deal architect

SAP Nation 3.0

People ask me all the time if I have plans for volume 3 in the SAP Nation series.  I tell them I am waiting for a turnaround in the SAP economy. A noticeable one. For reference, my models showed the economy running at between $ 200 billion all the way up to $ 700 billion a year if you include end user costs and amortization/write-off expenses. That makes SAP Nation one of the largest economies in the world – and a boat anchor for its customers.

I wrote volume 2 because I thought S/4HANA was going to be SAP’s way to shrink the burden. A year later, with a confusing and very slow rollout and mostly on-premise deployments, it actually threatens to make the burden worse. It could leave customers with a massively fragmented landscape. The irony is SAP conquered the world in the 90s by collapsing hundreds of departmental solutions. Now it is the “fragmenter-in-chief” with its myriad acquisitions, not yet integrated and the gradual S/4 availability. It also threatens more lock-in as it pushes HANA after decades of supporting database portability.

As a result, I am becoming more convinced the turnaround will not come from SAP or its partners, but from actions SAP’s customers take over the next few years. As I go around the country and present at Rimini’s executive briefings and as I meet executives at cloud conferences like those of Plex, NetSuite and Workday, I get more proof points.

I have heard from several Rimini customers two striking things – the moment they switched maintenance away from SAP, their ticket volume went UP. SAP would fight them, would not support customizations and overall took so long to resolve their issues that they quit opening new tickets. Customers tell me their maintenance costs amortized over the few tickets SAP resolved work out to $ 50K or more a ticket. With Rimini they are handing tickets off early and often. The other remarkable thing they tell me is they thought they would save half off the maintenance bill with Rimini, but they are seeing incremental savings from lowered burden on their level 2 help (either their own staff or outsourced), from delayed upgrades etc. The savings are actually 3 to 4 times what Rimini promised. Rarely have they been so pleasantly surprised in SAP world with its usual overruns.

At other conferences I am hearing customers repeat back to me the “coping strategies” I had identified in both volumes – ring-fence SAP with cloud solutions, tw0-tier ERP, rethink talent model, move infrastructure to open source and cloud models.   

Trust me if they are telling me their experiences, they are giving SAP plenty of chances to change course. And it’s not just onesy-twosies – its hundreds and thousands of customers. SAP response is to re=negotiate with these customers or threaten them, but not fix the underlying problems.

SAP version of “turnaround” is the Wall Street version measured by whether it can sell more, rather than the customer version – can it reduce the burden they face?. So it keeps pleading its customers to buy more of HANA or SuccessFactors or Ariba when customers want value from their significant prior investment.

Unless there is a significant shift in SAP’s approach, SAP Nation will gradually shrink, but it will become less SAP Nation and more Rimini/Workday/NetSuite/other cloud Nation.

So here’s my big question. Ethically, when I do write that third volume, could I still title it SAP Nation 3.0?

An upbeat PowerPlex

I spent a few days at Plex’s user conference in Detroit this week. For me, the backdrop was the invigorated city as I describe here. That amplified the many upbeat conversations and presentations I witnessed at the event.

Jason Blessing, CEO invoked the WEF meeting in Davos earlier this year where the theme was ‘The Fourth Industrial Revolution”. While the world’s movers and shakers may just be coming to grips with that concept, Blessing nicely pointed out against a backdrop of smart watches and digital calipers “These are all things Plex customers are doing TODAY”. On the show floor, there were smart glasses from Google and others and smart helmets from Daqri.

I heard the term Mittelstandt mentioned a couple of times during the event. That is the legendary backbone of German small manufacturers and the PowerPlex audience of 1,200 at Cobo Hall, home of the annual North American International Auto Show, reflected the American equivalent of our manufacturing Renaissance.

Plex organized conversations with two customers, Quatro Composites and Polamer Precision who play in the aerospace sector. (Quatro also services medical and other markets). They both talked about explosive capacity growth in their businesses. The sky appears to be no limit for the industry as commercial aviation spreads globally, and as next-gen autonomous and space vehicles take off with a wide range of new applications.

