deal architect

Why we all need to draw bigger circles

A few days ago, I wrote about Bill Joy’s advice “If you cannot solve a problem, make the problem bigger. If you draw a bigger circle, you start to see several systems you can work on.”

Reading James Farrar’s post “Diginomica and the Salesforce Counsel of Despair”, I kept thinking we could all heed that advice.

I have a lot of respect for James and what he is doing for Uber drivers. But I wonder how  much he has factored the consumer pov. I moved most of my business to Uber a few years ago because I found taxis in many cities unhygienic and surly.  But recently, especially arriving late at night at my home airport I have noticed Uber drivers have been playing games – shopping around and canceling rides after they commit. I complained to Uber after I saw a female customer stranded at 2 am. Uber sent me a nice note but did little to investigate. In contrast, this week in New York city I took two yellow cab rides (cannot remember the last time I had) and three Carey Limo rides. Clean vehicles and pleasant drivers including a couple who fed my curiosity about the history of the city’s bridges. And I said to myself, thank you Uber for forcing the entire market to evolve.

That of course also raises the bar for Uber and for its drivers. And I wondered if similar is happening in London where the leg room in black cabs are always a treat for my 6 ft 2 frame. And where taxi drivers are famous for The Knowledge – a 150+ year tradition of learning every nook and cranny of the city. In other words, Uber was not going to have easy competition in that city and probably needed to compete more on price.

I wondered if James had surveyed a broad sample of Uber drivers like Tony DiBenedetto, former CEO of Tribridge did as he told me in an interview for Silicon Collar. He decided to sell his car and started taking Uber everywhere.  In addition, he started journaling each experience and told me about the drivers he met

Most of them were not ex-taxi drivers. I would say 50% of the people who drove me in that first month had a second job. It was everything from young kids just trying to make it, to retired people, or people who were bored. One of my drivers was a helicopter pilot who for two weeks a month worked for the big oil companies in New Orleans. The other two weeks he just didn't see himself doing nothing. He's ex-military, and so he picked up the Uber thing to basically not be bored. I thought that was interesting. The retired people were all pretty similar: They wanted to get out of the house or make a little extra cash. I'd say 5% to 10% were in between jobs. There's no question that it fills a gap in employment. It allows for people to run their little businesses, and still do Uber as a supplement. All the drivers love the flexibility.

Which brings me to some of the points I made to James on Twitter

• I admire what you are doing. Personally, I am generous to Uber drivers and like talking to them on my trips. Having said that when I wrote my recent book, Silicon Collar, I found our economy supports 800+ occupations and new ones every year...UK is likely similar..
• I am at other end of spectrum. we have 6m unfilled blue collar/trade jobs. Been so for a decade. Why do workers not want them?
• so If Uber makes you miserable, look around. Lots of opportunities. It's similar to advice I give to many young workers not happy in their careers. 

So, honestly, no offense to the kind man, but not sure I can relate much to James’s point that Uber “takes advantage of sweated labour with workers in London earning as little as £2 per hour.”

Which brings me to Salesforce. As James points out, it has become an icon for corporate activism

Salesforce has been at the vanguard, if not the barricades, in Silicon Valley’s fight for social justice. It has been an evangelical champion of equality claiming it as nothing less than a ‘higher purpose’ for the company. Salesforce weirdly refers to its workforce as the ‘Ohana’ (Hawaiian for family) and pursue four pillars of equality — equal rights, equal pay, equal education and equal opportunity. To its great credit, Salesforce has taken principled stands against discriminatory public policy proposals in Indiana and Georgia albeit in the name of the Ohana.

I am a Marc Benioff fan and have written about him in several of my books and blogs. I consider him a cloud computing pioneer, a colorful and generous tech exec whose conferences have reshaped the somewhat drab enterprise software market.

But I do wonder if in his activism, Marc has drawn a large enough circle and asked his customers if they are comfortable with that profile. As I wrote in Salesforce is vulnerable I am not sure many of them are. Many would prefer Salesforce focus on its economics and expanding its functional footprint as a cloud leader.  

I like activism at an individual executive level, I am less comfortable with it at the corporate level. It attracts activists for hundreds of causes and they hold you to ever higher standards. As a customer advocate, to me customers deserve way more attention than activists or for that matter, even Wall Street.

Having said that, I am glad Salesforce is not canceling their contract with the US Customs and Border Patrol (CBP) agency. According to Bloomberg, several hundred Salesforce employees have sent a letter to management

"Given the inhuman separation from their parents currently taking place at the border, we believe that our core value of Equality is at stake and that Salesforce should re-examine our contractual relationship with CBP and speak out against its practices,"

That makes me wonder if these activists have drawn a big enough circle around the CBP which has the hugely unenviable job of enforcing a broken immigration system. As I wrote here

The 3 million a year (immigrants) arrive here through a dizzying array of (over 200) preferences and visas – and many do with no formal paperwork. There is the F1 direct immigrant preference for unmarried sons and daughters of U.S. citizens, and their minor children. Not to be confused with the F-1 Student Visa which has restrictions on when and where you can work. Many F-1 visas get converted to immigrant visas when their employers hire them after graduation. Many of these lanes have not been well monitored. The H1-B visa, the so-called “Genius Visa”, was originally meant for highly specialized skills, PhDs in Astrophysics and such but they mostly got used for much more mainstream software developers. There has been so much abuse of the spousal visa that Congress had to add a specific section about it to the Immigration and Naturalization Act. Then there are diversity lottery and investor visas. And yet in spite of all these lanes, we have in addition millions of undocumented workers.

