deal architect

I hope this is not SAP Nation 3.0

Nucleus Research just issued a report which will make SAP wince

SAP’s new marketing tagline – run simple – is not only grammatically incorrect, it’s grossly inaccurate. Nucleus analyzed the experience of SAP customers and found varied – at best – satisfaction with existing solutions and great reluctance to adopt SAP’s latest applications. Six out of 10 existing customers wouldn’t buy the same solution from SAP again. When asked if they would consider a future solution, in all markets except ERP those same six out of 10 indicated they would not consider SAP’s future offerings. Perhaps more telling, for SAP’s core ERP market, 9 out of 10 customers indicated they would not consider a future investment in S/4HANA and appear to be following a slow tapering-off strategy as they evaluate other opportunities in the market.

In a FAQ, Nucleus added

Many customers provided more colorful assessments of SAP (SAP = “Stupid-Ass Program”) and its partners, the relative success of their deployments, and their view of SAP’s commitment to their success. While amusing and enlightening, we determined many of these more colorful comments might be viewed as more incendiary than supportive of an unbiased analysis

I am waiting for a turnaround to write SAP Nation 3.0. I would love to write a positive book in the trilogy. The way things are looking that turnaround may not happen for a few years.

In the mean time, I see SAP customers are driving their own version of turnaround. The 9 strategies I outlined in Volume 2 like Ring Fence, Two-tier ERP and Third Party Maintenance continue to gather steam.

Globalization 2.0–Taking it Global

I know a lot of people are upset with the UK. Lots of wealth destroyed around the world, Young Brits mad at older Brits, Scots mad at the English, Europeans upset with the Brits.

It’s important to not forget something remarkable happened with the Brexit vote.

From the WSJ

“Never has there been a greater coalition of the establishment than that assembled by Prime Minister David Cameron for his referendum campaign to keep the U.K. in the European Union. There was almost every Westminster party leader, most of their troops and almost every trade union and employers’ federation. There were retired spy chiefs, historians, football clubs, national treasures like Stephen Hawking and divinities like Keira Knightley. And some global glamour too: President Barack Obama flew to London to do his bit, and Goldman Sachs opened its checkbook.

And none of it worked. The opinion polls barely moved over the course of the campaign, and 52% of Britons voted to leave the EU. That slender majority was probably the biggest slap in the face ever delivered to the British establishment in the history of universal suffrage.”

Almost as remarkable is the fact that in the US two candidates from extreme ends of the political spectrum – Trump and Sanders - have picked up over 25 million votes in the primaries.

There is a definite anti-establishment sentiment in both democracies. And much of that is centered around a backlash against globalization. From the New York Times

“Trump, Sanders and those in Great Britain who ran the Leave campaign are tapping into an anger and anxiety that is clearly festering. Working-class folks in the United States are similar to working-class folks in Europe. And a lot of those working-class people feel as if the international economic system is not working for them and strangling the middle class.”

We cannot and should not ignore this as just some racist, old fart sentiment. The numbers are too large, the discontent too vocal.

Can we unwind globalization? No. Even the harshest critic has to acknowledge no generation ever in the history of mankind has seen so much product variety from everywhere at incredible prices and access to travel to remarkable places. It’s the other p - people, especially the volume of people, different from ourselves we are not comfortable with. It crosses cultures. Trust me, I have traveled to over 60 countries – it applies anywhere in the world.  In small numbers people different from you are a curiosity. In large numbers, they are considered a threat.

We have to manage the people volume and spread it around the globe.

The U.S. has had a quota of a million legal immigrants a year over the last couple of decades. However, the majority of these immigrants are admitted based on family reunification, not talent. They are the spouses or parents of talent-based immigrants. Instead of giving preference to talent, we have created new “lanes - added H-1B, L-1, and other types of "temporary" visas, or in the case of the agriculture and construction sectors, allowed a flow of undocumented aliens. Next, the annual H-1B limit the government announces is allowed to be exceeded with an uncapped flow of nonprofit and governmental researchers. Students on F-1 visas enrolled in STEM (science, technology, engineering, math) fields of study from accredited educational institutions in the U.S. are allowed to work for as long as three years as part of "practical training." The Center for Migration Studies, a New York City think tank, estimates we have 10.9 million undocumented workers. Many others believe we really do not have a good handle on how large that number is. The politicians keep talking about "comprehensive immigration reform" and "building walls," but the flow continues. Even for a country of immigrants, this has been unpalatable to the general population. 