Plex organized a visit to a plant of MFC Netform, a metalformer of components used for powertrains in automotive and agriculture. The squeaky clean plant emphasizes 5S manufacturing, and blends “operator led” autonomy with several Fanuc robots which do many of the dirty and dangerous tasks and proudly has a giant “Made in Detroit” sign above the floor. General Manager, Tim Cripsey, humorously described innovation and value creation as a tier supplier in the cut throat automotive sector.

In those conversations and during the plant visit you could see Plex used widely across shop floor and logistics functions. It is so different from countless other ERP implementations which stay at the headquarters and barely register with the manufacturing staff.

Beyond aerospace and automotive, in a humorous twist Blessing invited a food  and beverage customer, Green Flash Brewery on stage and had Genze, a Mahindra (from India) company drive up in their electric scooter and deliver some Green Flash beer. Genze is aiming for the last mile commute market with an all-aluminum frame and portable battery.

Plex is benefitting from the vibrancy and diversity of these customers. It is also expanding its market share in the manufacturing sector. The image below summarizes the impressive metrics Blessing and his team are delivering. 

Plex is also growing up as a company. It has transitioned from a largely customer funded model to a Plex funded one and is more modern cloud vendor than systems integrator. Some of the early customers miss the development support they used to get, but none complain about the growing functionality they are getting as part of their annual subscription. The opportunities for Plex’s services partners to step up into extension roles are pretty clear.

Overall, an enjoyable and educational couple of days. Plex is evolving nicely, and the city of Detroit is enjoying yet another Renaissance. 

Seriously, SAP?

Note: SAP appears to have taken down the video I had embedded and written about in this post, but the point is still valid - why is SAP trying to guilt its customers into adopting S/4HANA?

SAP has a new spokesperson, Phil.

He is pretty slick: “there’s no such thing as being fashionably late to a paradigm shift”

He is also condescending to his lady boss. I hear he is doing a series, so in keeping with the current US Presidential race, I presume he will next talk down to a minority, a disabled person etc. :)

Seriously, though does SAP think it can guilt its customer base by telling them they are late in adopting S/4HANA? How are they late when SAP has only delivered some financials and some logistics functionality so far. Probably less than 10% of the Business Suite and IS footprint. Has anyone been given a tour of the cloud data center where thousands of customers can run S/4HANA? Has it been benchmarked against today’s world class data centers defined by Amazon, Facebook, Google, Microsoft and others? I could go on, but I had raised many questions in SAP Nation 2.0 which is an in-depth look at S/4HANA

SAP customers, here’s a thought. Register for the Rimini briefing over the next month in cities across the US and Canada. I will be presenting on S/4 and alternative strategies customers are adopting as they wait for S/4 to mature. They are also giving out free copies of the book.

Come see us - Rimini has lined up excellent places for the briefings like the oldest inn in N. America in Montreal, and at a tall ship in Philadelphia.

 

 

 

A Tribute to Harald Stuckert

Harald Stuckert passed away a couple of days ago. It was a shock to everyone who knew him, and especially so to me. I had just seen a Facebook entry with him commenting on The Masters. He loved golf. I had received an email from him on Friday as soon as he read my post on SAP R/3 and said “I must say you're right and you spoke out of my soul!”

I had met him over the years but more frequently in the last few years as he started spending time in Bradenton, just south of where I live. His first project in the US had been at my Price Waterhouse office in Tampa and he had grown fonder about our part of the world. We would meet for a meal every few months and I would bounce my book thoughts by him. His reactions always told me if I needed to change course. He was too modest – never allowed me to quote him directly, but he would point me to others who could validate what I was looking at.

In those conversations, I found he was one of the most connected people in enterprise software and in outsourcing. At SAP he was one of the senior statesmen which made it so impressive in the 1990s. He was one of the first professionals who learned how to use global delivery firms – many from India – effectively. Recently he had been advising Infosys on a variety of strategic areas.

But it was the non-business stuff which was more fun. He would talk about his beloved dogs, the way too much time he would spend on Emirates Airlines and how they spoiled him. I would always wonder which of his cars he would drive in. Once he came in his giant RV and when we finished he appeared stuck in a cramped parking lot. I told him I would drive him home, and he could retrieve it the next day when the lot was emptier. He made me stand in the back to guide him and I watched with mouth open how he managed to wriggle the monster out. 

He was always smiling. In our industry that is such a rare trait.

Farewell, my friend. I was looking forward to many more conversations with you.