This week to celebrate the 40th anniversary of my own arrival in the US, I played tourist on my trip to New York and took a ferry to Ellis Island and Liberty Island. I took a photo of a quote from a century ago which to me reflects the attitude of majority of immigration officers I have met. In those 40 years, I have entered the country countless times as I have traveled to over 70 countries. Yes, a few are jerks, but the vast majority are good, caring workers trying hard to enforce compliance in a relentless flow of humanity.

Which brings me to Diginomica. James comments about them

When I raised the subject of the staff called for boycott of Dreamforce on twitter last week, Dennis Howlett complained bitterly about my use of language. In his post he mischievously raised the spectre of a trade unionism of long ago, Marxism and even the Soviet Union. He even compared me to Derek Robinson, a 1970’s trade unionist and member of the Communist Party of the Great Britain. In several Diginomica articles including this one, a consistent complaint from Howlett is the supposed politicisation of my union’s dispute with Uber.

I don’t know much about trade unions and socialist/communist ideologies. I do have a keen interest in Diginomica. collaborate often with their team. I quote them, they review my books, and quote me. There is mutual respect.

Having said that, I have told Dennis several times they need to broaden their circle when it comes to global coverage. Particularly since the arrival of President Trump, European media coverage of the US has been negative, even snarky. While they are entitled to that pov (Lord, many Americans are even more critical), I think in being fixated on US warts they miss out on plenty of non-US coverage.

It’s fine to criticize the US for leaving the Paris climate accord, but publications like Diginomica should have been all over Germany’s track record on renewables. After basking in the glow as a Green Chancellor for years, Angela Merkel is poised to miss her own modest targets. As I wrote here

Yet, in spite of spending hundreds of billions of euros on subsidizing renewables, Germany will struggle to meet its 18% renewables target for 2020. The country continues to rely heavily on its coal and lignite, and more recently on natural gas from Russia.

It’s fine to criticize US on trade tariffs, but in their coverage of manufacturing markets, I wish Diginomcia would ask why more non- US companies do not make and hire more here like BMW has with its SUV plant in S. Carolina. It is a tenet of modern business to make as close to demand, not cling to old Ricardian principles of comparative advantage.  Besides its vast market, the US has some of the best energy economics in the world, very competitive state and local incentives and our labor equipped with modern automation and accustomed to making newer, smarter products is no longer uncompetitive. 

Same with our immigration. It’s fine to criticize when we do inhumane things like separate mother from child, but drawing a bigger circle would also mean pointing out factoids about our broken immigration system. It would mean asking the uncomfortable question why undocumented immigrants entering from the US South used to be mostly single men, now entire families are trying to enter. Have we been sending signals their chances of entering the country improve that way?

It would also mean asking why with global affluence growing – you only have to visit Dubai, Singapore or Shanghai or go see Crazy Rich Asians - to ask why the world is not following the decades of US leadership and becoming similarly generous to immigration. Why does Japan with its acute aging workforce not take in more? Why did rich Arabs not take in the Syrians who trekked across Europe? From a language, religion, weather, cuisine and many other perspectives that would have been the logical destination for those refugees. Yes, these are troubling questions but ones I wish European publications would ask even as they intensely criticize US policies.

Finally, James invokes the Pope. “Last weekend the Pope visited Ireland and had to face up to the consequences of generations of abuse and misuse of power.”  My wife and I are not much into formal religion. My wife was brought up in Catholic Ireland, and I myself went to school founded by Catholic missionaries. But we are global citizens and visit cathedrals and stupas and mosques wherever we travel. Having said that, we are disgusted with the abuse disclosures in the Catholic Church.  Again, though I invoke the larger circle. My sister-in-law spent hours braving the crowds to see the Pope in Dublin that weekend. There are countless millions like her who look up to the Pope. Who am I to question that much faith and loyalty?

I respect personal activism, not so much corporate activism. But as an analyst, I like to be objective and unemotional when looking at issues.  And following Bill Joy’s advice, I would love all of us to similarly draw bigger circles. We need to stem the current epidemic of guilting each other about failing on some moral benchmark or other.

“Draw a bigger circle”

We are approaching the two-year anniversary of Silicon Collar (released on September 2, 2016).  Many readers tell me their favorite book I authored is still The New Polymath. Amazon tells me SAP Nation sold the most.

Many disagreed with the thrust of Silicon Collar that automation takes decades to kill jobs. In the interim, automation actually makes workers smarter, speedier and safer. It changes the nature of work and often generates new types of work.

To me, it was one of the most significant books I have written because it reshaped my own approach to work and life. Let me explain.

