on industry specific processes.

So, as an antidote to the marketing you will hear this week, I encourage you to re-read SAP Nation. $ 300 billion a year after relentless year in overpriced hosting, MPLS circuits, outsourcing and countless other charges. Not to mention spectacular IT project write-offs. And even if you are not a SAP customer you can extend the findings to most other corporate IT areas. Then look at how your business processes have stubbornly remained the same in spite of all the IT spend, and you can see why the productivity numbers are so dismal.

And to help with some antacid to offset partying, Amazon will be offering starting this Tuesday, the Kindle copy of SAP Nation at $ 4.99, half off the list price. The promotion will run through the Monday after the Big Game.

Read it and resolve to reduce your IT waste.

The only thing to fear is fear itself

For a decade now, my two blogs have been yin and yang. New Florence keeps me excited about new technologies, Deal Architect keeps me level headed about the economics of technology and the slow adoption rates in most enterprises.

That balance has been handy in the last few weeks as I research the impact of automation technologies on various occupations and industries. I see many of my peers excited about machine learning or 3D printing or autonomous vehicles but unrealistic about adoption timelines. The collective effect is we are creating panic scenarios about job losses. Add to that the opportunistic talk of politicians during a Presidential year and we are creating unnecessary pessimism about jobless futures.

Take Elon Musk’s recent comment that you should be able to summon a Tesla from across the nation in a couple of years. I am seeing extrapolation to Uber with driverless cabs and the end of parking lots. Forget that Musk went “wink-wink” about the timeline as he said ““ I might be slightly optimistic on that.”

A much more established car company, Mazda is betting people will never give up their love of driving. Audi’s new Q7 SUV has 35 features to protect a driver from human failings. They are betting humans will be driving for a long, long time. Many city speeding budgets are counting on that. Many insurance companies are counting on that. History is on their side – see how many millions of drivers around the world have not adopted automatic transmission, an invention which dates back to 1921!

Two Oxford professors analyzed over 700 occupations in 2013 and rated them by “susceptibility to computerisation”. Their category of “Bookkeeping, Accounting and Auditing Clerks” shows a 98% probability of likely impact. Again they did not try to estimate how long it would take for such impact. Of course auditing is different from the first day I stepped into Price Waterhouse. Most clients now have ERP systems, there are Big Data tools and forensic technologies for auditors to use. But will audit firms overnight quit recruiting young accountants? Not for a while, and they are already working with universities to develop much more tech, infosec-savvy accounting majors.

My research is showing there are several “speed-breakers” to too much automation

a) The tech hype cycle – something Gartner has talked about for decades also applies to most automation technologies. The technology being peddled is often 2-3 generations away from industrial grade application.

b) Enterprise adoption cycles – are always slower than you expect even when the payback analysis appears compelling

c) Customers inconsistently embrace automation – stick shift cars, print copies of books, branch banking, cashiers at stores – decades after we thought they would disappear they continue to flourish.

d) Labor adapts to automation – nothing like the hostility the Luddites showed to machines in the 1800s, but today’s labor has tacit knowledge which often makes complete jobs difficult to automate. Individual tasks can be automated and labor evolves.

e) The Gig economy – Profound changes are taking place in the employer-employee relationship way beyond what automation is influencing. Companies are dramatically changing with their own digital transformations. Workers with multiple employers, crowdsourcing etc are changing the labor economy.  

Every profession is becoming more digital, “smarter”. Four years ago, when I wrote The New Technology Elite I observed that in just about every industry : The lightbulb has gone on in even savvier CEOs. “If the consumer lives in the world of iPads and Kindles, can our own product be rethought to be more appealing to this tech-savvy consumer?”

Surrounded by smart cars, smart homes, smart everything, we are similarly seeing every occupation become “smarter”. The man-machine balance is changing but man is not disappearing in most of them.

So let’s focus on letting machines make our jobs less repetitive, less dangerous, less wasteful – and quit working ourselves into a froth about jobless futures

Amazon in India: Lost in the noise

Fortune has raised a firestorm with its cover showing Amazon CEO Jeff Bezos as Lord Vishnu, a revered Hindu deity.   Others don’t like the word “invade” in the title because it smacks of colonialism. After Charlie Hebdo, it is surprising the magazine was not more sensitive to any religious images and good to see Fortune has since apologized.