The art of the analyst “mini-summit”

I have written before about well done analyst summits here and here. Last week I had the opportunity to be part of a very well done mini-summit – a little over 4 hours – just before the start of Oracle HCM World. Walking in, I was cynical much could be accomplished in that compressed time frame but Oracle managed to squeeze in very different perspectives

a) Chris Leone, SVP Product Development for HCM, did a rapid fire start – he provided factoids on Oracle momentum like 100 new go-lives in quarter, 15 million+ employees on Oracle HCM products, 30% attach rates as customers are buying other cloud functionality in addition to HCM. He demoed new functionality as in the family of work/life apps. His passion balanced with the crisp manner in which he marched through 50+ slides like one above set the right tone. In a nice touch, his slides were available for us to walk through as Chris spoke.

b) Next there was a panel which provided the field perspective. Tony Kender, SVP Global HCM Cloud commented on the competitive landscape, and handled tough questions like how Oracle’s past reputation as an aggressive on-premise vendor affects its cloud competitiveness. Bertrand Dussert shared what he hears from HRO at large customers he is always visiting. ML Maco and Scott Stoll provided more of the mid-market perspective.

c) Differently from other summits where vendors show product demos, Oracle allowed each of us to go hands-on an iPad. Even more impressively for a vendor which often has confusing NDA guidelines, I took screenshots on my tablet and they happily emailed them to me – one is featured below

d) Mark Hurd, CEO then took questions. Then and later in his keynote, he provided details of Oracle’s employee demographics (the mix of 18% Baby Boomers, 44% Gen X and 38% Millennials surprised many of the conference attendees) and the demands Oracle’s recruiting (3 employment applications every minute), training and other needs puts on its use of the HCM software.

Well paced, lots of different perspectives – look forward to more of these “mini-summits” from other vendors.

Part 2 of Interview with Malcolm Frank of Cognizant: Davos, Design Thinking, Automation

Continuing my interview with Malcolm Frank, EVP of Strategy and Marketing at Cognizant. Part 1 can be found here

Malcolm, you were at Davos in January. What did you hear from the European or from the global perspective which is different from what you hear from US clients?

In individual conversations, there was a lot of focus on the relative performance of economies around the world. For example, a German executive was talking about the political mood in the US, observing "Half of your voters are angry, on the left with Sanders or the right with Trump. Yet America right now is economically the envy of the world. If the country that's doing the best is that upset, then what does that mean for the rest of us?" I thought that was a very thoughtful perspective.

When the conversations got down to business many focused on "How do you build a digital enterprise?" We saw that in particular in industry discussions. With financial services, there was a lot of interest around Blockchain. With healthcare, how do we rebuild national and individual plans based on newer technology? This year's theme at Davos was the Fourth Industrial Revolution. Some joked "Oh, I thought there were only two before, maybe there were four already." However, most everybody agreed it was just a question of how fast it's going to move and how broad and deep the impact going to be. Nobody was questioning the fundamental notion that we are at the beginning of a new, digital economy.

Design Thinking is another buzzword in your sector. Cognizant is setting up "Collaboratories" around the world - I enjoyed a lager at your midtown Manhattan one. Are those driven by the design thinking trend?

Design thinking is absolutely taking off. Yet some are confused as to what “design” means in the new business context. Think of big D design as opposed to small D design. Small D design we've been doing since the web blossomed in the mid '90s. How does something look on a screen? How will be it rendered on a mobile device? That's been the classic design if you will. What we're talking in Big D is business model design. How do you design new experiences for customers in a completely new digitally-based process?

For example we're helping several banks with a branch to the future. How do we blend next generation mobile banking with the physical branch? There's the use case when you're in the parking lot. The manager can say, "Oh, it's Mr. Mirchandani. I think it is something about his mortgage." When you walk in, there will be a manager with a tablet who will just grab you at the door, pull you into her office, solve the problem right there. Those are the types of things that require true design thinking, when we bring the best of the physical model and merge it with the best of the digital model.

Do clients look at firms like Ideo or Frog for the design and then bring you in? What is the competitive landscape there?