In the EU, the issues are different. In the US, people are mobile. It is estimated 1 in 40 Americans moves across states every year. In Europe, it is much, much slower (interestingly, the English are the most mobile there) but the East Europeans are changing that dynamic. Then there is the floodgates of refugees. Too much, too fast.

But that’s nothing compared to the other changes we need. China has its Made in China 2025 initiative, India has its Make in India. They also need a Sell in China/India and Work in China/India versions. Ditto for Mexico, Brazil and many other countries. Trade has been too one sided. Labor flow has been too one-way. Their citizens should be allowed to enjoy the same benefits of globalization – more product variety, better pricing, access to more places.

That will mean we have to encourage our small businesses to export more. It will mean we have to encourage our young to go work in Chongqing and  Pune and places they could not find on the map today.

We cannot roll back globalization. We have to adjust some elements, but more importantly we have to spread it around the world. Ironically, we need to take globalization global. It’s way too unbalanced today.

Part 2 of Interview with Stephan Sieber of Unit4

This continues our interview with the new CEO of Unit4. Part 1 ran yesterday.

The Unit4 brand is much stronger in Europe than in North America. What's your vision for changing that?

In fairness, North America is already around 15% of our revenue. In 2015, we grew licenses by 20% and doubled our bookings in the region. Doubling bookings is not something too many of our competitors can claim to have done in the region.

We certainly have appetite for more growth. However, we also have to factor that it is expensive to grow brand recognition in North America. Many European companies have burned their fingers attempting North American expansion because it is a rather complex market. It's probably more homogeneous than Europe but still there are huge differences between east coast, west coast, and whatever, the states in between and so on and so forth.

Yes, we are reminded of that every four years as we go through the US Presidential primaries how diverse this market is

We are being selective. North America higher education, public sector - especially in Canada-,Professional Services are very promising. I would love to be in a position to do massive airport advertising, but we're still working on getting the cash for something like that.

How do you see your competitive landscape changing in the next couple of years?

I would say we have three different types of competitors. We have, of course, to compete against the big ERP players, like Oracle, SAP, Microsoft and to a lesser degree, Infor, Epicor and Sage. Next we have a set of local players that we see quite often. In the Nordics, it's predominately Visma. In the Benelux, players like Afas. Then last we have the vertical players, so in PSA we face Deltek. In higher education we see Ellucian, Jenzabar, Oracle, Workday and Tribal Group. In not for profit we're meeting Abila and even more verticalized special players. I think that there is no significant change to be expected there, at least for in the next two years.

What we definitely will be seeing is cloud players becoming more aggressive, which will also further drive the vertical offering. Take NetSuite in what they do in not for profit, take Workday with what they do in higher education. Plus, I think there is a growing number of smaller startup firms that offer very specific best of breed functionality.

At the end of the day I don't really think that this is fundamentally changing the competitive dynamics. What's changing is the business model. We are more moving into a true as-a-service offering, not only deploying technology as a service but deploying business processes as a service. I could imagine that in a few years from now, we could be selling student success, selling better ranking for universities, selling less project risk for service organizations rather than just selling a set of functionality.

Let's talk about your product side. What excites you as you walk around your R&D lab?

I would say there are many things that excite me. If I had to focus I would focus on two things. Number one is the deep vertical expertise that we have and the conviction that we get again and again that our applications have been built from scratch for service organizations. We've launched what we call advisory councils. We have them for industries and also horizontal capabilities like corporate performance management. In each advisory council we've selected between 6 and 12 customers from Europe and the same number from North America. We spent a day with them talking about what changes on their businesses and how can we support them better with technology. The expertise that we bring to the table combined with the expertise and the collaboration that we have with our customers, this is something that I'm truly excited about.

The second thing is our self-driving ERP concept and related plans for a digital assistant. Through our partnerships, predominately with Microsoft, we clearly see that there are technology components we can use and add our own algorithms and expertise to truly build applications that are different and provide a unique consumer-like experience. We are building applications that really support people to be smarter, to be more efficient, and ultimately to be more productive.

