deal architect

IBM Red Hat: Reading the tea leaves

I have certain core IT values. I like customers to buy versus build systems . Have long been a buy cheerleader. But in return, I expect vendors to build not buy.  So, I have never been a fan of big acquisitions. Certainly not at massive multiples.

So my initial reaction to IBM’s $ 34 billion play for Red Hat is that of distaste.

But the opinions of bankers and investors matter more than mine so not going to comment more on that front.

Reading the tea leaves, though I wonder if this signals

a) The end of another hype cycle for AI?

I saw a recent Fortune issue which was all about AI and I wondered if that is a signal of the peak of the current AI hype cycle. BTW, we are going through the 4th or 5th hype cycle around AI. They appear and disappear every decade or so. As I wrote in Silicon Collar

“Since the 1950s! That is when Alan Turing defined his famous test to measure a machine's ability to exhibit intelligent behavior equivalent to that of a human. In 1959, we got excited when Allen Newell and his colleagues coded the General Problem Solver. In 1968, Stanley Kubrick sent our minds into overdrive with HAL in his movie, 2001: A Space Odyssey. We applauded when IBM’s Deep Blue supercomputer beat Grandmaster Garry Kasparov at chess in 1997. We were impressed in 2011 when IBM’s Watson beat human champions at Jeopardy! and again in 2016 when Google's AlphaGo showed it had mastered Go, the ancient board game. Currently, we are so excited about Amazon's Echo digital assistant/home automation hub and its ability to recognize the human voice, that we are saying a machine has finally passed the Turing Test. Almost.”

Is IBM’s pivot from the attention it has given Watson the last several years more of a confirmation of the peak?

b) A great disturbance in the Force?

I wrote earlier about The End of Cloud History I concluded

“Yes, we are approaching a pivot in the cloud apps market. This is where the geopolitics were in 1989. The next decade and beyond will be tumultuous – exciting for some, disrupting to others.

It is the end of cloud apps 1.0.”

Last week, Larry Ellison announced a more secure Gen 2 cloud. IBM’s play for Red Hat is about “multi-clouds” and given its traditional hardware and hosting strengths, I read more of a pivot towards private clouds.  

My fellow analysts who watch hawk-like for multi-tenant, public cloud architectural purity will be having conniptions with the cloud washing we will see in the next few years. 

I have a feeling J.J. Abrams could make a next career cataloging the cloud pure and evil that are about to unfold.   

The 90s called–they want their ERP back

Eric Kimberling shared with me his post Top ERP Systems for 2019. His top 5 are Microsoft Dynamics 365, SAP S/4HANA, NetSuite, Workday and Salesforce (more its partners like FinancialForce).

The post made me wonder what my application analyst colleagues at Gartner in the 90s would say about the state of ERP today. These were studs like Erik Keller, Chris Jones, Art Mesher, Bruce Bond and others. You can credit us or blame us for a large percent of ERP decisions in the runup to Y2K. Without sounding too boastful, we helped tens of thousands of enterprises with their ERP selections, many of which are still running.

In turn, we were also demanding on vendors. Yes we argued architecture – thin v fat client, 2 v 3 tier deployments, but we also demanded functional depth. We challenged their claim of “best practices” and reengineering platforms.  We saw vendors were not doing enough on the shop floor, in logistics, customer facing areas and created new categories of markets like MES, SCM and CRM. We pointed out that ERP vendors had little in way of books of record for insurance, oil and gas, retail, utilities and many other sectors. As a result, vendors like SAP introduced their Industry Solutions, most after the Y2K deadline had passed.

We also pointed out that the payback from ERP was showing low because customers were implementing financials, hr and other back office modules but not operational or customer facing ones. Many were so guided by SIs, especially those with accounting heritages who had never set foot in a factory or warehouse or R&D lab.

