deal architect

TAMyopia

When I was at PwC in the early 90s, I remember we used to throw out statements like "we have 40 to 50% market share in the SAP (or PeopleSoft) implementation market" When I got to Gartner I saw their competitors were saying similar stuff. So, I started telling them - "no, actually you have less than 10%" . The tune of at least some of them turned to "we have 50% market share of deals we choose to chase". Choice - certainly their prerogative which segments or verticals they chose to focus on. But it's not a reflection of Total Addressable Market.

One of my favorite advisory projects is helping vendors challenge their previous definitions of TAM.

I have seen plenty of dysfunctional behavior from technology vendors of every shape when their TAM definition is narrow  - salespeople chasing deals convenient to them, not what the leadership would have approved, marketing claims to deliver functionality in areas which their R&D had no intention of developing in any meaningful manner, CFOs and investment committees which don't approve enough R&D and Capex needed to keep their entities competitive.

In my recent book, I outlined several trillion dollar markets that many technology vendors have missed since the late 90s. Those included smart products, digital marketing, IoT, cloud infrastructure, various verticals - - Google, Facebook, Amazon, Foxconn, GE, Siemens and a whole bunch of vertical players have thrived in those markets even as many technology vendors ignored them. Download the chapter from my recent book  in link here if you want to read about all the missed markets.

Many of those markets were brand new ones or what in MBA school we called adjacent markets so you can understand why so many vendors ignored them - even as they now wish they had entered those markets. But even in their core focus markets, I have seen many a myopic definition of TAM. Here are a few examples

a) Automation and Outsourcing

When I wrote Silicon Collar three years ago, I chose the title because it felt like traditional definitions of white, blue, pink collars were dated as technology was reshaping every job, everywhere. We all wear a Silicon collar these days.  I had examples of robotics, drones, machine learning, CGI, exoskeletons, robotic process automation (RPA) and other automation in the oil patch, in accounting, in films, in winemaking, garbage collection and many other sectors. I wasn't dreaming this up - executives at sophisticated companies were in the book describing their experiences.

So, it has been a bit disconcerting to see so many outsourcers have glommed onto RPA as their major (in many cases only) focus when it comes to automation. Even more cynically, most outsourcers do not take seriously repeated customer expectations to automate their own labor intensive services.  

b) Data Centers and networks

I cannot believe how envious many vendors are of AWS's and Azure's recent success. On the other hand, I cringe when I hear software vendors and many outsourcers say "glad we didn't have to invest billions in Capex". The reality is less than a decade ago HP(with EDS), Oracle (with Sun), IBM, Accenture, Verizon, Deutsche Telecom and other telcos populated and ran data centers and networks for the world. The emerging cloud infrastructure market was theirs to lose and they have done so - spectacularly, so far.

Many SaaS vendors view the cloud infrastructure market as a bonanza - let someone invest the Capex, we will just rent it for cheap. It's not really that cheap and increasingly they are being expected to support multiple clouds. Zoho has continued to invest in its own data centers and passing along those savings to customers. The time will come for other software vendors to similarly hedge their bets. They will have to expand, or at least, morph their market definition of infrastructure.

c) "Glo-ver" in SaaS

I have increasingly been pointing out a huge under-achievement in the enterprise applications market. After two decades of cloud and in-memory applications, only about 20% of a grid across countries and industry processes has a decent choice in contemporary architecture. Myths persist such as "verticals are a sink hole". Sure if you dont do it right, but go see how much lock-in revenue and margins SAP has enjoyed with its vertical investments in the early 2000s.

I have accelerated my coverage of applications and executives who are focused on the white spaces - see some of that coverage summarized here in a trend I call Glo-ver  expansion in focus.

Back to helping vendors challenge their previous definitions of TAM.  Those are fun projects when the vendor is willing to open up. I must be honest though - many vendors look to influence analysts, not use them much for intelligence. So, they would rather posture they have "50% market share in deals they choose to chase".  

Seriously, I hope that changes. Too many vendors are defining markets too narrowly and finding their competitors have done the same and a result too many are chasing after the same, narrow markets. That is a sure path to commoditization.  Trust me - I have seen it repeated many a times over the last three decades. There is little safety in those numbers.

Occupation: Advisor, Analyst, Author

In my four decades of global travel, I have always hesitated about the correct occupation to list on a landing card or tell a passport officer (apparently I am not the only one who agonizes about that answer). At PwC, the answer used to be consultant or advisor, and I am sure I noticed a couple of immigration officers smirk at that. At Gartner, the answer was analyst, till an officer asked me "so why are you not using your diplomatic passport?" and I had to say "not that kind of analyst". I felt the most welcome ever entering Canada a few years ago. The immigration officer practically hugged me when I said I was an author. That did not last. Couple of trips later, in some other part of the world, that answer triggered the question "so how many copies of your books are you carrying?" Ergo, let's figure out how much customs duty you owe.

