It was a rough week for tech stocks on Wall Street. And with the uncertainty around US interest rates and elections for another 2 months who knows what other whiplash effects we will encounter.
I usually take a narrower pov - how will this affect enterprise software and services? And in the last two weeks have had several interesting conversations, and will have more at upcoming industry events in the next few weeks.
Is SAP in trouble?
I heard from a couple of folks
“Three board members gone in less than two months”
“This is a lot of executive talent to replace on short order”
Is Salesforce taking SAP’s place as a vertical leader?
Marc Benioff was in fine form as he reported an impressive quarter on Jim Cramer’s Mad Money and importantly talked about AI use cases from several industries including Wiley (publishing), Kaiser (healthcare), ADP (services), Wyndham and Open Table (hospitality)
Are we in the Gartner trough of disillusionment when it comes to Gen AI?
Dreamforce, Workday Rising, SuiteWorld should give a better perspective on the trajectory of the industry and I have heard about product announcements from Zoho and others under NDA
When are we going to see Gen AI impact on SI developer productivity? And that in common phases in most of their projects - data conversion, testing, end user training etc?
Many SIs will have large booths at the industry events and should allow a chance to ask them about Gen AI impact on their practices.
I also tend to take a long term view of the sector in line with enterprise customers. They buy solutions which serve them for 2 decades or more. They spend months evaluating options and negotiating contracts. Throw in vendor events and news and all these data points are tea leaves which help me in my tasseography. You have to drill down in to the small patterns, not jump to conclusions from the clusters
I also rely on history for macro clues. Hardware and telecom vendors have historically provided the groundwork for architectural shifts. The initial set of applications and services tend to be “safe” and under utilize the new processing power. It took Apple and Google nurturing mobile apps ecosystems to help grow sales of mobile devices. It took Amazon similar to build a massive ecommerce engine.
We are seeing the same when it comes to the power of GPUs and LLMs. As I wrote here, the initial Gen AI use cases in the enterprise have not been very ambitious – especially when you consider the power of NVIDIA’s Blackwell platform. They have focused on SG&A, not on the much larger COGS and Revenue and Asset management opportunities on their customers’ P&L and Balance Sheets
I have said often that even after 25 years of SaaS applications, 75% of business processes across countries and industries do not have much vendor application choice. Vendors have been content to keep selling basic ERP and CRM functionality, and there mostly for English speaking countries. Those terms have been around 30 years – I helped coin some of them. If anything, the hype from GenAI has caused a pause in expanding their transactional functionality. Without the functionality they do not have data or the domain expertise to imagine ambitious AI use cases.
Even SAP which has the broadest reach of customers, functionality and talent across industries and countries has been cautious in the reach of its GenAI offerings. So about its exec departures, yes it is somewhat concerning but I am more worried that SAP is not being more ambitious in its offerings and is mostly focused on an updated core ERP. As for Salesforce, I love Marc’s optimism but his use cases mostly focus on payback from customer service productivity. I would love to see in addition operational, vertical and geographic use cases.
And in turn this is a major opportunity for NVIDIA, other chip makers, LLM providers and hyperscalers to build a broader ecosystem of use cases and business cases. . Many of these markets should be highly differentiated and command premiums which Wall Street expects to pay for NVIDIA GPUs and hyperscaler pricing. It should be a virtuous cycle as it has turned for Apple, Amazon and Google in the last go around.
It is good to see Jensen Huang, Sam Altman, Thomas Kurian, Matt Garman make the industry rounds but I would love to see them drive more leadership and ambition in their enterprise ecosystems. As for me, I need to get an oversized coffee mug to read more tea leaves. As I wrote here, Wall Street’s definition of industry leadership has evolved over time from BOPS to FAANG to the Magnificent Seven. We cannot rely only on the current crop of application and services vendors for enterprise AI leadership.
