deal architect

I hope SAP dreams bigger–much bigger

Over the last few months I have been doing my research for SAP Nation 3.0 while going to countless industry events, and consulting with several clients. I sense the enterprise software and services market is at a pivot. More about that in a minute.

I have also been reading about and watching a lot of US history in the 1800s. The US went from the Western border  being the Mississippi river to what it is today. It took negotiations for the Louisiana Purchase with the French, the Oregon treaty with the British, the Mexican Cession of California and other western lands, the Alaska Purchase from Russia. It took incredibly brave pioneers to tame the wild West – the miners who flocked to California, the Mormons who settled in Utah and many others. “Manifest Destiny”  was the frequent rallying cry and many a glaring mistake was made in that zeal, but the country gradually moved its Western borders to the Pacific Ocean.   

In 2000, the enterprise software and services vendors were kings of the world. In the previous decade, as customers rushed to solve their Y2K issues they bought packaged software by the truckload. Each year at Gartner I saw that in thousands of calls with clients. I also saw these customers became dependent on systems integrators and outsourcers to implement, host, manage, upgrade the software.

In this boom, these vendors forgot to look around them or broaden their horizons.

In the meantime, products became smarter with sensors and satellites and software. Who largely benefitted from this? Contract manufacturers like Foxconn, Flex and Jabil. Foxconn itself employs many times the staff large IT services firms do. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Cloud computing has taken off. Amazon and Microsoft have taken over infrastructure markets that were IBM and Oracle and HP’s to lose. Mobile computing took off. Who benefitted? Players like Apple, Samsung and Google. Industrie 4.0 and IOT took off to the benefit of large asset makers like GE and Siemens. Enterprise vendors have done little to verticalize. CIOs are doing their own modernization with micro-services. These vendors claim to be process experts – talk of “best practices”. Guess what, the next wave of process automation is being led by customers who are trying out drones and robots and RPA with specialist solutions – read Silicon Collar to see how little a role these vendors have played.

These are not small markets. And in each case enterprise software and services have played cautiously, not invested enough in CAPEX and R&D. They keep gloating about their quarterly performance, customer “stickiness”, how much “digital transformation” they are enabling.  They are self-delusional. The new breed of vendors has out maneuvered them over and over in the last two decades and grown much bigger than them.

Unfortunately, that is the peer group SAP continues to measure itself against. It fights for Magic Quadrant spots against Oracle, Salesforce and Workday. It continues to rely heavily on IBM, Accenture, Deloitte and others for counsel and guidance often at massive cost to its customers.

It will continue to do ok with that approach. But I hope SAP starts to dream bigger. It has a new cadre of executives, many from its acquisitions, that are ambitious and driven. It has a customer base which has largely stayed loyal in spite of a number of unforced errors SAP has made.

I saw big thinking when I used to go to Walldorf in the late 90s. I look forward to that grand thinking again. SAP needs a Manifest Destiny call. It needs to look beyond the Mississippi. It needs to aim for the Pacific. That is the message I am taking to SapphireNow next week.

Host Analytics: The Beauty of Focus

Us analysts like to ask vendors: what next? I am constantly asking them to verticalize. Very few vendors actually do that but transaction processing vendors are constantly claiming to add analytical capabilities. Analysts also love to create new market categories. Gartner has two Corporate performance management (CPM) magic quadrants – one strategic, one focused on the finance function. Why? I am not sure.

My reality check comes when I consult with clients. Most are frustrated with all the shelfware they bought in the last couple of decades and are wary that today’s vendors are still trying to sell them portfolios when they are looking for individual components to modernize specific areas.

So it was refreshing to spend a day this week at Host Analytics Perform 2018 conference in Dallas. Here is a vendor which is unabashedly focused on the CFO, and even more narrowly just on planning activities – budgeting, forecasting etc. And customers and prospects I met were happily chattering about planning cubes and break backs.