Since then, there has been plenty of moronic talk about how manufacturing is dead and supply chains were optimized long ago. The US is still the second largest manufacturer in the world and the modern shop floor is dotted with wearables, 3D printers and robots. Supply chains are being redefined with modern distribution centers and last mile delivery options. Utilities are into net metering and predictive maintenance. Insurance companies are being challenged to rethink business models. Banking is being reshaped by a swarm of fintech vendors. Every process in every industry is being reimagined with automation – drones, AI, autonomous vehicles, kiosks, RPA. There is no industry whose books of records have not been reshaped. It’s time for ERP vendors to wake up from their Rip Van Winkle 20-year slumber and show they have customer citations with these modern capabilities.

Looking at Eric’s list I get deja vu. Most on his list are fine in the back office but not do not have robust capabilities (as yet) in operational areas. They certainly do not have industry functionality (most do around services and PSA, but not in other big chunks of the economy) . Those are the areas that need modernization. Instead we risk making the same mistakes we did in the 90s, helped by a younger generation of the same SIs.

Don’t get me wrong – I was trained as a CPA. I understand the need for robust financials and analytics

But let’s call them that – accounting and hcm in the cloud. Let’s not call them ERP. And like my colleagues did in the 90s let’s push vendors to deliver contemporary and deep functionality, not just talk “cloud” architectures.

And let’s challenge SIs when they talk digital transformation around these narrow footprints. That is today’s codeword for reengineering. The biggest bang comes from smart products, omni-channel commerce and related logistics, modern shop floors not just from modernizing the back office as we did the last time.

AI in the enterprise: a reality check with John Sumser

John Sumser, aka HR Examiner, has been focusing on "intelligent technology" including AI and machine learning as it morphs the HCM function. Trends in that function are a forerunner of what we will see across the enterprise. I recently caught with him on his latest report and what he learned at the recent HR Tech event in Las Vegas

John, what are you excited about when you look at "intelligent technology"?

In the HCM world, it's pretty clear to me that data is becoming infrastructure rather than the stuff that passes through the software. Everybody I have talked to said, in one way or another, that first you have the data and then you have the software, so the software sits on top of the data . Getting the data right is the key to allowing the software to do its thing.

The second thing that was pretty uniform, although I had to prompt it sometimes, is that what now comes out of a machine is an opinion. It used to be what came out of a machine was the facts that you put into it. But, it is decreasingly the case that what the machine gives you is the facts that you gave it. It is almost always, at some level, providing an improvement on those facts, some benchmarking, forecast, context or some insight.

Rather than software being a re-packager of the data that you give it, it's now an interpreter of the data that you give it. That's a big change. That's a really big change. And so, people are starting to talk about that. People are starting to try to figure out how you deal with that.

I ran a session a called "How to Evaluate an AI Vendor," The gist of it was how do you understand data quality and what does it mean? Does the vendor understand their data models at scale? If you've got 5,000 people in your company, you're going to have a million data models.

How do you monitor their health? And, how do you make sense out of the variable quality of the overall data farm when you're making decisions?

When you say it's more opinion and less fact, is that surprising to the audiences? How did they react to that?

It was a lightbulb. It was actually a surprise. Nobody -- I've worked a long time to get that idea that simple, and the notion that machines are now not as reliable from a pure fact perspective causes lots of heads to bounce up and down. "Oh, that's what intelligence means."

One of the things that I've been probing a lot of the bigger enterprise vendors is, you don't have enough enterprise class data. Most of your data is locked up in customer, on-premise systems. You don't have permissions to access that. A lot of what they're talking about is stuff that consumer tech is doing, the image recognition, the voice recognition, and so on. There's very little enterprise data that is really being used for AI use cases.

You're right. The notion that enterprise technology is going to resemble consumer technology is one of the most damaging ideas that we've entertained in enterprise technology. I was looking the other day. I made a reservation on OpenTable for some restaurant in Las Vegas. OpenTable has handled 820 million reservations. With 820 million reservations in your database, you could do things like predict what the menu ought to be and where you ought to locate the restaurant if you want to have a successful restaurant in Western Sonoma County, California. It's a huge database of consumer interest and preference.

If you've got 10,000 people in your organization, you're never going to have that. You can't get to a trillion data points like OpenTable can in a 10,000-person organization.