The Background

When I started to write the book nearly 3 years ago, there was near-panic about machines taking over human jobs. Gartner had projections like “By 2025, three out of 10 jobs will be converted to software, robots or smart machines.” and “By 2018, digital business will require 50% fewer business process workers.” Two Oxford U researchers had an even more pessimistic assessment: “According to our estimates, about 47% of total U.S. employment is at risk.” WEF, McKinsey, MIT and many other thought leaders had similarly large and scary projections about job losses.

I read most of the research and interviewed other market watchers. Very few of them had talked to practitioners who were approving investments in, testing and working alongside automation. Others were one-dimensional – they would only base their research on projections around one type of automation like RPA. Still others appeared politically motivated – wanted more social benefits like Universal Basic Income in their anticipation of catastrophic job losses.

So, I did what Bill Joy (the Sun co-founder among many other things) likes to say “If you cannot solve a problem, make the problem bigger. If you draw a bigger circle, you start to see several systems you can work on.”

I interviewed 50+ practitioners in as many industries/work settings. They told me about machine learning, robotics, drones, wearables, exoskeletons, self-driving vehicles and many other forms of automation. More importantly they told me what worked, what did not, how expensive the machines were. They were pragmatic, not hysterical about the machines they were working with. They told me machines are good at certain tasks, not complete jobs. They told me about unintended consequences – how automation often leads to new, different jobs.

I then spent a lot of time on a very dry subject – data from the Bureau of Labor Statistics. Our labor economy is majestically diverse – supports over 800 occupations. And it is layered – in franchises, on platforms, concentric circles around the Fortune 500, the Federal government etc. – see my posts The Alt-Job economy and The Clover-Leaf Talent economy . I found very few market watchers understand these layers in our complex job economy and so use glib terms like “gig economy”

Most importantly, I spent time looking at automation in the last century – UPC scanners, ATM machines, how cars have been taking over driving from humans. I found UPC codes actually improved inventory control in stores and allowed them to order more SKUs. Sales went up and grocery checkout jobs increased. ATM machines transformed the role of the teller – made them customer service and sales reps. 50 years later, just in the US we still have 90,000 bank branches with over half a million associates. Cars have gradually been self-driving since cruise control was introduced in the 1960s, and yet globally 50% of new cars are still sold with stick shifts.

I concluded in an article called Slow-Motion Automation  “… societies absorb automation at a pace that’s much slower than technology’s evolution. And five powerful “circuit breakers” help delay and influence the trajectory of automation in surprising ways.”

People call me a luddite for not accepting machines are becoming faster and killing jobs. I accept that technology progress is accelerating, but its societal adoption is not accelerating and the impact on jobs is still pretty gradual. 

So, how has the book research changed me personally?

Made me curious about what people do every day

Like most people, I knew from my neighbors, friends and clients we worked in oh, 30-40 occupations – attorneys, brokers etc. When I wrote The New Polymath in 2010 I thought I had researched a wide range of occupations that Renaissance Men excel at.  The BLS data opened my eyes to our much, much larger set of occupations.

Now, when I watch a movie like Arrival, I observe that the Amy Adams character is a linguist who is fluent in Portuguese, Farsi, Sanskrit and Urdu and is qualified to decode alien language. Or that the Matt Damon character in The Martian is a botanist and as he says he literally has to “science the shit” to survive. I enjoy meeting with Mike Rowe and watching his Dirty Jobs episodes which highlight jobs we don’t even know existed.  When I meet a Phil Manougian at the National Hurricane Center, I like learning trivia that he is a NOAA Commissioned Corps Officer. It is one of 7 Federal Uniformed Services (others are Army, Marines, Navy, Air Force, Coast Guard and Public Health Service). When I go to a National Park, I seek out Park Rangers. Each has a fascinating story about his/her career path and all kinds of anecdotes from the wild. On flights, I am genuinely curious about what my neighbors do for a living. If they are willing to talk, I listen especially if they happen to be metallurgists, geneticists or in other occupations I don’t encounter on a regular basis. 

Made me more cautious about academia and analysts

I was shocked that the Oxford study I mentioned above had been cited and repeated in over 600 other academic publications, none of which chose to point out the flaws in the methodology as I had in the book. 5 years after their scary projections, not a single job has been lost and yet they have not chosen to reverse their study. Given the immense influence Oxford has, I find that irresponsible. At least, Gartner has backed off from its own pessimistic projections.

Now when I see a widely cited analyst and academic study on any subject I check to see if people have truly kicked its tires.

Made me much more interested in “history of work”

Like most technologists I like to look ahead, not back. I have written plenty about the “Future of Work”.  Silicon Collar forced me to do a lot of research on automation which originated in the last century – how it originated, how it gradually got adopted, the societal impact it had. The book made me go back and study the evolution of occupations. I wrote  “In fact, many of us continue with names which reflect the trades of our ancestors. It could be the Chinese Chong (derived from bow maker), the English Weaver, the Egyptian El-Mofti (from Arabic for legal expert), German Baumgartner (related to orchard), or the Indian Bhattacharya (from Sanskrit for teacher)—and there are thousands of other names derived from occupations in various societies.”