I should say AAA - as in advisor, analyst, author as my professional bio describes me. But then they would assume I worked for the automobile association.  Can you imagine how long I would hold up the immigration line?

AAA confuses far savvier clients of mine. Many of them see my 7 books and assume I am an academic. My accountant does not understand all the different revenue and spend categories that apply to each. Vendors see analyst and wonder why I don't do Magic Quadrants. Still others have no idea I write the New Florence blog - 15 years and 6,000 posts later. The Deal Architect name has led to inclusion on mailing lists for architecture magazines.

But deep inside I know if I were to unbundle AAA I would probably not get a nice reader review like this

'Mirchandani not only does his homework but seems to have first-person access to everyone who’s anyone in the technology sector, so the quotes peppering the text are all germane and keen'

Even better are those from my advisory clients who say "Thank you for stopping us from making a $20 m mistake" or others who say "you opened our eyes to all the white space in the market we were not addressing"

They don't get hung up on monikers. They do ask me how I manage any conflicts of interest. Otherwise, they just know the blend of AAA brings them a very different perspective and much higher payback than what they get from others. 

Curious - would love to hear from readers what unusual experiences you have had with immigration and customs.  

Oracle: Gen 2 cloud, but Gen 1 applications

Larry presented on Fusion applications in his second Oracle OpenWorld keynote yesterday. It is a bit unusual for him to dedicate a full keynote to applications. He tends to focus on database and infrastructure topics, and mostly tweak application competitors where it suits him. In a nice touch, he did take time to talk about co-CEO Mark Hurd who is out on medical leave.

I have followed Oracle for three decades and even when talking applications, Larry emphasizes what at Gartner we called "speeds and feeds". So, buy Oracle apps "because we use native stored procedures, we have a thin client architecture" etc. The reality has always been that customers buy applications based on functionality and economics as much as architecture and tools. However, he continues to mostly emphasize the technology not what the business user needs.  Yesterday it was about using the autonomous database, multi-tenancy in the cloud and machine learning.

History has shown wave after wave of Oracle applications do fine, but never get to dominant market share, and Oracle ends up catching up with acquisitions. That's partly because they don't benchmark their features and functions against world class customer needs. Could their manufacturing software run the BMW plant in Greer, SC with its massive amounts of automation - robotics and sensors? Could their warehousing functionality run an Amazon fulfillment center which utilizes concepts such as "chaotic storage"?  Can their supply chain run last-mile and same-day delivery concepts being tried out in retail, grocery and other distribution markets? Can their applications run a world class 'operating room of the future" for a healthcare company? Could a MNC customer looking for a global 2 tier ERP strategy count on NetSuite to support it in Indonesia, Brazil and Poland?

What was striking yesterday was how narrowly Larry defined enterprise applications. He said cloud infrastructure competitors (Amazon, Microsoft, Google etc) don't have such applications, ignoring that the pendulum in the industry is swinging from buy to build and tons of enterprise application code is being written on their infrastructure and platforms. He ignored that massive amounts of VC and customer investment has gone into vertical functionality like in FinTech - just visit Shanghai or London and see the vibrant startups there - and that for healthcare and other industries.  

He claimed Oracle has "more applications, more features, more functions" than any other suite - ignoring all the vertical functionality SAP has. He said Oracle is replacing SAP at customers - but none of his examples showed SAP customers moving industry functionality like utility billing or oil and gas functionality to Oracle. He took shots at S/4HANA as "hosted, not in the cloud" ignoring that many of his own customers are still not convinced about the public cloud. In fact his own announcements this week with VMware and "Oracle Cloud at Customer" reflect that reality. Or that SAP's contemporary portfolio today vastly exceeds his - it includes S/4, C/4, all its cloud acquisitions, AIN, IBP, ByD, Qualtrics and much more.

To his credit, he acknowledged that Fusion applications have taken "12 or 13 years" to bring to market. Actually, it has been longer than that because in January 2006, Oracle was already announcing it was "Halfway to Fusion". But let's not nitpick. The reality is in those 12, 14, 16 years Oracle has and in fairness its peers have completely missed out on developing applications for several trillion $ markets. Those included smart products, digital marketing, IoT, various verticals - - download the chapter from my recent book in link here if you want to read about all the missed markets. Google, Facebook, Foxconn, GE, Siemens and a whole bunch of vertical players have thrived in those markets even as Oracle and other applications vendors ignored them.