It's interesting. Folks look at it from one of two angles. Some will turn to classic design firm as you're describing. The problem is often they don't have the industry expertise. They certainly don't have the enterprise technology chops, and don’t focus on critical, but more prosaic, issues like process mapping and change management. On the other hand there are firms that come from a more technology or outsourcing model, that are acquiring their way into this business, organically building a way into this business. Ultimately, I think it just really depends on what the specific issue is for the client and who they're more comfortable with in terms of starting on the design process. Think of it as the difference between designing products vs. designing customer experiences vs. designing new business models.

Malcolm, let's talk about moving away from headcount based to IP-based business models, the holy grail in outsourcing. Are people still talking about it or are firms doing something about it?

Yeah, there's certainly a lot of talk about it. I laugh because I remember there was a lot of talk about this when 4GLs were new. Same when object oriented programming was maturing. Ditto with the first generation of the Web. There's a part of me that says the grass is always greener on the other side. Product firms look at us and wish they did not have to worry about waiting for contracts on the last day of the quarter. And we look at valuations of product companies and drool.

In today's world I think there are 2 things to think through. One is implementing bespoke digital solutions like we've just been talking about the past few minutes. Those, from a delivery standpoint, at least as they're currently defined, won't look much different than what we've been delivering in the industry from the past 30 - 40 years.

I think the big delta we have in the industry, today, is around platforms. Not for individual clients, but a one to many model for white spaces in specific industries. You are seeing a number of these popping up. It's still quite early, though. They could mature over the next couple of decades or at the other end of the spectrum, they could end up being like the 4GLs, where we said, "Uh-oh, it seemed like a good idea on paper but it didn't actually work out that way,"

Okay, since I am working on a book on automation and impact on various occupations, what are you seeing?

We think automation is a big deal. If you look at it from a client perspective, this may be the largest opportunity in a generation to rethink their businesses and find cost savings within their operations. We've already seen with some of the robotic process automation (RPA) that we've been implementing there are tremendous cost savings that be achieved. That is an area that I think clearly merits watching. It's also has impact on our own delivery model given we are labor intensive. I think for us, our only risk is ourselves - that we don't move quickly. I see some clients who try to hide behind regulation or security considerations to protect their business model. If those are the only moats left around you, that's pretty frightening.

I always worry will our industry have its Uber moment? I'm always paranoid about that.

Yet I don't see a disruptive competitor rushing in and gobbling up lots of market share. The digital opportunity is driving so much opportunity and change that you may see some firms gain some momentum and some slow down. If you draw a circle around the top 20 firms in the industry, it's still going to be that list. It's just going to be like the soccer league tables or Major League Baseball standings. Some of them may race to the top. Some may drop to the bottom quickly. But it will still be those names. That's how I'm thinking about it right now.

Knowing Malcolm, he thinks endlessly about such trends and he has decades of experience in the industry to draw upon

A Digital Assistant for the Enterprise

Business Insider has a nice article on how the Echo has become a huge success for Amazon. Its Alexa is the digital assistant in many a household as she helps them play music and with new extensions like Dot and Tap reorder items and do  other handy stuff. Siri Eyes Free keeps me entertained and communicate safely when I drive – I use it to call and text people, listen to voice mail, provide sports and weather trivia. Others are addicted to Microsoft’s Cortana or Google Now.

Digital Assistants are a vital part of our daily lives.

Unit4 would like to also make them part of our business lives. At its Connect conference in Amsterdam this week it announced plans for its version. It’s goal: “Using pattern recognition to understand the behavior of the user, combined with data from a number of sources, the Digital Assistant performs useful activities by itself. “ It’s part of the evolution of the Self-Driving UX it announced last year, and growing relationship with Microsoft and leverage of its machine learning prowess (see my note – AI is the new UI).

I asked Unit4 for use cases they see and you can see a simple one in the mobile screen shot. They plan more complex ones around categorization of invoices according to risk profiles, pre-population of expense reports and time sheets based on historic data, and discount proposals based on customer risk profiles.

At this point, it is just a vision statement, but cannot wait to see the roll out. We are finding such creative uses for these assistants in our homes and cars, I cannot begin to imagine how many more scenarios business users will dream up.