What happens in those smaller settings is latency becomes a primary problem. Fidelity becomes a primary problem. You don't have those when you have a ton of data points.

We're about to see some expectations being reset in the enterprise space. That doesn't mean that there isn't cool stuff being done. It just means that you will not see what Cornerstone is busy suggesting that they're going to have a recommendation engine for learning videos. You can't do that with little tiny clients.

If you took all the clients in the world, you wouldn't have enough data to make sense out of it. If you had all of the employee data, employees don't handle their interactions with the company in the same way that they do with a consumer product. They don't have daily interactions in their learning system.

I don't have a clear picture of how it shakes out. But, the difference between consumer technology and enterprise technology is going to become increasingly apparent.

Well, tell me where it is promising in HCM AI

First of all, if you wanted to find where a technology rooted in statistics was going to take hold, you'd look at insurance and banking, maybe pharma

So, Allstate Insurance is a really good example. At Allstate, they have built by integrating - it is a patchwork quilt of vendors integrated into a single system that can go from identifying names of people who might be good employees all the way out through the entire acquisition and development process to identifying the kinds of skills that you'll need in the future and the sorts of places where you're going to need to open offices. And, if you get to the place where you're opening offices up, it can help you navigate all the way through the staff problem. That's pretty interesting.

What's even more interesting there is that team is run by librarians. The team that built that structure are the librarians they hired. There are five librarians, five Masters of Library Science on the team.

The reason that's interesting is because, in order to use the next technology, you have to be better at asking questions than having answers. This is what it means when you say that the machine gives you an opinion. But, if you have a boss or a very upset spouse, these are the times when you only need one opinion to make a decision. Every other time, you need multiple opinions when you make a decision.

The worker of the future is going to be better at gathering opinions in order to make decisions. Places where it's easier to have ambiguity be the center of the equation are the places where this stuff is going to tick.

There is a vendor called Bridge that has an integrated LMS and performance management system. The idea of performance management stops being, "Here's how you screwed up and missed your objectives last year," and starts being, "Here's how we're developing you." The manager gets coached through the available material in order to bring the employee along as a developing expert in something.

There's a great one that's for interview scheduling - Ascendify. Their interviewing system identifies the interviewing team by expertise, gives that interviewing team a set of questions to ask individually, and evaluates the results of the interview to see if the information that was asked for was obtained and then revises the question set for the people down the road. It does this while doing all of the coordination necessary to keep hiring interviews scheduled.

Ascendify only works in the Fortune 100. If you're a big company, that process is cumbersome and expensive and often has ten interviews as a part of the overall process. It takes all the administrative load out of that. That's significant. The estimate for Microsoft's interview coordination budget, so just scheduling and rescheduling the interviews, is $20 million. They can zero that out and give you a faster process.

The first wave of things look like those sorts of incremental improvements to existing processes. Over time, what's going to happen is the silos, which look to me like things that are held in place by existing enterprise technology, will start to collapse. It doesn't take very long, if you stand far enough away, to see that employment branding, recruitment marketing, onboarding and orientation training- are all the same task. Because they are understood to take a different point in a workflow or done by a different expert, you have the same task performed multiple times by five different people for different reasons. You can consolidate that under a goal that looks like, how do we shorten the time to productivity for a new employee?

If that's the goal of the entire talent acquisition process, including the training and admin functions that wrap around it, then what you do in the initial moments of contact with somebody who might come to work for you are different than what people are doing today. That becomes easier and more intelligible when you've got data as infrastructure underneath it all

I heard you say some customers are doing interesting stuff. Some startups are doing some cool stuff. Where do the mainstream vendors fit in?

The emerging battle is for the replacement generation for enterprise software. The people who are in that battle are IBM, Google, Amazon, Microsoft and -- maybe Facebook.

In that group, the name of the game is selling commodity processing and storage. And so, they all -- IBM and Google being the first into the market, they all have an idea of an overlay of technology that expresses as functionality. They all already have applicant tracking systems. They all, for the most part, believe that the world is better if you have a taxonomy as the fundamental structure for HCM.