I also had several déjà vu flashbacks that day. One of my first research notes at Gartner in 1995 (yes!) was titled “Budgeting: The painful annual ritual”. A quarter century later most companies still use spreadsheets and make basic adjustments to previous actual and estimates. Or they still use tools like Hyperion  It is still a hugely political process to agree on budgets. Even the large forecast misses during the last recession have not done much to shake this ritual or dramatically reshape planning processes.

That’s big enough market for CEO Dave Kellogg and his team. They want to make the monthly, quarterly, yearly rituals less painful and more effective. Offering functionality in the cloud is a giant step forward (beyond the lowered TCO of not needing to invest in infrastructure, application management and upgrades) to allow for more real-time and collaborative planning. A focus on the budget owner allows for UX in the form of MyPlan, dashboard and mobile features and targeted functionality – over 200 new features in the last year. They include Spotlight which integrates visualization capabilities of Microsoft Office with the data at  Host, integration with several Workiva for external statutory and compliance reporting, with Floqast to streamline closing processes, with ASC606 Revenue Recognition from the accounting firm, RSM (formerly McGladrey) and several others such as support in data loads for Asian (double byte) data characters and NetSuite connectors

Is Finance too narrow a focus? Dave’s view is the CFO, his prime sponsor in organizations, should take their planning capabilities into other parts of the organization, be in sales and operations planning or production planning. In that he may be borrowing a page from ServiceNow’s book. ServiceNow has seen its CIO base take its ticketing and workflow capabilities into HR shared service and customer service areas. If Host can deliver extensions which allow for easier planning of common scenarios – launch a new product, enter a new country, reorganize sales territories – it would go a long way towards helping the CFO sell it internally and help them deliver to their mantra of Continuous, Connected and Collaborative planning.

Dave is also borrowing a page from his previous employer, Salesforce. In his keynote, he spent a fair amount of time on “Trust” – the promise of uptime, secure infrastructure, the ability to deliver promised features. He reinforced the last point by saying in his view cloud contract renewals should not commit a customer longer than the buying executive’s tenure. That’s refreshing to hear in a world of so much vendor lock-in.

A couple of other observations from the event:

- Host had an analyst breakout during the day. As happens often, that agenda fell by the way side, and the session turned interactive. I was impressed by how Dave handled the analyst questions and parceled them out to his direct reports. I have seen too many vendor execs fall apart when they have to go off script. It showed his maturity as an exec. It also shows his media savvy, helped by his own regular blogging (he is also a fellow Enterprise Irregular).

- He was followed on stage by Bert Jacobs, who along with his brother founded and run Life is Good, best known for its optimistic T-shirts and hats. Their story of rags to riches is impressive enough – the personal stories he told from the Good Kids Foundation ( they donate 10% of profits to improving children's lives through that foundation) was even more so. When I was writing Silicon Collar I saw all the pessimistic memes that get propagated – machines will take all our jobs, our middle class is dead, our manufacturing is dead etc, and so it is nice to see optimists like Bert show us that things and people are actually pretty good. I have asked Host permission to embed video of the session on the New Florence blog - I found it that inspiring.

All in all, a refreshingly focused day. Life felt good. 

PowerPlex: Celebrating American Manufacturing

I tend to take a lot of photos and talk a lot when I am invigorated by products, places or people. Two days in Detroit this week for Plex’s annual user conference yielded me over 200 photos and 50 conversations. That's a lot of invigoration!

Here are some things that stood out

Jerry Foster, CTO of Plex had a keynote with several customers and partners which brought out explicitly how the shop floor is changing with wearables, sensors, robotics and drones. The session and the expo hall showcased DAQRI smart glasses, a Honeywell ring scanner, MS Hololens and LUIS cognitive services, a headset with the Kopin Whisperchip to offset plant noise, PTC Thingworx & Kepware. I go to events of many ERP vendors and I have never seen so much focus on the shop floor. I have asked for permission to post the keynote on New Florence. Worth spending an hour when I have it up.

The show floor profiled products of many Plex customers. I also had conversations with several of them. I was struck by how many products are “smart” – their bill of materials are increasingly influenced by Silicon Collar and embed chips, bluetooth, lithium-ion, software and sensors.

