deal architect

Merry Enterprise Season!

Mark Hurd reported yesterday, Oracle’s two cloud ERP businesses, Fusion ERP and NetSuite ERP, delivered a combined revenue growth rate of 32% in Q2. Workday similarly reported 30+% growth in its latest quarter, and Salesforce in the high 20%. In most meetings I have had with SAP executives as I write Nation 3.0, the results are similarly impressive. I had an introductory call yesterday with Bill Berutti, new CEO of Plex and he was very upbeat.

It is so nice to see the whole sector do so well. It should make for nice holiday parties. As an analyst, I want them to spread their wings and will raise the bar for them again, but that can wait for the New Year.

In the meantime, I want to thank Stacey Fish, Angela Barbato, Susie Johnston Foran, Sharon Sulc and many others in the industry who have to put up with my pesky and plentiful questions all year round.

Happy holidays, all!

SAP's evolving partner economy

Ask about who has had a successful platform strategy, and most people will point to Salesforce. I beg to disagree – compared to revenues Apple has generated for its partners and itself from its iOS store and Amazon with its fulfillment engine over the last decade, Salesforce is a distant laggard. While customers have built plenty of custom objects, the revenues generated by ISVs on the platform is relatively small. Still as enterprise software goes, Salesforce stands out.

Ask who has had a good reseller channel and people will point to Microsoft and HP. I cannot disagree with that. They do not not get much recognition but SAP’s reseller channels around its BusinessOne and BYD products would get more recognition if they were independent units. Instead, they are dwarfed by SAP’s powerhouse direct sales engine which is the envy of most enterprise competitors.

That SAP direct sales focus has also meant association with a vast ecosystem of systems integrators and outsourcers. Again, that is the envy of many competitors, but if you read the first volume of SAP Nation this ecosystem has also been a burden on the customer base. And for the ecosystem cost (which ranks alongside GDP of largest 50 countries around the world), the failure rates have been unacceptably high.

So, with all these conflicting thoughts running through my mind, I went to SAP’s Partner Summit in NYC this week. They did a good job bringing together a mix of ISVs like Hrizons (a SuccessFactors implementer which also offers complementary software), resellers, small/midsized SIs like Beyond Technologies and large ones like Deloitte. And customers like Cintas and Pregis talk about their use of old and new SAP products and the partners who helped them in their journeys.

My feedback:

It was nice to spend some time listening to Diane Fanelli, SVP describe how SAP is showcasing in its App Center a growing number of ISV offerings using tools in its Cloud Platform and Leonardo offerings. In previous attempts, SAP has tried to do similar around NetWeaver and HANA. The customer access is much more digital this time around, the Cloud Platform leverages lot more open source and the barriers to partner participation appear much lower. It is fledgling at this point in terms of revenues for the ISVs and SAP (Fanelli says focus is adoption prior to monetization). I hope they continue with her statement “the future is small, simple applications that snap into existing landscapes. You go shopping [for them] on your phone." Which also means the onus for vertical and other books of record will stay with SAP. Too many vendors abdicate heavy lifting to their platform partners.  

In my research for Volume 3 of SAP Nation, I have seen many customers use smaller SIs for their S/4HANA projects, SuccessFactors and newer SAP projects. So, it was good to spend time with Blue Marble and Nimbl at the event. I do worry that SAP continues to seek bragging rights by talking about 18,000 partners. That’s way too many. It would do better for itself and its smaller partners by ruthlessly culling the number.

SAP also continues to be enamored with its bigger SI partners. I understand their view that such partners are a channel or at least an access path to influential client executives. I don’t understand the continued lack of certification or controls. SAP’s brand suffered considerably from the overruns and failures in the first wave of ERP.

The issue is less about SAP, more about the slow evolution of SIs and outsourcers. There is little automation in their service delivery, and still way too much consultant travel. The CTO of Deloitte, Darwin Deano responded to my question with "We're 20,000 people. It's not going to completely change overnight. But I can assure you that every SAP project is benefiting from things like automation and other new ways of working”.  I would love to see much more remote delivery,  more use of automation in data conversion and testing, more use of machine learning in parameter configuration. I would also like to see much more proactive commitment to multi-tenancy and public clouds.  