I strongly believe this self driving concept is something that is highly differentiating. This is something that can't be replicated easily because it requires more than just technological expertise. It requires the understanding of the industry, the understanding of human behavior in business processes, and emerging technology. Combining these three elements into something that is completely new and completely different is hopefully a big differentiator for us.

Interview with Stephan Sieber, CEO of Unit4

Stephan Sieber took over as CEO of Unit4 in April. He joined the company in 2014, after over more than a decade at SAP, including Managing Director of SAP Switzerland and Chief Operating Officer of the region DACH (Germany, Switzerland and Austria). He was also a member of the management team of SAP Germany. I had a chance to talk to him about the first couple of months in the new job and his vision for the company.

Here is part 1 of the interview

The first months must have been incredibly hectic. Please share with readers your initial thoughts from the new job.

First of all yes, it has been hectic, but in a positive way. I am doing two jobs - as CEO and continuing my old job as head of sales. My successor as head of sales will join us n early July.

In many ways, I am executing on a strategy that has been worked on for years. When I joined Unit4 in April, 2014, I joined initially as head of strategy. I think I was quite instrumental in putting the company on the journey that we have taken.

I think my biggest surprise is seeing the massive amount of opportunity in the market. Of course, I knew that in my earlier strategy job, but I was more occupied, to be honest, with a lot of internal work developing our operating model. Then I took over sales in mid '15 and I spent significantly more time playing outside with very tangible customer opportunities and prospect opportunities. Now as CEO, I can step back a bit from the more tactical day to day business and look at the market and the company from a more strategic point of view.

When I look at what is going on in the IT industry and how we can bring new technology to service organizations (Unit4's focus in verticals) it's just amazing to see the massive amount of opportunity that lies ahead of us. Our margin is improving quite nicely as a result of the changes in the operating model we have adopted, but even more importantly, our top line is trending the right way.

The previous CEO, Jose Duarte had a services background. You have a strategy and sales background. Is that causing any transition challenges for your organization?

I think Jose and I have a pretty comparable background when it comes to focus on sales and services. He was running a global services organization at SAP. This is something that I had not done but I was a general manager at SAP managing large regions and geographies and they had a strong service footprint as well.

Where I want to be different is to be even more specific in our vertical definitions. I think a definition like professional services is too broad of a target market. A law firm or a marketing agency or an engineering, procurement and contracting (EPC) are not comparable. I think we need to be even more specific on how we differentiate and how we help our customers to better manage their business.

Talking of your focus services industries - your higher education sector seems to be doing very well from the number of customer wins you keep announcing. Both you and Jose had identified a handful of other service verticals. Are you going to accelerate your move into some of the other service verticals, either via acquisitions or other investments?

As you know, till we took the company private in early 2014, Unit4 was run more as a conglomerate of technology firms than as a single global technology firm. We wanted to change this and make it a global tech leader with a global operating model. As part of that shift, we put acquisitions on hold and decided we would also change the style of acquisitions when we did them again. We didn't want to just acquire market share, installed base and recurring revenues. We wanted to acquire technology and also team members that help us to innovate and grow.

When we came across the higher education player, Three Rivers, it was the type of solution we’re looking for. It's state of the art. It's modern technology with mobile capabilities and embedded analytics and provides a 360 degree view on student success. It puts the student in the center of the application while allowing for multiple views of administration for the university.

Three Rivers was our first attempt at a different way to grow. From that point of view it has been a major success because as you rightfully pointed out we see the market reacting to that. We win a lot of new business. We see installed base customers migrating. We also see that we have been able to integrate this company in record time and to use the flexible platforms (for example, in R&D, but also customer support or our global deliver center in Lisbon for implementation services) to create synergies with acquisitions. From that point of view this is clearly the prototype or the poster child for what we want to do going forward and yes, you will be seeing us more active in the M&A space.

Don't forget though - we are still heavily focused on organic investments in our own R&D. Our CTO and his team are working on a completely new standalone professional service automation (PSA) solution. You could look at this PSA project almost like an acquisition that we did because we're putting additional, incremental teams, on top of the platforms that we have created.