Plex organized a visit to the Chelsea, MI plant of Hatch Stamping which makes highly engineered metal stampings and assemblies. Its plants across the country are a nice blend of man and machine with massive stamping presses and robots next to welding and coating lines. Even the scrap they produce is art-form. 

I was part of a panel on forces of change in manufacturing. It was a packed room and we could have spent the entire session on technology (Chad Walls of Kamco Industries on my panel had been part of the earlier keynote and quite a few conversations in the halls were about Plex’s new UX and analytics). I was pleased David Morfas of Plex, the moderator allowed the audience to participate and we covered wide ground from plant location drivers to challenges of attracting young talent to the shop floor. 

Throughout the visit I got plenty of mix of old and new Detroit, a continuing icon of US manufacturing. Jeff Schroeder of MFC Netform kindly gave me a tour of downtown Detroit. The Z Lot with its urban art and the modern stadiums contrasted with the Opera House opened in 1922. I stayed at a hotel next to the Mariners Church opened in 1842, and the tunnel to Canada opened in 1930. Quite a contrast to GM headquarters a stone's throw away with its gallery of modern automotive design.  Cobo Center where the conference was held is contemporary in style and design but they have commissioned a mural by the fresco artist Hubert Massey to celebrate Detroit’s industrial history. 

Funnily, unlike at a typical user conference, there was little news from Plex - very few press releases, a quick update on the continuing CEO search, product roadmaps in an analyst breakout session. That bothered a couple of my analyst colleagues. Not me. I felt the vibrancy in the customer base and in the city. The shuttle driver to our Hatch plant tour drove us through the heartland of Detroit area manufacturing. He spoke warmly of his bus, on a Ford F 550 chassis, even though he also gets to drive Mercedes-Benz vehicles. I was struck by his pride for the product and the place. American manufacturing is doing fine.

Plex should continue to thrive in that community.

The next stage of the ServiceNow rocket

I spent a couple of days at Knowledge 18, ServiceNow’s user conference. It was good to get a deeper dive into the product and meet the executives re-shaping the company. Couple of positive areas and couple of potentially problematic areas I picked up.

ServiceNow is a “blue-collar” company whose platform first found a niche in the bowels of IT shops. Its case management tools allowed companies to build knowledge bases of problems and resolutions, and encourage users to self-serve solutions and use its community to share tips and tricks. Its workflow engine allowed for more efficient, seamless routing of tasks and approvals. Its growing set of virtual agents allowed human agents to move up-market away from routine Tier 1 tasks.  Importantly, all this was in the cloud when competition was still on-premise and clumsy. Co-founder Fred Luddy has been quoted as saying  "The IT industry deserves a tool that just works. We're going to give it to them."

ServiceNow built a loyal following which rewarded it with explosive growth. Annual revenues skyrocketed from $13m in 2007 to $ 244m in 2o12 and from there $ 1.93bn five years later

Customers then introduced the tool to other parts of the enterprise beyond IT, particularly in customer service and HCM (in HCM, the big adoptions have been in shared service settings and in onboarding steps across a wide range of benefits, security and other applications- so as a connective tissue across disparate books of record).

Internally, ServiceNow has also deployed its technology for its financial close process. The good news was this customer extension beyond IT was organic, with little selling needed from ServiceNow. Now the Customer Service and HCM buying centers are being proactively targeted though the bread and butter still comes from the IT organization. Also, during the time I was there, I heard mostly positive talk about Salesforce and Workday – at least for now ServiceNow wants to be an orchestration and user engagement play, not a book of record.

John Donahoe joined as CEO last year, to shepherd the company through the next phase, hopefully as explosive, of growth. He came after transitioning eBay and PayPal through the deep recession, the move to mobile platforms and shielded it from activist investor Carl Icahn’s distractions. A former Bain consultant with this consumer tech experience I found he had a refreshing pov on the next stage for ServiceNow. Not all my analyst colleagues approved, but I quite liked the non-product emphasis in a keynote and in a presentation to analysts. He talked about “purpose” for the company, the executive talent he has been bringing in (ServiceNow had an engineering culture and does not appear to have invested much in structure around people and organization), the branding investment he has been making to allow ServiceNow to expand beyond the IT sweet spot, Customer Success metrics (like some in graph he presented below) and the fact that as with Pierre Omidyar at eBay, he believes founders continue to add value much later in a tech company’s evolution. Luddy is now Chairman and was quite prominent at the conference.