For my next book, I have been reading a lot about how the US tamed its West in the 1800s. Again there, my keen interest is in how occupations evolved.  There I am learning about Meriwether Lewis and his already wide set of skills when President Thomas Jefferson picked him to lead the Corps of Discovery. Then the President arranged for him to get a crash education in many other disciplines “Andrew Ellicott taught Lewis map making and surveying. Benjamin Smith Barton tutored Lewis in botany, Robert Patterson in mathematics, Caspar Wistar in anatomy and fossils, and Benjamin Rush in medicine.”  

It is fascinating to read about our Mountain Men and their mapping and trapping skills. About our whalers and how the light bulb affected their fortunes. Or our cowboys who arbitraged and moved cattle from Texas to the rail junction in Kansas for sale in Chicago and the Northeast. The early logistics pioneers at firms like Russell, Majors and Waddell who outfitted the oxen wagons the pioneers took west, and the Pony Express, the “human telegraph”. So many colorful occupations adorn our history books. Did you know Sam Clemens aka Mark Twain was a steamboat pilot for a couple of years in the 1850s on the Mississippi river before his writing career took off ? Granted he was fictional, but does Captain Ahab not intrigue you about what a real whaler’s life was like when the book was written around the same time?

So, in balance I continue to be fascinated by the ever evolving job economy. We have a choice of 840 occupations the BLS is tracking. The list will be updated in 2018 and I expect it will be longer and have more STEM influence. Our workers are getting 2nd, 3rd, later acts in life. No other country has so many new gen opportunities — franchises (about 7 million jobs), platforms (Apple, Amazon fulfillment, eBay work at home, Uber etc — about 20 million part time for now but rapidly changing ), new services — alternative healthcare, ethnic groceries, pet/child care etc.(another 5 million). I am not even including Silicon Valley type entrepreneurship opportunities in energy, space, food, IT etc.

Yes, lifetime employment and pensions are elusive, but we have ended up with a remarkable new labor economy that our parents would have drooled to be part of. The book research convinced me what a great time it is to be alive and working.

I look forward to drawing even bigger circles!

Who will claim the Enterprise “Western Frontier”?

This summer while researching for SAP Nation 3.0, I have also been reading plenty about the young nation of the US in the 1800s. The comparisons to the enterprise vendor market, two centuries later, in the 2000s are striking.

In 2000, enterprise vendors had many reasons to feel good about themselves. The Y2K challenge had been met - customers could breathe easier. ERP software had allowed enterprises to replace hundreds of fragmented, departmental solutions. New customer facing, supply chain, industry specific opportunities beckoned. A growing proportion of corporate IT spend was with outside vendors – “buy” had trumped “build”.

As you looked at who would dominate the coming century you could say IBM, Microsoft, Oracle, SAP, infrastructure vendors like HP and Verizon. At Gartner we even thought SIs like Accenture would become enterprise integrators and move to the top of the food chain.

The US, then the original thirteen colonies, in 1800 was a young, skinny country. 2/3rd of the population lived within 50 miles of the Atlantic Ocean. Under British rule, the Royal Proclamation of 1763 had declared the boundaries of the colonies as the Appalachian Mountains. Any travel or settlement beyond the mountains was illegal. Even after independence the country had not grown much. The Mississippi river was the western border. You could have put bets on the Americans, but also British, the French, the Spanish, even the Russians on who would take over North America. Each had a foothold across parts of the continent. May be even the Dutch or the Portuguese who were colonizing parts of the Caribbean and S. America.

In his inaugural address in 1801, President Thomas Jefferson talked about a nation "with room enough for our descendants to the hundredth and thousandth generation."  Jefferson was off by a wild margin.  Within five generations, by the end of that century, the country had citizens from "sea to shining sea". The Americans had won out handily – it was actually done by the middle of the century, though the Civil War which followed could have changed that trajectory.

It had taken Jefferson’s Louisiana Purchase from the French in 1803. It had taken similar vision from later Presidents to keep adding to the country's real estate. Andrew Jackson tried to buy Texas from Mexico in 1829. He was rebuffed but after many twists and turns, President James K. Polk annexed Texas in 1845. After the Mexican-American War in 1848, he signed the Treaty of Guadalupe-Hidalgo in 1848 and picked up California. He also negotiated the Oregon Treaty with Great Britain in 1846. In 1867, Secretary of State William H. Seward negotiated the purchase of Alaska from Russia.

None of these expansions were easy to finance nor were they always popular. Jefferson was questioned if he had constitutional authority to sign the treaty with Napoleon. With the country struggling with debts from the Civil War, Alaska was called "Seward's Folly". While the leadership arranged for the real estate, it took grit and plenty of sacrifice for the population to move west. It was a trickle when Meriwether Lewis and William Clark did the epic Corps of Discovery trek to the Pacific in 1804. Their maps and commentary on various Indian tribes along the way opened up wave after wave of others who followed west on the Oregon Trail many as mountain men and missionaries, the Mormon migration to Utah and the California Gold Rush of 1849.  The floodgates opened up with the completion of the transcontinental railroad in 1869.