Lost in the noise about the cover is the actual story about the ambitious nature of Amazon India that I excerpted on my innovation blog.  It shows an Indian economy being transformed into a juggernaut. Amazon’s investments in bike based deliveries will transform logistics there “since the country has an arcane address system, patched together haphazardly over the decades, with many addresses containing descriptions reading something like “behind the mosque, across from the stadium.””

Amazon will also transform the commerce landscape in India: “Amazon has partnered with thousands of small shop owners across the country to act as pickup points in exchange for receiving a small commission per package.”

This is definitely a case of don’t judge a book by its cover. If you have any interest in India you will find Amazon’s plans there fascinating. And given Amazon’s ambivalence about media coverage, Fortune actually deserves credit for getting the company to open up. 

A decade of the Enterprise Irregulars

Two decades ago, Selling Power magazine had Gartner executives on the cover with the byline “When the Gartner Group says “buy”, the market listens”. Given the magazine’s audience, the focus of the article was Gartner’s well run field organization which the article cited “over the past five years.. has grown from 40 to more than 500 reps”. I remember being proud to read CEO Manny Fernandez quoted “We do not sit on the fence…We've had clients who have canceled our service because they're unhappy with what we've written about them - and that's okay."

Gartner is still very influential, but that milestone reminded me of another one. The Enterprise Irregulars, a group I am now part of, will celebrate its tenth anniversary this year. The group – a loose coalition with no dedicated salesforce -  is a reminder the analyst market has changed dramatically.

Many readers know of the EI site and the blog posts there. You may not know its origins. Two visionary SAP executives, Mike Prosceno and Jeff Nolan, saw blogging grow in importance and invited a group of independent bloggers to the 2006 SapphireNow event. It was bold, and risky. In fact Nolan announced it in a blog post titled “When everyone has a suitcase nuclear weapon”. That small group, inspired by Sherlock Holmes’ ragtag team of young intelligence agents on Baker Street, named itself the Irregulars to contrast ourselves from the Main Street analysts like Gartner. The group has added and lost a few members over the decade, but most readers do not know much about the depth and breadth of the body of work of its members.

EI members have founded or are key contributors to sites like Larry Dignan at ZDNet, Phil Wainewright at Diginomica, Susan Scrupski at Change Agents Worldwide,Tom Raftery at Redmonk, Phil Fersht at Horses for Sources and others. Less than 10% of what they write (or what I post on my two blogs) shows up on the EI site. Our editor, Zoli Erdos somehow manages to homogenize our disparate content.

Even more impressive is how they have mastered changing channels of getting the word out. Many of us came from Gartner, Forrester, IDC etc – the traditional analyst world and have adjusted to the world of videocasts and social media. Ray Wang tweets from more places around the world than any other human. Jason Lemkin hosts his immensely popular annual SaaStr event reflecting the new world of ARR and multi-tenancy . Dion Hinchcliffe’s presentations are art form. Michael Krigsman hosts the weekly CxO executive talk show. Jon Reed is always leading the way with his videocasting.  Charlie Bess has been active in robotics competitions for years. Paul Greenberg and Denis Pombriant are serial book authors. Brian Sommer, Naomi Bloom and I do an annual prediction videocast sponsored by Workday.

Very different from analyst/media firms is the fact that many EIs are technology executives (like Thomas Otter at SAP, Jason Corsello at Cornerstone OnDemand and David Kellogg at HostAnalytics) , entrepreneurs (like Ramana Rao and Ross Mayfield) and investors (like Evangelos Simoudis and Anshu Sharma). They bring a practical perspective to many of our internal debates.

Talking of debates, we have plenty of them. Not surprising given our roots we have a disproportionate number of current and former SAP employees, consultants and advisers. Yet many of EIs provided input to my SAP Nation books – as Manny would say no sitting on the fence here either.

Get to know the EIs - check out the much longer list of EI bios here And use them as a benchmark for the morphing world of technology analysis and intelligence.