Which brings me to two things that caused pause. For a $ 2 bn vendor, the expo hall was awfully large, filled mostly by system integrators. The analyst area was at the back of the hall, so the noise and the foot traffic in the hall was unmistakable. I spoke to a few of these partners and they fall into two camps. One is the blue-collar, ITSM-type implementer. The other is the slick “digital transformation” spouting consultant. ServiceNow needs to be evolved beyond the first, but needs infrastructure to manage the hype and scope of the latter.

If anything, ServiceNow is itself using their jargon like digital transformation and “future of work”. Here’s my pov – internal process digitization is to small ‘d”. Big D and truly impactful transformation comes from smart products, significantly rethought business models, channels, industrial assets and logistics. At least with its current footprint, ServiceNow only facilitates small “d”. Its alignment with the CIO actually may hurt in some companies where IT is considered tactical, slow and back office focused. About future of work, I kept thinking about all the man/machine combinations I heard and wrote about in Silicon Collar. I don’t see ServiceNow helping BP with its robotic crawlers and inspection drones, or KPMG as it rethinks audits and impact of cognitive computing, or plants investing in Industrie 4.0 technologies and many of the other use cases I profiled. The Bureau of Labor Statistics tracks 800+ occupations. I doubt ServiceNow touches more than 50 in its current reach.

That is actually a major opportunity. Most cloud vendors have shortchanged vertical processes as I have written here and many other places. By extending its platform into vertical processes and through some targeted acquisitions, ServiceNow could open up coverage of a lot of white space. For now, horizontal processes offer plenty of runway. 

Not your Dad’s CRM

I was looking at our Amazon credit card statement. I expected plenty of Whole Foods charges after I told my wife we get another 5% off if she used the card, but I was taken aback by the number of charges from a vendor called “AMAZON MKTPLACE PMTS”. Turns out we are not unique. Amazon has started sharing stats about its marketplace including “they sell half the products that Amazon customers buy, and more than 140,000 small and medium-sized businesses surpassed $100,000 in sales on Amazon in 2017.”

Turns out marketplaces are a thriving global phenomenon. Sameer Patel, CEO of Kahuna who has pivoted his company to sell SaaS solutions to such marketplaces says much of his traction is outside the US to vertical marketplaces. His customers include Mudah, the largest shopping marketplace in Malaysia and Restorando, a dining marketplace in Brazil and Argentina. His team demoed me insights that they provide marketplaces to balance interests of sellers and buyers and continue to generate vibrancy that keeps them coming back.

While these marketplaces attract businesses who want to leverage their commerce and fulfillment engines, vendors like NetSuite have been strengthening their own commerce engines for businesses who don’t want to become over-dependent on a marketplace channel. Former CEO Zach Nelson, for years, argued that CRM was poorly defined, since it left out customer-facing transactional systems.

Zach is right and CRM vendors are increasingly welcome to tackle other customer facing transaction areas – order to cash, with unique pricing/promotion and mass customization needs, and vertical billing, claims processing and other areas. Some of that functionality was delivered by ERP vendors decades ago, and they have not exactly kept them up, opening up significant new opportunities.

On a recent visit to Uptake, I saw a brochure which said “Machines don’t have to break”. Such a simple statement, yet such a dramatic impact on field service. Analysis of customer data from railroads, utilities and other businesses with complex assets, and their recent acquisition of APT with its vast library of equipment failure modes, they are moving maintenance away from traditional break-fix and scheduled visits to much more predictive work. Think of the impact that has on crew scheduling, employee skills and maintenance business models. Its no longer just old CRM service functionality.