The good news is those markets are not closed. They are looking for their own Gen 2 applications.

That's Oracle huge opportunity - Gen 2 applications on its Gen 2 cloud. But it needs to get serious about developing or acquiring those Gen 2 applications, not just peddle its long-delayed Gen 1 applications.  

Oracle OpenWorld from afar

I have been watching bits and pieces of OOW from afar. Some observations

Larry, can I please have some of the anti-aging stuff you are on? Damn you look good

Marc Benioff and Aneel Bhusri, I know you are good friends but I want to know which of you, and after how many glasses of wine, thought up this brilliant placement at Oracle Park

The Oracle autonomous database does work. No DBAs on Howard Street during OOW week! Replaced by autonomous cars

Vishal Sikka, curious minds want to know whether you were thinking of your escape from SAP or Infosys here

Jeff Bezos should talk to Marc and Aneel - buy some space at Oracle Park and Larry may just leave him alone

Safra, my wife similarly wants to know your anti-aging secret.

Three pivots on one slide! I watched the whole Accenture pitch and ended up with a whole new buzzword dictionary.  

Oracle freemium......I cannot want to see the anti-aging stuff for this

Good to see Moscone center infrastructure has dramatically improved. NOT, but at least people are good humored about it. Or at least the female of the species.

More anti-aging - Steve Miranda's baby face never ages. He need not have had 2015 call in.

And the Oracle Twins - they age together and ever so gracefully

You know, I may never physically go to an OOW again. I would be wasting time with silly bloggers and missing out on all these astute observations!

BTW, I also have some drone generated pics. As they say, I could show you, but then I would have to .....:)  

Photo Credit - Oracle session replays and the #OOW19 Tweet stream.  

Zoho One evolves at rapid clip

Earlier this year, I wrote about Zoho One " ... the bundle priced at $30 a month an employee, or $75 a month on per-user basis. It was launched in 2017 with 35 applications, it now has over 40.  And from the presentations we heard more apps will join the bundle. A dollar a day per employee is a compelling value proposition, when the functionality keeps growing exponentially. "

I compared it to Amazon Prime "The more I heard of Zoho One and the growing apps coverage for the same price, I thought of how Amazon Prime has grown in coverage. It started off a free 2 day shipping, then added free movies and since then countless new features." Prime, of course, has proven to be a rocket ship for Amazon.

This week, Zoho provided an update on One. It's now up to 45 applications. They told me in a side conversation they have 50+ apps right now....just not all announced.  "Some are on alpha programs, and we really do test them before we formally launch them or add them to Zoho One!"

Features keep evolving including its workflow management tool, Orchestly, which lets managers and administrators design and run workflows without the need for coding skills and PhoneBridge, its telephony platform, which integrates over 50 telephony vendors on one side and several Zoho applications on the other side.

When you look at services under the cover, like in the "AI" category, you get a sense for the growing richness of the applications.

The tools in the bundle keep evolving, many aimed at end users which SMEs with small IT staff especially appreciate.

Bear in mind, many vendors promised they would take savings from taking advantage of cloud infrastructure at vendors like Amazon and invest that into application functionality, and either have not done so, or are just not productive. Zoho continues to rapidly grow its application footprint even as it grows its proprietary DC network. They have shown they can run their DCs more efficiently than going with public cloud infrastructure.

No wonder the bundle is popular. There are now 20,000 businesses using Zoho One, up from 12,000 last year. According to Zoho, a quarter of Zoho One customers use more than 25 applications and more than 50 percent use 16 or more. So, clearly, customers are buying into Zoho's version of suite.

Indeed, Zoho tried to jam a 158 slide presentation into an hour's time slot. Hey, it's good to see a vendor continue to invest in new functionality, and not just milk what they have delivered in the past.

Makes you wonder how much further our industry would be if other vendors would similarly reverse their 50 to 60% of revenue investment in Sales and Marketing and plough that into R&D.

 

Re: Oracle OpenWorld

I am going to miss going to the event next week. My fault. I had a conflict that cleared up, but not in time for Oracle to register me. I have asked them for streaming info so will catch up on a few sessions that way. Sorry to miss those who are going.

In the meantime, thanks to many of you for your input on whether I should think of next writing Oracle Nation. I have also reached out to Oracle to measure what their level of support might be if I do end up writing. Hopefully, it is comparable to the support I got from SAP in writing SAP Nation 3.0. I expect to hear back in a couple of weeks.

Those who do go to OOW, please send me your thoughts on the book, especially on the applications side of the business. You can be my eyes and ears there - will help considerably in my decision. Thanks!!