Part 2 will run tomorrow

SAP finally has a marketing hit

SAP Marketing has had a rough patch. There was the obnoxious “spokesperson”, Phil that SAP had to hastily take down. There was the balloon imagery around SAP’s cloud. Someone forgot to think about the hot air connotations. There’s all the New Age “does your business have a soul?” ads that had people scratching their heads. More recently there was a 8 page color insert in the WSJ with language so banal, I was surprised the Journal even ran it.

But they have a big win with Kevin Plank, Founder and CEO of Under Armour. The backdrop of the NBA and the Stanley Cup Finals and the mini-controversy around Stephen Curry’s new sneakers certainly help. The imagery and the music are uplifting, but Kevin himself is a marketing stud and even SAP could not screw that up.

Two nits. All the sensors and displays are gleaming precise metrics so I wish Kevin’s script had given him a specific supply chain improvement metric – not “20, 30 to 40%”.

And the final SAP tag line “When you run Live, you run Simple”

What does that mean?

Face it - Any software which is not live, in production, is shelfware. In SAP Nation, if you are not Live, it could be a sign of another massive writeoff.

As for Simple, I much prefer what Kevin calls it “a big, bad technology partner”. Accept that as a compliment SAP, quit the “Simple” BS.

 

 

Jeff Weiner’s dystopian comments

On Monday as I was going through the first edit of my book on automation, I heard of the whopper Microsoft bid for LinkedIn. I then read CEO Jeff Weiner’s letter to employees announcing it.

Josh Bernoff calls the letter creepy. My reaction was more specific to the para below. I asked why is a CEO whose company thrives on recruitment of human employees painting such a dystopian future about jobs? Does LinkedIn think it can provide a safe harbor from all the wreckage it believes is headed our way?

Remember that dystopian view of the future in which technology displaces millions of people from their jobs? It’s happening. In the last three weeks alone, Foxconn announced it will replace 60,000 factory workers with robots, a former CEO of McDonald’s said given rising wages, the same would happen throughout their franchises, Walmart announced plans to start testing drones in its warehouses, and Elon Musk predicted fully autonomous car technology would arrive within two years.

I wanted to send Jeff a copy of the early edit version of my book. My book is pro-automation – in fact it has countless examples of robotic surgeries, drones for inspections at elevations, machine learning in various settings, driverless farming vehicles and on and on. My book also points out automation is gradual – takes years and decades, and works best alongside humans, making them safer, speedier, smarter.

Jeff’s examples just repeat news story headlines. I wonder if he has analyzed any of those scenarios in any detail.

Take the Elon Musk quote. Yes, Musk has said you should be able to summon your car from across the country. Driverless car technology is evolving nicely. It has been for decades.  The 1958 Chrysler Imperial first introduced cruise control to the masses. In 1992 Mitsubishi introduced the LIDAR based distance detection system, a building block of many of today's driverless prototypes. In 1999, Mercedes introduced Distronics assistive cruise control to the world. The DARPA funded Grand Challenges for driverless cars were first held in 2004.

Road infrastructure, on the other hand, has not kept pace. In fact, in response to a Consumer Reports test, Tesla has made changes to its AutoPilot feature to restrict its use on residential roads and roads without a center divider. Lane markings are widely inconsistent across our roads. Delphi, an auto parts manufacturer, took its driverless vehicle on a cross-country trip in 2015. It found that pavement markings are quite different across states in spite of uniform standards. Quite a bit of investment will need to be made in our signals, construction zones and roadside fiber to communicate with driverless cars – this when cities and counties will face a dip in speeding fine revenues when machines will be much more compliant with speed limits. 

Our driving laws also need to evolve considerably. In Europe, truck platooning is likely to be an early (as in starting in 2020) use case for autonomous vehicles. Drivers will still be needed—by law they’ll have to keep their hands on the wheel. Platooning will lead to many benefits, but job losses? Not any time soon.

I could go on about driverless vehicles, but let’s next look at the Foxconn point. Foxconn is a remarkably well run company. It has delivered billions of Apple and other devices at high-quality and under unbelievable time constraints. It is always looking for efficiencies and has been trying out its Foxbots for years to supplement over million employees around the world.

Robots can do certain tasks extremely well, especially tasks which are repetitive and unpleasant to humans. But there are countless tasks where humans are still much better. Don’t believe all the hype that robots can do anything. 