More HCM/CRM integration - SAP’s acquisition of Callidus takes it into the sales compensation space, and adds configure-price-quote (CPQ) applications to its hybris commerce engine. ServiceNow is hosting its user conference, Knowledge18 next week. I am impressed how many HCM analysts are attending. In fact, I think they outnumber CRM centric analysts. LinkedIn, which used to be a recruiting tool has under Microsoft, increasingly become a CRM tool. Digital assistants like Amazon Alexa and Amelia are joining the services workplace.

Nearly a century ago, John Wanamaker, a marketing pioneer famously said “Half the money I spend on advertising is wasted; the trouble is I don't know which half”. Today’s CMO would get fired for even thinking that. Google, Facebook, even Accenture (with the slew of digital agencies they have acquired) have changed marketing in the last decade. We are about to see another road bump as GDPR and other privacy related legislation kick in.

I was briefed a couple of months ago by WorkSpan. Their tag line is “Alliances have a solution to call their own.” It is surprising, given how many businesses go to market through channels and partners, that CRM has not evolved much earlier to include PRM for Partners. More CRM evolution.

People snickered when Bill McDermott, CEO of SAP recently said “..we know the world needs a next generation CRM concept….” Other people roll their eyes when they see Oracle has been branding its Sales, Service, Marketing and Commerce products under the moniker of MCX or Modern Customer Experience. Both vendors could see their ERP product functionality cannibalized by next-gen CRM. But both are pointing to how CRM has been morphing and extending into a whole bunch of new areas. As I wrote after a recent Oracle MCX event, we are not in Kansas anymore.

Mostly analog in a digital world

My friends in tech like to constantly talk about how fast technology is evolving. I like to remind them the supply side of technology is accelerating, the adoption and implementation of technology lags considerably.

I got a reminder this week, following another earlier in the year how some processes have not evolved much since the time of our ancestors. It’s a process called Lost and Found, which Google can show 54 million results for if you search for “best practices” around it. And many more million search results bragging about the Internet of Things. 

I lost my FitiBit One tracker in Miami. I am pretty attached to it given it has been an appendage for 4 1/2 years and nearly 7,000 miles in steps. It is constantly communicating with FitBit servers and I get weekly activity reports and periodic milestone badges. You think FitBit could facilitate interaction between finder and owner like Uber does. Uber says “The best way to retrieve an item you may have left in a vehicle is to call the driver. Here's how:” FitBit has chosen to not get in the middle. So you get comments in their community  like this to a finder who was trying to identify the owner “Put a sign on a telephone pole where you found it or found in the local paper. Fitbit will not be able to get it to the original owner”. Actually FitBit does even less. I tried to replace and pair with my wife’s tracker. She has not used it much over the same period. I charged it, and it displayed fine. Once off the cable it would not display. FitBit decided it was a display, not a battery, problem said it was out of warranty and the best they could do was offer me 25% off a new tracker. To add insult they also sent me an email this week about compliance with upcoming GDPR rules. Yes, they have lots of data about you, your location etc. but don’t expect them to help you much if you lose the device.

But this is not just about FitBit. My search for the device and that for my wife’s keys earlier in the year has allowed me to see how different entities handle lost and found. Southwest Airlines has one of the most thorough processes. You fill out an online form and item description, and they send you weekly emails on the search results. AA is similar except they limit the likely place lost you can report to just one location (it could have been lost at the originating gate, on the plane or destination). They text you periodic search information. The two offices I visited in Miami checked promptly and reported back they had not seen it. I dealt with 2 Marriott hotels and they politely took my information but did not call back with any details.  Avis has an online form but they don’t communicate back much when a search of the returned car is all they need to do. Tampa airport keeps a digital list of found items but you physically have to go into the office to see if there is a match with yours. The taxi service which my wife used was pretty useless. She is convinced she lost the keys in the taxi but they could not even identify the driver or the car.  The café in Miami I was at did not bother to call back. TSA wants you to call a number at each airport you may have passed through to see if they can help with lost items.

Someday we will have tracking tags embedded in everything valuable. Till then let’s just accept we live in a mostly analog world even as we pretend we are in digital nirvana. 

Hold on tight to your valuables folks. Even if Good Samaritans try to get your stuff back, processes to facilitate a reunion are pretty poor.