1995 called. Time to revisit your applications strategy. Now!

I joined Gartner in 1995. I remember clients would call and say they were getting ready for next-gen applications, but that they felt they had "enough time". The deadline in their case was, of course, the Y2K "wall". By the end of the year, the urgency grew and for the new few years, for several analysts like me, all hell broke loose.

Gartner had an elaborate call tracking and scheduling system called GAMEC to facilitate 30-to-60-minute consultations with clients. The average, annual GAMEC metric for an analyst was about 500 inquiries. In the 4 and a half years that I was at Gartner, through the end of 1999, my GAMEC count was over 7,500!

Having come from Price Waterhouse where I ran a software intelligence group, I handled many of the ERP software queries around SAP, Oracle, PeopleSoft, JD Edwards and other client/server vendors. Having done multiple implementations, I also handled many of the ERP systems integration queries around Deloitte, IBM and other SIs. And for years after leaving, in my own firms I helped many of these customers source and negotiate their ERP application management, hosting and other contracts.

As an industry, we declared victory that Y2K was not as lethal a disaster as some had projected. The reality is many clients waited too long and then paid significant premiums to SIs and still had poor implementations. Others did not do enough due diligence on their software vendors and many are still paying the price. Many only replaced back office systems, when updating operational areas would have delivered them much higher payback.

I get the feeling we are about to see a similar spike in interest in next-gen apps in a move that Hemingway called "gradually, then suddenly". As I tell my advisory clients "fool me twice, shame on me" - we made a lot of mistakes in the 90s and we would be remiss to repeat them.

I have had conversations with several SAP customers in writing SAP Nation 3.0 and others since it was published in March. Many of them say they are looking at migrating to S/4HANA, but then they add "we have time till 2025",  the announced SAP end of life for their current ERP software. Honestly, they should be looking not just at S/4 but other new SAP technologies like C/4, IBP and Leonardo. BI customers should be looking at the Analytics cloud. BusinessOne customers at ByD and so on.

But, wait a minute, we don't have a hard Y2K wall this time, so what's the hurry? If anything, it is possible SAP may extend ECC support beyond 2025. Customers of Oracle, Infor and other on-prem vendors show even less urgency in looking at next-gen solutions. But the management changes and layoffs at SAP earlier this year reflect an industry where open source, ML, IoT are the future not ABAP or Basis. The acquisitions of Mulesoft and Tableau at Salesforce, the autonomous database and cloud infrastructure investments at Oracle are signs of a significantly changing industry. Your Board and management team are talking Digital Transformations. Do you really want to be stuck in 2025 with technology and talent from the 90s or even earlier? Have you considered your recruiting brand for younger IT professionals if you want them to support Baan or PeopleSoft? Have you considered the compliance and security risks with your customizations around that technology?

If we learned anything from the 90s, we should be preparing for things very differently

a) Spend time to envision your next-gen application portfolio

In the 90s, applications consolidated many departmental solutions and allowed companies to set up shared service centers across global subsidiaries. This time around the goal should be about (and the payback will come from) retiring last-gen customizations and tons of spreadsheets, consolidating many of the surround cloud solutions companies have acquired in the last decade, and most critically modernizing industry and geography specific operational systems. They were neglected in the Y2K rush and in the twenty years since every industry and country has gone through seismic changes. Evaluate your current major software vendors to see if they can support you (make them share detailed road maps for industry and geographical growth, and negotiate penalties if they delay planned deliveries), but also be prepared to look around. There are plenty of vertical and geographic application specialists, and you should consider custom developed applications which leverage next gen ML, multi-tenancy and other platform capabilities from Amazon, Microsoft, Google, Alibaba and others. All this will take months, if not years to evaluate.

b) Spend as much time to review your service providers and your own talent needs

No question - the last wave of services procurements was poorly done. Companies did not plan for a life cycle of needs. They hired SIs for initial implementations, then outsourced their infrastructure to hosting firms, then hired application management, often offshore firms to help with on-going care and feeding of their applications. Each of these was done over years, often with different providers. It has also become their biggest single cost, without proportionately positive results. However, so much has changed in the last twenty years. Services should be a lot more automated now. They should deliver shared service/multi-tenancy efficiencies. There are third party maintenance firms for level 3 support, rural sourcing and near sourcing firms for AMS. We are also seeing a reversal and several CIOs are insourcing talent. Much of it is for making their own products smarter, IoT compatible and contemporary in design. As with vendors, customers are having to look for talent with open source, ML, integration and other capabilities. Reviewing the changed talent and automation marketplace similarly deserves months of analysis.   