Japan is the leading maker and consumer of robots, accounting for half of the world's production. It has the world's largest concentration of robot engineers. Yet, these world leading experts have tried for five years following the Tohoku earthquake to use robots to clean the radiation at the Fukushima nuclear plant. So far, all the robots sent into the reactors have failed to return.

Let’s look at the McDonald’s point. McDonald’s and its franchisees are always looking for efficiencies in the kitchen, in the drive through, and other processes. Yes, because of the minimum wage hike, there is talk of kiosks to replace human cashiers.  It’s already common in Europe. Will it take off in the US? Not a given. Don’t forget the consumer.

I personally use self-service technology everywhere. My research shows, however, shows many consumers are ambivalent about self-service. They have seen banks try to make money off ATMs, airlines off boarding pass kiosks, car rental companies off toll tags. Many want a discount for self service, not have corporations just use it to pad their profits. Still others are resentful of checkout machines which capture a video of their transaction. It is meant to reduce fraud but consumers worry that their privacy is also being compromised.

Here’s  a common reaction from a consumer forum.”Part of the cost of an item is to pay for the service of checkout. I'm not going to waste my time and effort, and take someones job in the process, by checking myself out. If self checkout gave you a 5% discount on the total bill, I'd consider it, but otherwise, I'd rather not take someones job."

The US Postal Service has been puzzled at the relatively low usage of its kiosks even after a decade of availability.Me, I would not wait in line for a postal employee, and prefer using the kiosk, but many consumers prefer not to. I can bet you McDonald’s and other food chains will have to factor this consumer sentiment as they consider kiosks.

Finally about Walmart. Amazon distribution centers have had Kiva robots zip around for years now. Guess what, they still have hundreds of employees in these centers.

Unfortunately, Jeff’s comments are like those being broadcast by way too many academics, analysts and politicians. They are projecting computing curves to job curves. Just because computing power is growing exponentially does not mean a direct, immediate impact on job curves.

In their positions, they should be a lot more careful about what they say. Since so many of them are so confident we are moving into a jobless future, the mood of the common person on the street is pretty gloomy.

I am sorry. I refuse to support their pessimism. My book, which should be out in a few weeks will combat that pessimism in much more detail and show countless examples of well done automation – that which makes humans safer, smarter, speedier. 

The HP Enterprise “Startup”

I had a chance to spend some time at the HP Enterprise Discover event in Las Vegas last week. I was last at the event in 2012 when HP was a $120 billion entity. Today, HPE after the spin off from its personal computer and printing businesses and more recently the sale of its business services group to CSC, is about 40% of that size.

I had expected to see a much smaller show floor. But it was just as big as four years ago , and while the majority of the booths focused on HPE’s IT infrastructure focus – servers, storage, network – I was pleased to see quite a bit of application focus.

First, the data center focus. Plenty of speeds and feeds and contemporary jargon like hybrid clouds, composable infrastructure, hyper converged, Big Data, software defined everything, Docker, Helion etc. that Ben Kepes does a nice job summarizing.

HPE’s messaging is much tighter, but I am not clear how the economics will work. If with a captive sub like EDS it could not compete with public cloud economics, how will it do so partnering with independent service providers? While there will always be large customers like Dropbox which was on stage and has been moving away from AWS, many smaller customers are going the other way and increasingly buying their infrastructure as a service. Same thing with telcos. HPE would love to sell them gear, but telcos are some of the least popular vendors with CIOs, and it will be interesting to see if HPE passes along what it learned from the frustrating last few years to them and to relatively new SIs like PwC which was prominent at the show.

More about apps. I heard “Digital Transformation” several times. (I had just been at Cognizant Community and heard a very different angle on Digital there) It was good to see focus on verticals like Legal Services (with eDiscovery and other tools), Retail, Healthcare and others. I particularly enjoyed cameos where HPE introduced us to the DS Virgin Formula E racing team. Plenty of dazzle and sustainability in that combination. A demo with a Flowserve pump (with instrumentation from National Instruments and an augmented reality app – see image) brought out a nice predictive maintenance use case. Another one with PTC (and more measurement tech from National Instruments on a bicycle ) presented a product engineering use case. Another using a BMW i3 showed off a connected car scenario. I walked around and saw other sections on wind farm management, smart cities and other Internet of Things applications.