Rimini Street: The Little Engine That Could

As part of its 2015 reporting, Rimini Street shared with me they now have as customers more than 125 Fortune 500 and Fortune Global 100 companies. That is pretty impressive reach when you also factor their smaller customers and many other companies who are not their customers but use their benchmarks as leverage for negotiating down maintenance rates.

It’s not just the economics – many customers report they like Rimini supporting their customizations not just the standard vendor code; others report much more personalized service from Rimini. So, in many ways Rimini has had influence on the software and the application management outsourcing market way beyond what shows on its income statement. 

I first wrote about Rimini in 2005. I have always liked customer choice and compared what they offered to independent auto service choices we have in addition to service from car dealers.  In the last decade, my respect for the company has kept growing as they have persisted with so much hostility aimed at them.

The software vendors have not been nice to Rimini for the loss of maintenance revenue, when in fact they should be grateful Rimini has at least kept the customers in the fold. Those that move to the cloud are more likely lost forever.

Many people are surprised with the world moving to cloud solutions, that an on-premise maintenance provider continues to thrive. Actually for many customers, the ability to stay with a stable on-premise solution, albeit at lower costs is an attractive path.

As David Rowe, Rimini’s CMO explained to me in SAP Nation 2.0 (and similar considerations also apply to Oracle customers)

“CIOs are winning awards for driving innovation with savings from Independent Support. This strategic flexibility to evolve and grow their SAP application landscape is very important to these leading CIOs as they recognize that they aren’t ‘frozen’ under Independent Support nor do they need to be tethered to the vendor for ‘hit or miss’ innovation."

Many of my friends find other startups more sexy. That’s ok, but I doubt they can showcase many which have had this much impact on IT budgets.

CIO Priorities: The Oracle POV

Bob Evans, Chief Communications Officer at Oracle has a nice “State of the CIO Nation” post at Forbes, with the infograph below and he cites examples from GE, Monsanto and other companies. ‘

It’s a feel-good post from a CIO perspective but I had a few observations on some of his points.

1) Generate New Revenue Streams – new revenue is likely to come from smarter products and services which embed or are enabled by sensors, software, satellites and other technology. In many companies, the lead role there is being taken by the product engineering or R&D groups. There are several companies where the engineering groups today have more software engineers reporting to them than to the CIO. And they have design, contract manufacturing and other expertise which few CIOs are likely to be able to match. So, IT is likely to have a secondary role in this area

4) Evangelize Cloud Computing – more than the CIO, many technology vendors need to heed this advice. They have little incentive to move away from older data centers, on-premise software maintenance revenues, traditional application management and BPO contracts.

5) Evangelize Digital Business – I think a business savvy CIO is ideally suited to do this, but in many companies, the CMO is (rightly or wrongly) perceived as the Chief Digital Officer. 

10) Accelerate Cybersecurity – I would have this much higher on the list. Also, I would like to see Oracle lead an industry coalition to tackle the many facets of cybersecurity – certainly with its expertise with government, telecom and other sectors, it is well positioned to do so.

Overall, tough to argue with Bob’s point that the demise of the CIO has been greatly exaggerated.

Urgency in Enterprise Tech

During the Workday Predict and Prepare videocast in December (see full replay by registering here) I made the point that enterprise tech can still learn plenty from consumer tech especially as it comes to new product launches and customer adoption cycles. I used the example of the Apple iPhone 6s launch – available to purchase within 3 weeks of announcement, and 6 million units sold in 3 days.

In contrast, as I described in a whole chapter in SAP Nation 2.0 enterprise vendors take years to roll out announced products, and then customers often take decades to adopt them.  I frequently fret to my friend Dennis Howlett how slowly even cloud vendors roll out new functionality, though to their credit customer adoption is significantly quicker given their mass distribution model.

It’s not just Apple. Rick Rieder of Blackrock nicely brings out the shrinking adoption cycles in most other product categories and how the adoption curves are increasingly vertical - much quicker spread across customer bases

Of course, it is not just software vendors, systems integrators and  project managers who plan multi-year implementation projects are just as guilty. Outsourcers who sell 7 to 10 year contracts are delusional. Seriously, they should listen to Geoffrey West of The Aspen Institute who has been creating a body of work analyzing why cities live on and evolve over centuries, whereas corporations only last a few decades. The Fortune 500 turns over much quicker than in the past. Over  75% of those on the list 50 years ago have been acquired or have gone away. The appetite for long term commitments has been shrinking accordingly.