c) Do more scenario planning, not traditional TCO/ROI analysis

I hear from several customers they cannot justify a move to a next-gen product. I can certainly empathize, but often their analysis of the cost and benefit is one-dimensional, focused on a single application and does not cover the lifecycle. We need a new generation of IT financial analysts who can perform scenario analysis to handle the complexity of multi-year, portfolio wide migrations.

d) Develop a new intelligence network

The one big difference since the 90s is proliferation in information sources. Blogs and vendor marketing materials are plentiful. But they tend to be anecdotal, or single threaded. And many tend to focus on the negative. Google the term "SAP Indirect Access" and you get 6.5 million hits. Is that a concern? Of course, but one of 00s of things to consider as you look at next-gen applications. Peer networks are a far better source of intelligence and sharing. Again, you need multiple conversations given the complexity of the portfolio.

Long and short, it's not too early to start reevaluating your application portfolio. Don't let vendor end-of-life projections lull you - or in reverse, force you to join a stampede in migration. Do it on your own terms and speed, but don't ignore the history of the 90s. You may be doomed to repeat those mistakes.  

SAP and the changing face of Asia

I have increasingly been pointing out a huge under-achievement in the contemporary applications market. After two decades, only about 20% of a grid across countries and industry processes has a decent choice in cloud solutions. As a result, I have accelerated my coverage of applications and executives who are focused on the white spaces - see some of that coverage summarized here in a trend I call Glo-ver expansion in focus.

So, I looked forward to an opportunity to meet with several of SAP’s Asian customers at an event in Bangkok last week. Even better, they actually showcased a wide range of industry nuances across the country/industry grid.

Zahila Mohd-Ali of Sarawak Energy talked about a Vegetation Management System, an important consideration for a utility in tropical Malaysia. She covered wide ground including drone applications in thermographic inspections, mobile field force applications and operational parameters at power plants.

Hans Van Wuijchkhuijse of Troo talked about the very different challenges of selling life insurance in a country like the Philippines where 52% of the population is under 25 years old and tethered to mobile technology. He related to his own experience growing up - his dad had told him to go talk to the insurance agent the family had long patronized.

In another country with a similarly young demographic, Myanmar, Roland Lee described City Mart’s fantastic growth from a single supermarket in 1996 to wide range of modern physical and electronic retail channels with 9,000 employees. In a fascinating breakout, listening to him describe rapidly changing customer preferences and logistical challenges I felt like I could have been talking to a grocery exec in the US as Amazon and others dramatically reshape that sector.

Lisa Robins of Standard Chartered simplified the complex supply chain in auto, aviation and other manufacturing sectors across Asia, and then related that to cash flow her bank helps finance especially for smaller suppliers in lower tiers of the chains.

Daniel Laverick of Zuellig Pharma talked about his company’s efforts to ‘fight fakes’ - counterfeits and other pharma tampering in Asia. He talked about the promise of Blockchain in that context. In a breakout, he talked about bridging his IT organization - a seasoned ECC support staff with others focused on proprietary algorithms and Azure cloud nuances.

I especially enjoyed time we had with Scott Russell, SAP President, Asia Pacific and Japan. He likes to use the term ‘Asia Soaring’ for the region that has been home to him and his family. Organizationally, SAP has China and a few other markets reporting directly to the Board but Scott’s territory is wide and he can effortlessly cover nuances across each of the markets. I told him I could spend days listening to him talk about war stories from each market. I come to this part of the world about once a year - he has lived here every day since the early 2000s.

There were other perspectives from execs at Ananda, a real estate developer, the National University of Singapore, SingEx, a venue/events organizer and a tour of one of JustCo’s coworking locations in the city. 

The big takeaway from me from the event was Asia has long been a manufacturing base for the world. That is changing as trade tensions between US and China intensify. But even more so with its bright, young demographic Asia will increasingly influence customer expectations and experiences for the world. My wife and I then spent a few days in Japan with its fascinating blend of extreme automation in every aspect of life and immense respect for artisans of every flavor. The world will increasingly look to Japan as the man-machine mix similarly evolves everywhere.

I wish I had more time understanding how SAP competes in this more price sensitive part of the world. Also, how SAP and regional partners will support the vertical diversity that was highlighted at the event. One risk is SAP keeps just talking S/4, C/4, Experience Management and not drilling into vertical operational areas.

For now, it is time for Oracle, Salesforce, Workday and others to similarly start showcasing their Glo-ver investments. SAP has been in Asia over 30 years and now has over 9,000 employees spread across 31 office in the region. The event in Bangkok showed me just how far the competition has to go to catch up.