Yet, there was a continual westward pull with feeling of "It's written down somewhere - it's got to be". If people could not see it in the stars, hear it in political speeches, imagine it in their holy books, they did find it in what John L O'Sullivan wrote in the July–August 1845 issue of the Democratic Review "It is our manifest destiny to overspread the continent allotted by Providence for the free development of our yearly multiplying millions."

In contrast, as we approach the end of the second decade of this century, we see no clear winners when it comes to enterprise tech vendors. If anything the market has become more fragmented since the start of the century. A new set of cloud software companies emerged and became stronger - Salesforce, Workday, NetSuite. Yet, in two decades, cloud applications have barely scratched 20% of the addressable market across geographies and verticals.  Lots of white space to be captured.  Cloud infrastructure has taken off. Amazon and Microsoft have penetrated markets that were IBM and Oracle and HP’s to lose. 

IT integrators like Deloitte were challenged by Indian and other global delivery services firms. 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.  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.

Consumers used to get dregs - decades after governments and corporations got technology innovation. Now, we talk about the Sunday night, Monday morning disparity. What consumers have at home and car is better than what they get in their office, in their planes, in the hotels they stay at. Who was responsible? Players like Apple, Samsung and Google. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Enterprise tech ignored consumer markets, even now only glibly talk about B2B2C – business to business to consumer.

There have been several trillion dollar markets since the start of the century. But in each case enterprise technology players 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.

The good news - nobody has yet become dominant. Nobody has shown the vision of  Jefferson and Seward to acquire massive chunks of real estate

For various reasons I will discuss in the book I am betting on SAP to be near the top in leading the pack. Unlike an IBM or an Oracle, it still has at core an application and business process DNA. It has some of the most sophisticated customers across the world. It has blunted the threat from cloud vendors with its own acquisitions. Having said that it has also shown a tendency to make unforced errors. It has chased often after platform markets when it should stay application centric. It has disappointed its customers with Indirect Access and other ill advised licensing moves. Its partners continue to do poorly and cost its customers way too much cost and effort.  

The century is still young. Other enterprise vendors can still rally their troops with a Manifest Destiny call. From sea to shining sea still awaits.

Nothing “permanent” about Oracle-Rimini

I cannot believe I am writing about another legal matter this week. I wrote earlier this week about litigation cases involving Oracle, SAP and Workday.

Judge Larry Hicks of the US District Court in the District of Nevada has had a distinguished career after his appointment there by President Bush in 2001. He has been on senior status since the end of 2012. The means he could have retired but continues to serve the public. You have to admire that.

I wonder though if he has enjoyed presiding over the Oracle-Rimini saga which has been going on since January 2010. It’s been like a tennis match with volleys back and forth. Indeed, a sentence in his latest judgment brings that out nicely (italics mine)

In its decision, the Ninth Circuit affirmed in-part, reversed in-part, vacated in-part, and remanded in-part the jury’s verdict and the court’s various orders in this action.

I had to smile when I saw the latest injunction is titled “permanent”.  I did find Oracle’s reaction a bit strong given that they have not been able to put this to bed yet.

Rimini Street’s business has been built entirely on unlawful conduct, and Rimini’s executives have repeatedly lied to cover up their company’s illegal acts. Rimini, which admits that it is the subject of an ongoing federal criminal investigation, has proven itself to be disreputable, and it seems very clear that it will not stop its unlawful conduct until a Court orders it to stop.

Rimini for its part, blandly said it will appeal.

I realize this is all legal jargon and jockeying and I am no lawyer.

But…..Oracle could have solved this years ago by offering a similar service. Most Rimini customers I talk to were not just attracted by the lower price (they had to balance the viability risk that came with a small vendor being sued). They did like the fact that Rimini supports their customizations. They love the fact that their ticket volumes have GONE UP. Yes, they got tired of raising tickets with Oracle (or SAP) because they tell me they rarely got resolved so they quit raising them. They like the dedicated rep model they get with Rimini. Oracle usually tells them the quality of their product is more secure, more trusted etc. It was a quality of service, as much as product and an economic decision for many customers.

Oracle has also sent mixed messages to its customer base. It keeps telling them to move to the cloud (indeed the litigation I wrote about earlier in week suggests it coerces them to do so). But if they want to stay with the legacy products, why resent them looking around for support?

Here’s what baffles me. The reality is most Rimini customers continue to buy new stuff from Oracle (and SAP). They continue as YOUR customers, Oracle. I like the fact that you are challenging the Pentagon not to sole source cloud infrastructure, but in turn should you not respect incumbent customers balancing their portfolio if they so choose?

I apologize for putting my usual customer advocate hat. Let’s go back to our regularly scheduled programming and enjoy the tennis match!

Next-gen software executives

I was pleased to see Salesforce has appointed Parker Harris to its Board and promoted Keith Block to co-CEO. I have long been a fan of Parker – just brilliant and a nice guy to boot. I think the enterprise software industry has been incredibly lucky to have him, Stan Swete at Workday, Larry Ellison at Oracle, Hasso Plattner at SAP, Soma Somasundaram at Infor – some of the best enterprise architects all converge at the same time. Similarly executives like Keith, Bill McDermott at SAP, Tom Siebel now at C3 and others have taken sales to new heights in the last couple of decades.