IBM and Google are very quietly duking it out over which is the better taxonomy, but it's pretty clear that, in this particular game, taxonomy is going to be the key because you can organize everything around the taxonomy. If you go taxonomy plus competencies in the places where people want to use competencies, you start to have a magic formula. That's the initial data structure.

If you start with the initial data structure, then you can lay workflow on top of that pretty easily. The next generation of large-scale enterprise providers looks like it's coming out of that area, and they all have recognizable teams.

If you look at what they're doing, it's really interesting. The Microsoft people analytics team, which is both in HR and product development, has 140 people in it. People analytics, the HR analytics team, 140 people at Microsoft. At Facebook, it's 60, and that's 60 people doing HR analytics for 30,000 employees. These are environments where budget doesn't mean the same thing as it does in the customers you and I understand, but partly because both companies are using their internal processes as a way to accelerate product development. There's real interesting stuff up there in the sort of serious cloud providers area.

The next tier down, if you look at Workday, even Kronos -- Workday, Kronos, or Ultimate Software, the ones that pop up on my radar as the best of the bunch, it looks to me like one of those situations where you lift the house up and install a new foundation underneath it. At Workday, it's a planning and data management system. And, at Kronos, it's a layer of intelligence that uses 40 years' worth of time clock data to predict some interesting stuff.

I don't expect to see anything resembling innovation out of Oracle or SAP. They won't go out of business because of it. They have a long, long, long tail on their cash cow, but people are going to have to innovate around them in order to get real intelligence in their enterprises.

Then the rest of it is small point solutions and data manicuring plays.

That's another fairly prophetic statement that it is the infrastructure-oriented Microsoft, Amazon, Google, IBM that are leading the way on big machine learning. Are HR executives willing to accept them as their HCM providers?

Well, I think it's interesting. If you look at Google and IBM's strategy, and they're really out in the market right now, they are largely going for a sort of a Trojan horse play. IBM is inside of Workday and inside of Cornerstone. Google gets their foot in the door by being the frontend of employment websites for 3,000 companies.

I don't think that the way that it happens is these companies come out of the gate on day one selling a comprehensive enterprise solution. They come out of the gate on day one solving actual, significant problems with a meaty difference so that they have the relationships in place that they can build on. They will ankle bite their way into taking accounts. It's not going to be an RFP level competition for a long time but, by the time it becomes an RFP level competition, the game will be over.

A different Vegas. A very different Workday.

This was my sixth trip to Vegas this year. Coming from humid Florida, I have a routine for that city. Gallons of water and lotion to compensate for the heat and dryness. Gear to protect against the excess of artificial light and sound. But this time in town for Workday Rising, Vegas felt a bit different. The remnants of Hurricane Rosa cooled it down to pleasant levels. The ceremonies honoring the anniversary of last year's mass shooting gave the city a bit of humility.

Rising also felt different. CEO Aneel Bhusri justifiably missed the event due to a family emergency. While his executives made up in energy, I missed the annual comedy routine he and co-founder Dave Duffield put on. In many other ways, Rising was different.

Analytics as the third “pillar”

There was palpable excitement about Prism Analytics launched in the last year. Many customers see it as democratizing complex analytics and bringing the wizardry of teams of expensive data scientists and complex platforms like Hadoop to the average user.

Prism was spawned from the Workday acquisition of Platfora. Its collaborative Worksheets grew from the acquisition of Gridcraft. Many other small acquisitions other the last few years have helped built Workday's machine learning chops. It is safe to say Workday has been building a third pillar of intelligent apps beyond its first two transactional ones in HCM and Finance.

The Adaptive Insights acquisition, Workday’s largest so far, was an resounding endorsement of that third pillar and got plenty of play at Rising. Releases 32 and 33 due next year will heavily feature planning functionality, improve Adaptive look and feel, and importantly expand it significantly beyond its financial planning roots.