S/4HANA–the “anti R/3”

I recently heard from the Price Waterhouse partner who was instrumental in our moving to Tampa in 1990. It was nice to catch up and it took me down memory lane. In many ways, my group was at the epicenter of the emerging client/server application market. In 1992, we surveyed all the new players like PeopleSoft and incumbent ones like Dun and Bradstreet Software and that led to the publication pictured above. It also led to a full feature spread in InformationWeek and other press coverage.  That in turn led to the recruiting call I got from Gartner which I joined in 1995.

I remember the conversations with SAP about its client/server product, R/3. There was a quiet conviction that its 3-tier architecture would scale even as the market was unconvinced anything on UNIX boxes could scale. There was a fiery determination that stored procedures and other code embedded in database were evil. From my experience with R/2 at a previous assignment in London I knew if R/3 was anywhere as functionally broad and globally competent, it would squash the competition. Its integrated nature would allow customers to de-fragment their application portfolio.

Sure enough R/3 did all that

I could also see at Price Waterhouse and much more clearly later at Gartner that SAP was clueless what happened to its code after it was shipped. It could not see or chose to ignore the havoc its partners and its upgrades were causing at its customers. 300+ pages in SAP Nation describe that pretty vividly.

So, when S/4HANA was announced last year, I thought it would continue the good that R/3 brought the world, and offset the evils it also wrought.  Since SAP had seen cloud vendors like Workday and Salesforce, and its own cloud acquisitions adopt a much more efficient delivery model for over a decade, I thought it would adopt and improve their approach.

Now, I am not so sure

Unlike with R/3 there is no firm conviction about the architecture. Now SAP tells customers we have multiple models – take your pick (see the 5 editions it recently announced pictured below).

It has given up its commitment to database portability. Code embedded in HANA is efficient it says, not lock-in, not evil. Systems management tools around HANA, oh they will come eventually. The in-memory switches of other databases – don’t believe them.

And unbelievably, SAP, the one which helped companies de-fragment their application portfolio, has now become the fragmenter-in-chief. It has tens of un-integrated acquisitions, with no clear, long term road map of how S/4 will be rolled out. The disparity between the 5 editions will keep getting worse as some will have 4 releases a year, others one or fewer and customers will adopt them at their own pace.  

I am sure somewhere in Walldorf, someone can keep all this straight. My only hope about all this is since S/4 is the anti-R/3 on so many fronts, that it will also kill the massive, bloated ecosystem that R/3 created.

I know – you want some of what I am smoking

(W)ring out the old

Starting next week, I will be presenting themes from SAP Nation across the US and Canada as part of the Rimini Executive Briefing series “Unleash your SAP X Factors” (register here).

It will be good to discuss with SAP customer executives the many ways for them to wring out fat from that spend like the two books in that series described in detail.

I am sure these executives already have plenty of ideas about how to invest the savings that the briefings will help them identify. But I have even more ideas for them in my next book which should be out later this summer. I had a chance to test market some of that research at the Information Systems and Operations Management forum at U of Florida in Gainesville this past Friday. I discussed various automation technologies and impact on many jobs as the two slides below outline.

I look forward to the SAP X Factor briefings over the next 2 months. Hope to see some of the blog readers in the various cities.

And then in the Fall, hope to see more of you as I discuss themes from the next book.

Interview with Malcolm Frank of Cognizant: Davos and Digital

Malcolm Frank is, in my opinion, the best "analyst" on the outsourcing sector. He is not an analyst per se, but as EVP of Strategy and Marketing at Cognizant, he has a ringside view of trends in the sector. I make it a point to spend time with him at least twice a year and listen to him present and read what he writes every chance I get. I recently caught up with him on what he gleaned from his time at Davos, the digital and design thinking buzzwords in the market, automation and other trends in the sector. Here is part 1 of our conversation.

Malcolm, "Digital" is a hot theme with every outsourcer these days. Seems like you have been talking Digital for 5-6 years. Now that every one else is talking Digital, how is your thinking evolving?

When it comes to the "Digital" buzzword, I have a bit of a giggle about this. We're all going to look back a few years from now and say collectively, "Oh, that was so 2015." If you view it from the CXO perspective the term is still too ephemeral. Rarely do clients roll out of bed and say, "I have to solve a digital problem today."

You can see also see how the SMAC (social, mobile, analytical, cloud) stack has evolved in the market zeitgeist year over year. Around 2010 cloud was the rage, as it seemed everybody was marketing solutions around the “cloud” to the point where the term became meaningless. I think clients in particular got a bit annoyed by it.