But readers know my view is we are approaching the end of Cloud 1.0 apps.  We will need additionally some new executives in the next phase. We should actually have been starting to groom them a decade ago.

Here are some teams they need, each with an appropriately empowered executive:

Business Process Visionary

I was in Anchorage, Alaska recently and noted that along with Memphis, TN it is one of the 5 busiest cargo airports in the world. Of course, I said thanks to FedEx.  Amazon is no slouch when it comes to logistics – started working with the US Postal Service on “postal injections” 15 years ago. Started putting Kiva robots in its distribution centers almost a decade ago and is now exploring drones and other automation. Amazon, FedEx and others have transformed logistics and supply chain processes. Global manufacturing has turned upside down with Apple moving completely to contract manufacturing. It is about to change again as companies produce close to demand and are rethinking automation on the shop floor. BMW’s ultra-modern plant in South Carolina is an example of that.

Startups have been teaching companies to apply data science to enterprise processes – Oversight Systems around payables and other accounting , Uptake around complex assets, Palantir around fraud detection. In fintech, startups have been transforming banking operations. Ditto with other verticals. Small businesses are using platforms from Amazon, Apple, eBay and others for their eCommerce, their fulfillment, their talent sourcing.  Less than 10% of Fortune 500 talent is on their direct payroll. Some of the remainder in on 1099s, but the vast majority in in their suppliers, their service providers, their franchises and their platforms. Talent management has become exponentially more complex with this diversity.

You know what – none of the major software vendors or their SI partners have helped with much of this. Part of the reason is they have mostly taken old processes and taken them to the cloud. They have “reskinned” their process maps with prettier interfaces,  not tried to rethink the processes for industry changes and automation opportunities. But after two decades, it is time for the application software industry to start leading again with process innovation, not just keep talking about tired old “best practices”

Customer-centric economist

Most vendors have smart CFOs who can talk ARR, Rule of 40 and other investor lingo. But most of them could also use a peer who also helps them speak to customer technology economics.

For decades now, customers have learned from multi-year outsourcing contracts. They expect benchmarking and continuous improvements when they give a vendor years of runway and control. They want to see Six Sigma and CMM type productivity improvements. Most software vendors go in expecting to raise prices when customers renew their contracts. The disconnect between buyer versus vendor expectations is startling.

Another area where software vendors have fallen short is optimizing the cost of migrations to their solution. It’s not rocket science to take someone from Point A to Point B. Its been done hundreds of thousands of times around ERP, CRM and other projects in the last few decades. But most vendors just expect customers to pay SIs to get them there.

Vendors understand Point B intimately – it’s their software. Their salespeople know which Point As to  target.  They could use an internal economist who can focus on how best to deliver the migration - with automation and with specialist staff - at scale to the customer base.

Ecosystem overseer

Most vendors have a partner management role. But it often reports to sales and has a revenue goal to help fund customer events, training and other investments. That’s certainly one role. A separate one should focus on quality and customer economics in the ecosystem. It is mind boggling that vendors let their own brands suffer based on failures and overruns in their SI partners. It is shocking how many let them violate their own commitment to multi-tenancy and no-customization proclamations.

Again, this is not rocket science. SIs have done hundreds of thousands of these projects.  A few years ago, I wrote about cloud vendors and roofers.

I said

Cloud vendors are doing themselves a disservice by going in with service partners who remind the CIO of the last “roofing job”. They need a newer ecosystem of partners who use automation for the migration, the integration, the testing – the roofers who use conveyors and digital cameras. They need roofers who are done in 2 days. Partners who treat it as a repeatable, predictable job not treat it as a work of art. Then watch CIOs talk to their peer neighbors and start making the move one after another. And watch the neighborhood start to shine.

So congrats to Parker and Keith. But we will also need a new and different set of executives as we move into a new phase in the software industry

‘Tis the season for software lawsuits

Oracle, SAP and Workday have all been hit with lawsuits in the last few weeks for very different reasons as I describe below.

But first a preface – lawsuits draw a lot of attention but it’s usually wrong to extrapolate too much from them. Couple of perspectives on that:

- A vendor once asked their attorneys to brief me on the first day of their trial on an IP related lawsuit. My reaction was – wow, they must feel really confident to brief me months or years before a likely court decision. My second reaction was in fairness I should allow the other party to also brief me. Then I thought about it – the jury would not read or be allowed to what I wrote before it made its decision. And in good faith I could not pretend to tell my readers and consulting clients how exactly this jury may lean. Especially a jury of lay people listening to a complex IP case.  So I ended up not writing anything about the case that day or much even later.

- I have been “close to the action” on several cases as an expert witness and they are rarely open and shut cases. The attorneys are incredibly smart, but often don’t work full-time on software industry cases. So, there is sometimes a learning curve.  They are masters at simplifying complex topics to make them understandable to juries. They have to however, keep a safe distance from the expert, so the judge is sure you are truly independent. So, even though you are being paid by  “the same side” you are guessing why they take certain positions or ask certain questions. You usually have copious amounts of evidentiary data to work your way through, but cannot use that for any of your future writing or consulting.