Many things enterprise vendors could be doing to accelerate their own product rollouts and adoption

a) Use an internal KPI –what percent of our revenues come from products introduced in last 2 years? Relentlessly drive everyone in the company to improve that KPI. Ideally also report that publicly – though it will be embarrassingly low to start with

b) Don’t hype products which are half-baked. Seriously how has it helped IBM that it announced Watson 5 years ago? How did it help SAP to hype S/4HANA last year when all it could offer customers was some basic finance functionality, and that mostly in on-premise mode?

c) When the products are truly ready, launch them with lots of excitement and create adoption urgency. Nothing better than having customers line up for blocks and share selfies when they get their hands on a hot new product. Reward and recognize early adopters. Spread incentives and excitement through user groups.

d) Invest much more in R&D. And dramatically improve productivity of your R&D. Products cannot be accelerated any other way. Ignore Wall Street benchmarks about R&D spend as percent of revenue – much of that is based on steady state, on-premise history.

e) Create a “reverse innovator’s dilemma”. Clayton Christensen has created a vast body of work on how older products and business models conspire to hold back newer products. Don’t ignore that intelligence – use it to lasso your older products. Announce aggressive end of life dates. Have faith in your new products. Push your partners to invest in updating their skills in line with your newer stuff.

Too many tech vendors are sending confusing messages by continuing to milk decades old software, data centers, staff skills. Time to catch up to the world where same day deliveries are routine, and even skyscrapers going up in a month do not amaze any more. 

 

The Year of the Vertical

I woke up this morning to press releases from NetSuite and Infor from the annual National Retail Federation show in New York, announcing new retail customers and investments. It is a rapidly changing industry with omni-channel options, mobile pays and beacons in stores, same day delivery and many other innovations.

Last week at the Detroit Auto Show, Ford announced an app which has elements of GM’s OnStar, Uber, Apple Pay – way more than feature/functions in their F-150s or Fusions it is about “how to make consumers’ lives easier during those 900-plus hours a year they spend in a vehicle moving between home, work, school and social events.”  Cheap gas and cheap interest rates helped make 2015 the best year ever for US car sales, but it is an industry in dynamic change with crossovers, autonomous driving, electric batteries, shared rides and many other conflicting trends. 

At the Salesforce Analyst Summit a couple of weeks ago, there was plenty of discussion of their industry extensions via partners like Veeva for pharma and Vlocity for telcos.

As CES was winding down I passed through Las Vegas and met some executives who talked about MiC2025 – China’s vision for next-gen manufacturing and shop floors, their response to Germany’s Industrie 4.0 and GE’s Industrial Internet.

As I continue my book research I am talking to executives in accounting, advertising, agriculture, banking, energy, education, healthcare, legal and many others on the impact of automation on their sectors.

And we are only in the middle of January. I am looking forward to events like Oracle Industry Connect and others which focus on technology trends in various verticals. I am also projecting several more industry announcements from software and outsourcing vendors this year.  

The Chinese will welcome the Year of the Monkey in a couple of weeks. In the enterprise apps market, I think it would be more appropriate to call it the year of the vertical.

Technology and Inequality

Every time there is a big lottery drawing, I wonder why as a society we don’t make a few hundred millionaires, rather than award the big prize to a small group of people. While China and the market meltdown will dominate conversations this week at Davos, it is a fair bet global inequality and the work of economists like Thomas Piketty will get plenty of play. It is a Presidential election year in the US, so we will be hearing plenty about wealth polarization. So, yes economic equality has been on my mind recently, especially as I continue research for my next book on automation and trends like the gig economy have on the future of work .

