deal architect

No, the cloud model is not dead

The meltdown of stocks like LinkedIn, Tableau and Splunk is leading some people to say “cloud is the new dot.com”.

To start with, the term dot.com brings painful memories. 2003 was by the far the worst financial year for our family. My dot.com startup failed after 3 years of trying and I had capital write offs in addition to the shockingly low salaries we had put ourselves on to conserve cash for the business. So, I feel the pain of many in the tech business as the NASDAQ meanders down.

But most cloud companies are different from the dot.coms of the early 2000s. In the dot.com world we had products but did not have customers – or at least not enough of the latter. For cloud companies, it is the reverse. There are literally hundreds of thousands of companies who are trying to beat down their on-premise costs – so there is little shortage of potential customers. The problem is more of pricing and product.

A few years ago, cloud economics were blindingly obvious. Many cloud vendors now want long term contracts, ignoring the nearly quarterly price/performance improvements someone like Amazon Web Services continues to deliver. They are also associating with old school partners who are making their economics look even less attractive.

Too many cloud companies are also trying to sell back office hr, general ledgers, budgeting, sales force automation, basic IT compute and storage features. And many on-premise vendors have caught up with me-too products in those areas. There are wide open industry and geography opportunities for them to pursue instead.

The pricing is easier to fix – if cloud vendors can be modest and go back to what worked for them in the past. The product extensions will take a little longer but it’s blue ocean stuff. They will find wide open,  differentiated opportunities if they make the investments.

I cannot explain the vagaries of capital markets, especially one where China and energy trends drive valuations more than underlying technologies. For most of my career due to ethical and independence reasons I have stayed away from investing in companies I follow.

But I can tell you what I advise customers and vendors – the cloud game is still only in its early innings.

SAP: Help me help you

Shaun Snapp writes

“It is now common to hear about "HANA fatigue." For four years just about every SAP conference has been distinctly HANA flavored. One of my clients told me of her experience of at one SAP conference where the HANA pitch was so strong it took on as she described it a "cultish vibe." That is a signal from the market to be aware of.

SAP can only keep talking about something for so long before either the audience accepts it, or rejects it and it is time to move on. That time is approaching for HANA. This is not to say that SAP won’t continue to improve HANA, reduce its price, and increase its implement-ability, but that its probably time for the marketing emphasis to change to a new topic.”

I have written plenty about SAP’s drift to platforms and tools like NetWeaver and HANA in my 2 SAP Nation books (btw Amazon is running a half off sale on the Kindle copy of the first book this week), and cannot disagree with Shaun’s sentiments.

Given that HANA is the heart and soul of its next-gen S/4 application products, it will take more than a change in “marketing emphasis”. S/4 may have to start supporting other in-memory databases so the applications are not solely tied to the fate of HANA. To give HANA a fighting chance, SAP will also have to make up for the  lack of systems management and talent infrastructure around it. My books cite customers who say while they will consider HANA as an analytical tool if priced better they are nervous about it as a transaction engine because of those concerns. If you are not confident you can recover within seconds you are unlikely to put your books of record on it.

I would say beyond HANA, SAP has broader fatigue problems. Customers tell me they are constantly hounded to buy more from SAP – it could be SuccessFactors, Jam, Concur or HANA. SAP still has plenty of customer loyalty, but they want SAP to help them squeeze out much more out of the millions they have already spent with SAP in the last decade or longer, not be pressured to buy even more.

If SAP can focus on helping its customers manage the huge surround costs around the existing software, customers will happily spend a portion of those savings back with it.  “Help me help you” is what customers are telling SAP.

Will SAP listen to that or will it continue to keep saying “The Answer is HANA”?

Japan: Man-Machine extremes

As part of my book research on automation and impact on jobs, I have been studying Japanese society. As Anthony Bourdain once said “Rigorously conventional on one hand, batshit crazy party animals on the other, Japan will always confuse outsiders looking in.”

It is a fascinating contrast in artisan skills and technology leadership.

There are master craftsmen – Shokunin – like metal smiths who try to recreate samurai swords using primitive, small lot steel and months, even years of flattening and rolling the blades. There is little written documentation to guide them to emulate the masterpieces which date back over a millennium. There are the intricacies of bonsai, the manicure of dwarf plants that the Japanese took from the Chinese and enhanced. There are sushi chefs who demand the best sumeshi, rice seasoned with vinegar, and served at body temperature. Not just any rice – those grown in mountains, again related to temperatures the grain was conditioned to.

Of course for each of these artisan masterpieces, there are mass produced options. You can buy “Mall-sai” at your local Ikea - S-curved tropical ficus plants. Conveyor-belt sushi is leveraging the magic of sensors, Big Data and magnets to bring much more affordable seafood to the common person. You can buy much more affordable, and handmade katana swords made in China. 

In artisan communities in Japan, the skill is handed down from master to apprentice over years. The goal is to produce disciples who improve on your craft, so as not to disappoint your master who taught you when you meet them on "the other side".

Then there is legendary Japanese service. Shop assistants and hotel staff greet customers with irasshaimase and bow to them. They would be embarrassed if a customer saw them fiddling with a mobile device. You don’t tip a Japanese server or taxi driver – they would be insulted. Some people complain the service is all rules-based – very difficult to get custom orders or service, but the attitude of respect for the customer is hard to find anywhere else in the world.

On the other end is Japanese fascination with automation beyond conveyor-belt sushi. Japan has the highest number of vending machines per capita – and they don’t just dispense sodas or cigarettes. You can buy panties, plants, sushi – just about anything from these machines, 24x7. A country with a rapidly aging population and not enough young workers (and a country which is not that open to immigration) is turning to all kinds of service robots – carebots aimed at the elderly. A country which has exported industrial robots for decades is pioneering all kinds of humanoid robots.

Toyota announced at CES in Vegas last month about its large investment in AI and robotics and is betting heavily on autonomous cars. Mazda is betting the other way that a portion of world’s drivers will always love driving cars – what it has branded “zoom zoom” over the years.

To me, the contrast in those two companies and broadly across Japan is a good reflection of state of automation. For all those who worry about jobless futures, it allows me to say societies evolve slowly and humans find plenty of niches to keep perfecting their craft even as technology and automation introduces it to a much bigger audience.