For a few years now, I have felt HCM world has been out of touch with the realities of the labor economy. As a result, we have ended up with gross mismatches where 6m blue collar and trade jobs are unfilled, and on the other hand we have too many white collar graduates with $ 1.5 trillion in student debt.  Less than 10% of the civilian workforce is on the payroll of F500 companies. The rest are not in the so called gig economy. They are in Tier 1 and 2 suppliers. They are in accounting, advertising, attorney and other service providers. They are on platforms of companies like amazon, eBay and Apple. They are in franchises of companies like UPS and Ace Hardware. Talent management software has missed this transition to a clover-leaf  labor model . You have an economy with rapidly changing occupations and skills (the Bureau of Labor Statistics recently expanded their list of occupations). Every occupation is being re shaped by a wide range of automation like robotics, drones, wearables. HR seems vaguely interested in automation trends. Given all this, I was pleased to see Workday announce their Skills cloud - a taxonomy of 55,000 skills based of winnowing down using ML from over a million user defined skills. That is a start to bring rigor to HCM, and hopefully to start to correlate it better to the macro job economy. 

The relative de-emphasis of industry verticals

If Analytics is getting plenty of attention at Workday, something else may have to give. In my view, that is investment in vertical functionality.

As I wrote recently I have been disappointed with the pace of verticalization in cloud solutions. Way too many vendors spray paint an industry specific feature or two on top of their horizontal financial, HCM or CRM modules and call that verticalization. My expectations for verticalization are more demanding from two angles

- I want to see a significant industry “book of record” offering. If you say you are committed to retail, I want to see a robust offering and a sizable customer base in the merchandising area. If it is insurance, show me similar around claims processing. If it is utilities, I want to see a billing engine, and one for complex asset management and maintenance.  If it is healthcare, show me electronic patient records. If it is oil and gas, show me functionality their geologists consider critical.

- I also want to see contemporary functionality. Show me something customers can plan a serious digital transformation around. So, for example, if you say you are committed to manufacturing markets show me execution support for a modern shop floor with robotics, sensors and wearables.  For utilities, show me support for net metering and for plants fired by renewable fuel.

From my more demanding definition, Workday has truly verticalized only in higher education. While it has features which are aimed at specific industries, it does not have books of record. It is increasingly clear it sees a much better path to keep investing in its three pillars. I cannot fault Workday for that focus, just worry its horizontal sandbox is attracting too many other players even as much of the white space in industry functionality gets little attention.

The emergence of Workday Ventures and the Workday platform

At Rising, I was invited to a breakout with 12 portfolio companies in the new $250M Workday Ventures fund. The billing was “The companies in our portfolio solve problems that we don't solve natively in our Workday applications. Our portfolio companies leverage the latest technologies and have proven that they are ready to serve our enterprise customer. All Workday Ventures portfolio companies are now official Cloud Connect Partners and are using our APIs to build integrations.”

I meet with 3 portfolio companies.  Voicera offers Eva, an in-meeting AI assistant. Eva will take notes for you in meetings, or conference calls, or interviews. Indeed as I was taking notes, I noticed Eva was live-transcribing our conversation. I quit writing and asked Omar Takawol, CEO to send me a transcript. I had previously met Omar when he sold BlueKai to Oracle. I have a feeling Eva may play a big role when I write my next book.

Next up was Pymetrics which develops  neuroscience games to help companies rethink their talent management strategies. I had previously profiled CEO Frida Polli on New Florence. Suplari provides unified insight into indirect expense spend - contracts, spend across AP, P-card, T&E, POs, and invoices, as well as usage and consumption data. CEO Nikesh Parekh joked the company name has roots in consigliore from the Godfather books and movies.  Each of the portfolio companies I met was impressive and I wish I could have spent time with the other 9.

Leighanne Levensaler, SVP of corporate strategy and co-head of Ventures explained their investment philosophy. Their biggest KPIs, beyond a fund’s expectation of investment returns, are Workday customer adoption and embrace of emerging Workday platform technologies. On the first point, she said they had arranged for over 150 meetings between existing customers and portfolio companies at Rising.