Way too many SAP partners are proposing private cloud or on-prem deployment of S/4 (and possibly C/4 going forward). Not only will that continue the previous cycle of expensive ECC implementations, hosting, upgrades and application management, it will also complicate SAP’s efforts to have sufficient data in the cloud across customers to train its machines. So, this is definitely an area SAP needs to step up and guide, and if necessary, control the ecosystem. Seeding the ecosystem with more “born in the cloud” SIs who were raised with Google, Amazon, Salesforce and Workday technologies and agile methods would also be a smart move.  

Overall, it is nice to see a partner ecosystem in transition around SAP. I, for one, would like the pace of change to accelerate. And the SAP focus be on customer success and economics not just on channel revenues. Many analysts are also hoping there is a role for the recent acquisition, Qualtrix in measuring the partner experience going forward – it may go a ways to help justify the large purchase price.

SAP Nation 3.0 - early concept design

I have not finished writing the book, but my design partners are already rolling out cover and back copy ideas

Feedback welcome, thanks!

‘In 1800, the US, then the original thirteen colonies, was a young, skinny country. 2/3rd of the population lived within 50 miles of the Atlantic Ocean. You could have put bets on the Americans, but also the British, the French, the Spanish, even the Russians on who would take over North America. Over the next few decades the Americans had won out handily. It had taken leadership, incredible grit and a Manifest Destiny call to energize its citizens to expand westwards.

In contrast in 2000, enterprise tech vendors led by SAP,  other ERP/CRM vendors and their SI and other partners were set to dominate the corporate technology landscape. Instead their share of the enterprise has steadily declined. They have missed out on contract manufacturing of smart products, digital marketing, cloud infrastructure, industrial internet, process automation and several vertical niches. Two decades ago, few of us had heard of Accenture Interactive, Foxconn or Google. Few of us considered Amazon or GE as tech vendors. 

SAP has started to turn the corner with a series of new products and acquisitions which gives it a fighting chance against cloud competitors like Salesforce and Workday. The next decade will allow SAP to further reinvent itself and take advantage of wave 2 in many of the markets it ignored in the last two decades. Can it? Will it have its own Manifest Destiny call to go from ‘sea to shining sea’?

The book is optimistic about SAP’s prospects but also catalogs the many ‘unforced errors’ it has made since the turn of the century.’

 

 

Mark Twain and Hasso Plattner

As an analyst, I tend to be a bit dry and focus on product details and vendor economics. As an author, I become as Led Zeppelin says a “traveler in both time and space”.  In writing SAP Nation 3.0, I am making time for the human dimension of the executives at SAP, its customers, its competitors, so there are plenty of episodes like this one.

“I had expected Hasso Plattner to be exhausted. In fact, I suggested we postpone the meeting, but in 25 years of similar meetings I knew he looks forward to banter with analysts. For me, the payback usually came from watching SAP PR jaws drop at something he says during such meetings. Usually there would be an admonition after the session “Don’t you dare use that”

This meeting was safe enough - talk of multi tenancy, quantum computing, blockchain, microservices. But then he was talking about Tom Sawyer and Peter Pan, two characters who have brought him much joy throughout life.

He was doing his best Mark Twain describing how young Tom Sawyer had turned whitewashing a picket fence - a punishment for skipping school - into a group activity. He had conned his friends into thinking it was fun and required a unique skill - 'only one in a thousand, maybe two thousand can do it'. So much so that his friends paid him for the privilege of doing that tedious task in the hot sun.

The tale has clearly helped Hasso motivate customers and employees over the decades even when he is proposing something radical. As he told us in that meeting

Ten years ago, I had an idea which really worked: streamline ERP applications to basically record only transactions. And, everything else is then an algorithm to exploit the data. Facebook doesn't know what aggregates are. Why do we have aggregates?

That worked. Many people didn't believe that this can work, especially inside SAP. This freed us completely. Today, (with S/4HANA) it's all on demand. On-demand is much quicker because people are not permanently rolling up and looking at rolled up data. If they want to change it, it's instant.

That is really gratifying.

I had expected him to be exhausted during this meeting. We had been told to hurry up as he was about to pack up. 8 hours prior he had led a 2 hour keynote on the main stage. Anyone who has done public speaking knows how much energy that drains. He had then done a media q&a for an hour. Already sensing his fatigue, I had asked him a softball question on sports technology. And he had joked about how I always asked him tough questions.

But here was the old warrior now talking about more people to cajole, to win over. Even if it takes a decade. And even when there is still pretty of cynicism about HANA.

That's when it hit me. Don’t write off Hasso or SAP yet. There's plenty of fight left in this old dog.

Someday soon, I hope to ask him about Peter Pan. “