Long and short – whatever you read in the public domain in an article or a post about any software litigation, the actual, gory details are likely quite different.

Having said that, it is interesting that at least 3 very different enterprise software related cases are currently in the news. My commentary is below with no inside knowledge in any of the cases.

Investor v Tech Vendor

City Of Sunrise Firefighters’ Pension Fund has a filed a suit against Oracle. It says “Oracle drove sales of cloud products using threats and extortive tactics. The use of such tactics concealed the lack of real demand for Oracle’s cloud services, making the growth unsustainable (and ultimately driving away customers).”

Audits are an unfortunate but common occurrence in the enterprise software world. Oracle has a poor reputation when it comes to this, but many of its peers are as guilty. While a small fraction of customers cheat and others involuntarily fall out of compliance, it is also a common way for sales fields to make their quarterly or annual numbers. Having said that, many customers have learned to “punish’ such vendors by freezing them out of future business many times what they end up paying as a result of what they consider unfair audits. Also it is starting to show up in a slow number of cloud software implementations as I wrote here – many coerced sales just end up as shelfware.

The filing says “These tactics alienated and angered the Company’s customers, which in some cases have not only refused to purchase Oracle’s cloud offerings but have also looked to terminate their existing business relationships.”. One of the best things that could come out of this lawsuit would be if they could “name names” and show what I have been saying that customers do punish vendors for such behavior. That could force a rethink at many vendors that such short term revenues come at a very hefty price.

Tech Vendor v Tech Vendor

Teradata is accusing SAP of theft and anti-competitive strategy: “SAP could not have so quickly developed and marketed HANA in the first place without its theft of Teradata’s trade secrets. Now, using the fruits of that theft and its position in ERP Applications, SAP is attempting to foreclose Teradata from supplying EDAW solutions to many of the largest corporations in the world.”

I am not sure what to make of this. Usually, you hear murmurs in the industry about some impending action but this appears to come out of left field.

I have not been a big fan of SAP’s HANA strategy in my books and blogs. I think the database has distracted it from application leadership. But did they steal in-memory and columnar database IP from Teradata?

I want to see how Teradata attorneys can succinctly explain arcane optimization algorithms to a jury. Also how they refute SAP’s considerable prior art when it comes to analytics – their three tier architecture in R/3 which allowed it to support multiple databases and understand how users access certain fields more than others , Business Warehouse going back to 1997, its Business Objects acquisition in 2007 and its Sybase acquisition in 2010 and many other elements. In The New Polymath, in 2010 I had written about work at the Hasso Plattner Institute in Pottsdam which I believe was the genesis for what became HANA.  Not saying one side has more merit than the other, but it will mean looking at a lot of documentation to say who developed what and when before the other did.

Customer v Tech Vendor

Sacramento City Unified School District has filed a suit against Workday and Sierra-Cedar for a payroll and finance implementation gone awry.

Project overruns and failures are not unusual around ERP software. In SAP Nation, I had a chapter which cataloged year by year of major project failures in the previous 15 years. And I knew many more where the customer settled botched projects in private. What is different here is so far Workday and its partners have largely kept their noses clean, The amounts involved are fairly manageable at around $ 5 million. Of course for a school district, that is a lot of money but I am used to seeing many 9 figure failures.

Complex as each of those 3 cases are likely to be, they will be child’s play compared to the EU v Google antitrust investigation which has gone on for almost a decade and will likely morph some more.

Like I said earlier though, don’t expect simple summaries from me or others on how and why they get settled. The devil is in the mounds of detail and often that is precluded from being publicly shared.

Why so many “no-go” software decisions?

Most people assume Gartner analysts spend their lives drawing up magic quadrants. Actually the biggest single activity for most analysts is handling client calls as they look for new solutions. When I run into Gartner analysts at industry events I will sometimes ask them how many calls they average a year. Best I can tell, it is less than half what we handled when I was there from 1995-2000.

It was a very different time. Y2K led to a frenzy of software evaluations. Gartner had a higher mix of buyer as against vendor clients. The analysts today are more specialized by market category than we used to be.

But there is a much bigger factor. The conversion to cloud applications in the last decade has gone much slower, especially in larger customers, than the conversion to client/server solutions in the 90s. Salesforce and NetSuite have been around for two decades. Workday and Oracle have been offering cloud solutions for a decade, SAP and Infor for at least five. The last wave of applications are 20 to 40 years old and ripe for modernization. There are lots of drivers which would suggest a much more vibrant cloud applications market.

There are proportionately fewer calls to analysts, and even where they are made, much fewer actually result in purchases.   The last point is concerning and bears investigation.

From my conversations I believe there are several reasons for the relatively slow migration

“Square peg, round hole”

There are lots of mismatches in the market. Many customers want to modernize their shop floor or their warehouse with sensors and robots and are instead expected to buy complete ERP and Warehouse Management systems which, by the way, were designed to interface with humans, not machines. They want predictive maintenance around their major assets and are offered old school depreciation-calculating asset management software. They want social marketing and are offered bundles of SFA-centric CRM software.  They want to modernize industry functionality and find little of that has been moved to the cloud.