I went over to SAP’ TechEd a mile away in Vegas after the Rising event. It gave me a glimpse to a parallel universe we may similarly see emerge around Workday as its own platform evolves. A world of Mentors and geeks who are way more comfortable talking Kubernetes than about building blocks of organization hierarchies in Workday. 

Workday organized an analyst dinner at a restaurant with a large balcony. The temperature was pleasant but the noise and neon signs of Vegas bombarded your senses. I looked up and saw the desert sky. It took me to many pleasant memories of shooting stars and the haunting silence my wife and I have enjoyed a short distance from Vegas in Death Valley in CA, Antelope Canyon in AZ and Zion National Park in UT. It reminded me Vegas is a gateway to a whole different world.

Workday is becoming a similar gateway to the rest of the enterprise. While they are moving away from a transaction focus, their analytical and ML chops will open up new insights, and their platform will introduce a new set of developers and startups to the rest of the enterprise. It's their way of transitioning from a system of record to a system of insight. 

Dreamforce Keynote–the good and not-so-good

I am not at the Salesforce event this week but changed my travel plans to make sure I could watch yesterday’s streaming of the 2 hour keynote.

Some of it was predictable. Marc Benioff  has an admirable loyalty to Hawaii, friends in the music industry, Monastic monks and Deepak Chopra and as far back as I can remember they have been fixtures at Dreamforce.

The customer profiles were mind-blowing. I love the generous time 3 customers – Unilever, Marriott and Brunello Cucinelli S.p.A – got on the stage. Too many vendors gloss over customer mentions in such sessions – have 50 logos on a slide or invite executives to just pick up some award. Salesforce executives did a really nice job describing technology as applied to each of these customers and their industries. And each had subtle “social” statements. The Ben & Jerry/Unilever portion focused on allowing customers to make sustainability choices about ingredients in their ice cream. Tony Prophet, a black executive pulled up on his Marriott app his reservation at a Bellevue property for a LGBT conference. Nice focus on diversity. Brunello, even speaking in Italian, passionately emphasized “soul” in business and implored Marc to create something enduring by invoking the Parthenon and Florence. All well done.

What I did not care much about was the long lead in. I have written before Salesforce overplays the activism card and that leads to expectations it often cannot live up to. What Tony did in his Marriott segment was so much more subtle. I also think Salesforce overplays the Trailblazer and ecosystem stance. As an application vendor, customers pay it a lot of money. The custom building and SI costs are over and above. If anything Salesforce should be aggressively managing this not bragging about the billions it is costing customers. As an analyst, I tell customers to evaluate vendors based on functionality, economics, architecture not their diversity or activist stance. So,  I cringed a few times at the beginning of the keynote.

All’s well that ends well and other vendors would do well to emulate the time and space the 3 customers got in the Dreamforce keynote. Watch the replay here – especially the portions on the 3 customers.

Infor’s Vertical Journey

Five years ago, I wrote a note titled Infor: a grown-up sleath startup. I wrote about investments Charles Phillips and his team were making including those  in ION middleware and in beautification its captive design agency Hook and Loop was bringing to the product, to its events and real estate. But I was particularly excited about Infor’s industry focus. I followed up in 2014 with the Infor promise in the note It’s a Vertical World after all.

As readers know I have been disappointed with the pace of verticalization in cloud solutions. Way too many vendors spray paint an industry specific feature or two on top of their horizontal financial, HCM or CRM modules and call that verticalization. My expectations for verticalization are more demanding from two angles

- I want to see a significant industry “book of record” offering. If you say you are committed to retail, I want to see a robust offering and a sizable customer base in the merchandising area. If it is insurance, show me similar around claims processing. If it is utilities, I want to see a billing engine, and one for complex asset management and maintenance.  If it is healthcare, show me electronic patient records. If it is oil and gas, show me functionality their geologists consider critical.

- I also want to see contemporary functionality. Show me something customers can plan a serious digital transformation around. So, for example, if you say you are committed to manufacturing markets show me execution support for a modern shop floor with robotics, sensors and wearables.  For utilities, show me support for net metering and for plants fired by renewable fuel.