What’s interesting is much of the research on automation tends to focus on job losses that come with every wave of technology. But few seem to focus on the new categories of jobs and the wealth that technology creates. In our lifetimes, we have seen the Chinese create what is now the largest middle class in the world: “In 2000, the country’s wealth was similar to that of the U.S. circa 1939, the report found. By 2015, it had expanded to the level of the U.S. in 1972, effectively accomplishing a 33-year leap in less than half the time.” Much of that has come from manufacturing, electronic and other technology. India ‘s software sector has been a catalyst for a vibrant middle class. An Amazon exec tells Fortune “The size of opportunity is so large it will be measured in trillions, not billions—trillions of dollars, that is, not rupees,” Japan, S. Korea, Singapore have done similarly with biotech and other technology.  Ditto with many E. European countries.

Of course, in many of these countries, and in Africa and elsewhere, there are truly destitute folks. So, much more needs to be done and can be done by applying STEM rigor to their infrastructure, agriculture and other sectors. The problem, is we have a tendency to play Robin Hood to redistribute wealth, or in the case of automation, try to slow down its pace.

As Paul Graham, the co-founder of Y-Combinator (which has created quite a few millionaires with the startups it has funded) writes in his passionate essay “let's attack poverty, and if necessary damage wealth in the process. That's much more likely to work than attacking wealth in the hope that you will thereby fix poverty.”

And as we focus on “bottom of pyramid” poverty, I was struck by comments by Brazil’s ex-President Lula in a Foreign Affairs article on his Bolsa Familia initiative aimed at its very poor (which after a decade the magazine says is surprisingly successful)

“With all due respect to experts and academics, they know very little about the poor. They know a lot about statistics, but that’s different, sabe?”

Graham makes a similar point

“Except in the degenerate case, economic inequality can't be described by a ratio or even a curve. In the general case it consists of multiple ways people become poor, and multiple ways people become rich. Which means to understand economic inequality in a country, you have to go find individual people who are poor or rich and figure out why.”

Taking Graham’s point further,  the impact automation technologies (machine learning, robotics, wearables, 3D printing, digital publishing) varies dramatically by industries ( I am looking at agriculture, accounting, advertising, outsourcing, shop floors, and many other sectors)  and countries. I have to keep reminding myself to ignore politicians and economists who opportunistically or smugly talk as if they truly understand the impact technology has on work and on economies.

SAP Nation: More of the same

Somebody asked me recently if SAP was surprised by the many customers who spoke out loudly in the two volumes of SAP Nation. I said I did not think so – I had been telling SAP executives in person about the issues for years. They were unable or unwilling to manage the runaway economy that has grown around its on-premise products.

If anything, I was even more discouraged in 2015. The massive cloud investments SAP has made (acquisitions of SuccessFactors, Ariba etc) in the last few years are not changing the company’s revenue mix dramatically (prelim 2015 numbers show cloud  revenues at 11% of total, up from 6% for 2014). A majority of its new S/4HANA customers are NOT looking at the cloud option. They quote immaturity of SAP’s cloud, no migration support for previous customizations, and the confusing rollout of S/4 functionality.

Mercifully, SAP has started to de-emphasize “Simple” in its product naming, but the branding genius has replaced that with intuitive names like “edition 1503” and “1511”. In a humorous note, Kuen Sang Lam helpfully suggests they add the auspicious Chinese number 8. (btw, I was rolling on the floor when I read his comment cautioning early adopters “I have eaten “fugu” and it was great, but I was the number 259,366,487th person who has eaten it and staying alive to tell you about it here.”)

Before you try to figure out if 1503 or 1511 were picked because they are prime numbers, save your brain cells to make sense of this note by Monika Patel about what’s in and not in “1511”. I bet every CIO is clamoring to try out that fugu!

End result – SAP will continue to be an on-premise, Business Suite haven for years to come. Nothing wrong with that, if the economy around that was not running at over $ 300+ billion a year. In fact, it is music to the ears of SAP’s traditional partners.

Barring some miracle, I do not expect SAP to do much better in 2016. What that means is customers will have to watch out for themselves and accelerate the 9 strategies I described in SAP Nation 2.0 – ring fence SAP with clouds, 3rd party maintenance, two-tier ERP etc. to shield themselves from the continuing-to-run-away SAP economy.

Like I said – more of the same.