My questions here – does HPE have the application/business process depth to support such a wide range of industries? And with so many partners in each solution, will pricing be competitive?

In fairness, this is a new HPE and I liked what I saw in my limited time, even with my questions about economics and application focus. As CEO Meg Whitman said on stage, I definitely felt “a renewed sense of energy”.

I look forward to more live customer examples in future Discovers.

“Big Brains focused on Big Things”

Five years ago, I heard Jeff Immelt, CEO of GE use the term Industrial Internet of locomotives, wind turbines, aircraft engine and MRI scanners to differentiate from the Consumer Web that Apple. Google, Microsoft, Amazon and others have made part of our daily lives. GE has since inspired many of its customers and even those of its competitors to think about “Digital” from that complex, yes even boring, enterprise lens.

Around the same time, Cognizant CEO Francisco D’Souza could see significant changes coming in his client base, and outlined plans for his “three horizons” in his 2011 Shareholder Letter.

This  week, at Cognizant Community in Austin, D’Souza sounded like Immelt (he sits on GE’s board) when he told an audience of customer executives “Don’t fall into the FANG (Facebook. Amazon, Netflix, Google) trap” “Be inspired by them, but don’t copy them”. “They were born digital – you will always be hybrid”.

His EVP of Strategy, Malcolm Frank said its time to move from “Digital that’s fun” to “Digital that matters”. “Facebook is not going to run an airline, Google is not going to run an emergency room” “Systems of engagement were a head fake. We need to move to systems of intelligence”. In an excellent keynote (I will post a video shortly), he covered wide ground on the big things enterprises need to focus on.

The theme of Community this year was “Mastering Digital” (later in week I went to HPE’s Discover event and Digital Transformation was a frequently heard term there also) and I, for one, like this evolution.  Way too many initial digital projects have focused on social and mobile. Important, but superficial in terms of impact. Way more important is a move to smart products, rethought business models and channels, reconfigured supply chains and manufacturing.  Keynotes by Michael Porter on smart products and Peter Evans on platforms expanded on that thinking. 

Interestingly, in talking to Cognizant executives, it is industries that feel most threatened by the consumer giants and startups – retail by Amazon,  autos by Google and Uber, banking by several fintech startups that are showing the most urgency to undertake significant digital transformation. Others like insurance still appear to be waiting for their wake up call.

I would also be remiss if I left the impression that the consumer digital stuff is easy to deliver. In my books I have written extensively about Amazon’s highly efficient Kiva driven warehouses, postal injections and other supply chain innovations, Apple’s mind boggling quality across billions of devices via its contract manufacturing network and retail excellence, Facebook’s highly efficient data centers, Google’s sustainability initiatives and Alphabet’s wide array of R&D.

Still, as D’Souza says they were born digital and did not have to worry much about legacy. The rest of the Fortune 1000 and beyond does not have that luxury. For them, digital will be much more complex, especially when too much time and money is going into that legacy.

It is time for some Big Thinking.

Coasting towards 5,000 innovation posts

I just checked the New Florence index and we are at 4,960 posts. We should cross 5,000 by middle of July at the current pace.

The first post on that blog was on March 7, 2005. Back then, I was discouraged by lack of innovation in enterprise software, telecommunications and outsourcing, areas I help clients with and also write about on this blog. New Florence was a distraction I thought would run out of ideas in a couple of years.

It’s still going strong.  Eleven years ago, the iPhone, FitBit, AWS, the Tesla Model S had not been launched, the term Big Data had not been coined, IV drips in hospitals were still manual.

It’s been a remarkable eleven years, and if you look wide enough across infotech, nanotech, healthtech, cleantech, biotech, foodtech and around the world, the pace of innovation is only accelerating. New Florence has given me ideas for several of my books. It has made me much more curious about every city I visit, every executive I interview.

Importantly, it has exposed me to the “art of the possible” and encouraged my clients to expect more of their enterprise vendors. Fortunately, we have seen at least some progress in the world. But if I continue to sound demanding on this blog, blame it on New Florence, because I see that the pace of innovation is not slowing

Thanks to everyone who has inspired me for the past decade, to readers and to the sponsors. Here’s to another 5,000!