My hope was the savings to Infor not having to invest in cloud infrastructure and instead leveraging that of Amazon’s would go towards verticalization.  I have seen investment in horizontal HCM, analytics, even a new general ledger. While Infor has made some  industry investment, I would like to see a lot more. I want them to deliver to their tag line “we understand that making tires is different than processing milk. Processing milk is different from manufacturing apparel, and both are dramatically different from caring for sick patients”.

So, I was excited when I heard Infor has acquired Vivonet which offers solutions for POS, kiosks, kitchen systems, payments, labor scheduling, and food and labor cost management. In the press release, Infor says it already has hospitality functionality which covers property management, revenue management, asset and incident management, analytics, and artificial intelligence.

I am going to Inforum next week and am going to try and see what “books of record” major hospitality companies have adopted from Infor. I am also going to try and find out which are anchoring their digital transformations around Infor products. I travel a fair amount and must admit I do not see Infor (or other ERP competitors) show up as strategic vendors for too many in that industry.

It will be good to also see Infor progress in other industries it is focused on including healthcare, retail and manufacturing. And since it is in Washington, DC I presume we will hear about Infor’s progress in public sector and aerospace markets. In short, I am looking forward to seeing Infor’s delivery five years after I got excited about their vertical strategy. 

A subdued SuccessConnect

Vegas has way of making people, how do you say it, exuberant. On one day there was the CHRO of SAP, Stefan Reis presenting to the press corps about moving his workforce systems to the cloud to manage the giant 90,000+ global employee base. The next day he is in god-awful trousers with planet Mars props on stage handing out “HR punks” t-shirts to everyone and taking potshots at  competitors like Workday. But he redeemed himself with poignant moderating of guests like Adriana Marais who has signed up for a one-way ticket to Mars and Michael J. Fox who moved the audience to tears sharing the joys of life even as he fights Parkinson’s.

Fox was one of  many “feel good” moments at the SuccessFactors event in Las Vegas last week as I wrote here. But from a product perspective, the event was muted, especially compared to the announcements coming out of HRTech event which was being held a couple of blocks away.

The most glitzy announcement was the Digital Assistant, an Alexa for the enterprise  which applies machine learning to guide and recommend actions through processes such as onboarding. It  leverages the CoPilot bot framework that SAP has been showcasing in other non-HCM scenarios for over a year.

Most customers I talked you were more excited about the analytical tools like Collaborative Planning which SAP and SuccessFactors keep maturing. Others were more interested in the redesigned Android app in collaboration with Google.

Several analysts were impressed with lady execs like Athena Karp, CEO & Founder, HiredScore and Caitlin MacGregor, CEO & Co-Founder, Plum on a panel in the media room.  That showcased a new community SAP is fostering which is focused on emerging HCM hot buttons like well-being, pay equity and  unbiased recruiting.

The customers I talked to were ok with the modest level of new product announcements. Several told me they can barely keep up with the existing 4 releases a year. Indeed David Ludlow, GVP told me in a one on one “we are being asked to make it easy to consume features we already have through multiple channels like chatbots.”

Makes sense. Just don’t slow down the flow of  “feel good” moments.

‘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.

The end of Cloud history?

In 1989, Francis Fukuyama, then deputy director of the State Department's Policy Planning Staff (he has since taught at Johns Hopkins and Stanford among other institutions) predicted the fall of Communism and the world beyond in an article titled “The end of history”. In 1992 he elaborated his thoughts in a book. His view was optimistic – that Western democracy had prevailed and would survive as the “final form of human government”

Margaret Thatcher, one of the major contributors to the Fall of communism, and conservative herself is said to have reacted to Fukuyama’s article thus “The end of history? The beginning of nonsense….” No doubt, history marched on – there were wars in the Middle East, the EU and China both emerged as major global powers, Russia has not exactly disappeared.

Cloud computing is entering its third decade (NetSuite was founded in 1998, Salesforce a year later) and in many ways we can say it has won out over on-premise computing. And we can like Fukuyama say it is the end of cloud history, but how will the next decade and beyond play out?