Cost of moving to the cloud remains high

While multi-tenancy has reduced cost of upgrades, hosting and application management, the cost of getting there is still too high. Very few software vendors have developed automated migration tools. Fewer have learned to manage their systems integrator partners. Implementation costs and failure rates remain stubbornly high.

Cost of staying put keeps going down

Third party maintenance, new business models for outsourced application management, infrastructure-as-a-service all make staying with legacy applications palatable. End users may not like it, but cannot argue with the improving economics. 

The lag compared to consumer tech now seems permanent

A decade ago, most companies were willing to give enterprise vendors the benefit of the doubt to catch up with consumerization of technology. These days consumer tech companies are offering far more sophisticated infrastructure and artificial intelligence. The big surprise today is when Oracle or IBM delivers anything ahead of Amazon or Google. Even then, no one really expects their economics to be attractive.

It’s not all bad news. With so much of the market still wide open, we may see a second onslaught from Workday and  Salesforce. Oracle, SAP, Infor and others may jolt their laggard on-prem customer bases to migrate. A new generation of vendors offering point solutions may make them move to a new category of applications.

The market needs much more of that. We are in the summer doldrums with too many no-go decisions. 

Digital – with Impact

This is the third in my midsummer updates around cloud computing, renewables and digital transformations.

Over the last few months, I have been collaborating with my colleague, Brian Sommer as he works on a book titled “Digital with Impact”. Both of us saw the practice of Reengineering start off with much promise in the early 90s, only to lose steam in a few years. Companies bought into the false promise, encouraged by SIs, that packaged software available then would give them “best practices” and “reengineering in a box”. Many are still stuck with circa 1970 business processes and the on-going burden of those expensive systems. Both Brian and I worry something similar may be happening with today’s digital projects.

As Brian says “Today, digital isn’t simply a replacement for analog, spoken or other aspects of consumer or business activities. Digital in today’s business vernacular is about BIG change – not small changes at the margins.

Business leaders don’t need more encouragement to ‘go digital’. No, they need a path to define and achieve their transformational goals. That path comes in four phases: They survey the landscape and get quite educated on new technologies, competitive threats, new opportunities, etc. (SEE). Next, they synthesize this knowledge into a new to-be vision of the firm (THINK). Their next challenge is to make a frank assessment of how well their firm can complete this vision and what new resources or adjustments they will need to make (RECONCILE). Finally, these firms acquire the people, funding and more to make the change a reality (TRANSFORM). “

He is a firm believer that doing a software replacement with today’s cloud technologies is necessary, but usually inadequate for impactful digital projects. Most enterprise vendors have not kept up with new trillion dollar markets that have emerged in the last two decades, and do not have a big enough digital “vision”. Here are some examples of their myopia:

Products have became smarter with sensors and satellites and software. Who has largely driven 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.

So, a bold digital strategy calls for assembling a broad team of vendors, not just pinning hopes on those who have done well in the past with back office processes or with IT infrastructure. 

It also helps to probe to see how vendors themselves are changing. Digital transformations at their customers significantly impacts their own product mix and business models - often traumatically. In the last few months I have had a chance to talk to two vendors – Cognizant and SAP - about their own digital transformations.

Rajeev Mehta, President of Cognizant, the outsourcing firm told me “We actually took our revenue guidance (to Wall Street) down in 2016. And we started seeing the impacts of our clients demanding, wanting to start looking at transformation. We started seeing our existing legacy footprint under threat."

That led to a revisit of their 2020 go-to-market strategy. That turned out to be fortuitous as an activist investor, Elliott Management started clamoring towards the end of 2016 to implement what they called a "Value Enhancement Plan".

I am working on a case study which describes the organizational, product mix and other changes at Cognizant, but one of the outcomes from their internal transformation is:

“Operating margins have improved steadily and the activist investor, Elliott Management divested their interest in Cognizant in May 2018, after a 50% jump in stock price just 18 months after they pushed for their reforms.”

I am working on a similar case study about the digital transformation at SAP. Christian Klein, COO and  member of the Executive Board of SAP SE, told me “we are tackling the whole value chain of SAP. We are looking end-to-end, so marketing, sales, finance, service and support, cloud operations, the cloud infrastructure. All of this has to work in harmony end-to-end. That's the first aspect of our transformation.  Next, we are infusing machine learning, IoT, predictive analytics, all this kind of new technology to also bring the intelligence into play to scale and to also get some synergies out of that.”

“It's about adapting business processes to the new digital age. It's about fixing the data architecture. Last, but not least, it's about change management, and taking the people with you because, at the end, everything that we do in the cloud, in system side impacts, in our case, our 90,000 employees and our 360,000 customers, so change management is a key aspect.”

Benni Blau on his staff shared with me details of ten projects they have internally worked on, and the success metrics they can show across marketing, sales, finance and other business areas.

There will be lot more on these and other case studies in Digital with Impact and SAP Nation 3.0 books in the next few months. 

Long and short. Don’t just do small d – digital. Do it with a broad team of vendors. And prioritize vendors who have been doing their own digital transformations and can actually show results from such efforts.