Then around 2012 it was about building the social enterprise. I remember Salesforce.com focused on the concept and then a year later they pulled the plug on that and did not use the term again. Then in 2014 the market conversation seemed to focus on Analytics and Big Data.

Maybe I'm showing my age but I also struggle with the "Digital" term because I keep having visions of Robert Palmer and the demise of Digital Equipment Corporation.

All of that said, I think we're moving in the right direction. In the next couple of years you will likely see more digital solutions become crystallized and clients understand them better and how to procure them. For example, a bank will likely talk about to vendors about robo-advisory automation solutions as opposed to something “digital.”

Malcolm, I think you are being modest. For years now, you have helped guide Cognizant through its "Three horizons" strategy and you wrote the Code Halos book couple of years ago. Surely, that counts for some competitive advantage?

We think it's served us well in a couple of fronts. One is certainly in terms of establishing mind share and thought leadership because this is important to us. We're thoughtful about it as a company. We had our Center for the Future of Work. We've been at that now for 5 or 6 years. We have some very talented people as you know. That's certainly has gone well for us. It allows to see what's real in the markets and what's just talk.

Around the Code Halos book, I think the key nugget people picked up was that any person, place, or thing is going to have a virtual life as well as a physical life. It has its digital twin. We have seen a number of our clients pick up on that. It resonates with them. That clearly has been a very helpful construct.

I think a third construct that has worked well for us are both internally at Cognizant and for clients is our 3-horizon model. We hear a lot of talk today about two-speed and dual-track IT, and the 3-horizon model certainly applies to IT. Horizon 1, at least the way we have structured it applies to your core operations. These are things that are old to you and they're old to the market. The mandate there is run those better, faster, cheaper. Find ways to increase quality and reduce the cost.

Horizon 2 applies to things that may be new to that company but they are understood in the marketplace. We saw that in the automotive business with SUVs; firms like Chrysler had been making Jeeps forever. You had new entrants like a Volvo, BMW, Mercedes, Lexus, that came in about 15 years ago and said, "Hey, great category. It's understood in the market. It's just new to us."

There is a lot of activity there in digital. We see clients looking at use cases for their businesses which mirror the FANG (Facebook, Apple, Netflix, Google) vendors. That's a Horizon 2 model.

Then Horizon 3 is invention that is something that's new to you as a company and also new to the market. That's where we see a lot of our clients in banking, healthcare, insurance, and retail who are looking to reinvent their sectors. How can we think out of the box and apply digital and create completely new offers?

It's been a very good model to help clients to manage the change around them. Once you see an activity fits into one of the 3 Horizons, then you can get the appropriate model, staffing, budgets and goals to go against it. I think those are some constructs that have helped us in the marketplace to get more credibility in "digital".

Malcolm, if you think back to the 90s, "digital" back then spawned a variety of new consulting firms like Scient and Viant. In the Horizon 3 projects are you seeing a new category of competitors like digital agencies or design firms? 

Yes and no. You do see some new entrants, but it all depends on how the client frames the problem. If they define it as a design issue, you start to see some of the design firms showing up. If the client is truly just trying to figure things out, they may say, "Hey, I don't want to talk to the usual suspects. Why don't I go talk to one of these new strategy houses that is focusing on digital?" Others may define it as a data problem and go "Hey, that's big data. We need to get our arms around on this data exhaust and turn it into a business value." They may go to a shop that the focuses on that.

That said, as a general trend we see the market moving back to the usual suspects, meaning larger players like ourselves who sit at the intersection of business and technology. When clients get serious about digital – in moving the needle in their companies – they go beyond issues like planning, design and understanding the new technology stack. They say things like: "I need to figure out the business process change, I need to have somebody that has a vertical industry expertise to understand the regulatory issues, I need to have somebody who understands where the bones are buried in my internal IT. At the end of the day, I may have systems of engagement or systems of intelligence that are on the digital side, but they all have to tie back to the systems of record. I need somebody who knows that." and "If I want to do it on a global scale or at least on a broad scale, I need somebody who can do that heavy lifting". We’re finding that’s increasingly how clients are framing the problem.

More in Part 2 next week