Based on my research and consulting the last few months, we could see at least five scenarios emerge: 

a) Next-gen enterprise apps continue from current market leaders

The current crop of leaders – Workday, Salesforce, Oracle may continue to go from strength to strength. To SAP’s credit it has through its cloud acquisitions managed to survive the onslaught of those three and others and is poised to lead again. As I wrote a few weeks ago, it will take a next generation of apps with changing UX of voice interfaces and digital assistants, a lot more integration of automation like drones, robots, wearables and functionality which reflects today’s business practices not those brought forward from client/server world. This is a challenge for the incumbents. They want to keep selling what they have versus developing their next-gen of apps, and may give SAP a chance to get to leadership again. Having said that. in the last couple of decades, SAP has missed out on several trillion dollar markets as I wrote here. All these vendors are somewhat myopic – they keep looking at each other as competition and ignoring the white space around them.

b) A verticals led market

In the first two decades of cloud apps we mostly saw financials, hcm and crm functionality – horizontal across industries. Major chunks of functionality – utility billing, insurance claims processing, electronic medical records, retail merchandising,  manufacturing execution and countless others have stayed in client/server and prior architectures. By my estimate that leaves 80% of the market uncovered and opens opportunity for a new set of vendors (or outsoucers like Accenture) to come at enterprises with industry functionality partnered with horizontal functionality available  in the market today.  In other industries, large customers may themselves port their legacy industry applications to micro-services architectures.

c) Portfolio of technologies from multiple vendors

My colleague, Brian Sommer and I have looked at several business processes which the current apps leaders offer, and even there there are enough SMAC – social, mobile, analytical and cloud components you can use to craft far better purchase to pay or recruiting or shop floor capabilities. Customers prefer to buy versus build but many are finding they can combine components from multiple software, hardware, sensor and other vendors and create far more relevant and cost efficient processes.

d) A data led world

A radical new way to think of applications may be emerging. As John Wookey explained “And rather than ask people to type data into a system and then spit it back at them, {which is honestly what most applications do) ...ask for data and then give it back to you…you start with the idea of, here's the business objective, AND there's all the data in the world. What kind of an application would you build? The analogy I always use is Waze, which is to me, like the application that showed the best value or the best shift that will happen. When you go from a world in which you have an app that shows you red lines, yellow lines and green lines on a hard to read Google Maps, which is kind of what used to be in the traffic apps, if you remember them. To Waze. No one cares what the traffic is like in that area. What they care about is finding the best route to get home. How do I get from A to B as quickly, easily as possible. And tell me my options in doing that. And then feed me, turn by turn what I should be doing.”

We are starting to see vendors talk about machine learning – but those are in context of their current flows. Workday has Prism analytics which bring data together from multiple sources, SAP is talking about intelligent apps, but a new wave of business applications which works backwards from goals and objectives may be emerging. It could be data centric vendors like Google and others like IBM with Watson type capabilities which lead in this market

e) An infrastructure led world

The fastest growing segment of the cloud market today is that around IaaS. Amazon and Microsoft with their massive data center footprint and platform ecosystems could start through acquisitions and partnerships start to redefine the application landscape.

The problem with infrastructure led vendors is usually they think in speeds and feeds not features and functions or business outcomes. As an example, Oracle could have run away with the cloud apps market in the last decade, especially with SAP’s issues. They could have replaced hosting in tens of thousands of their PeopleSoft, JD Edwards, EBS and other customer bases with their IaaS. They have chosen to chase after Amazon. They could have listened to their legacy customer base which went to third party maintenance. These customers consistently ask for support of their customizations and improvements in ticket resolution. Oracle responds with “ours is more trusted – secure”. It’s ships passing in the night.

Yes, we are approaching a pivot in the cloud apps market. This is where the geopolitics were in 1989. The next decade and beyond will be tumultuous – exciting for some, disrupting to others.

It is the end of cloud apps 1.0.

Oracle Soar: “The Last (Application) Upgrade you will ever do”

In 1991, I was assigned a team at PwC to build something called “2O to 3O”. Dun and Bradstreet Software, especially its McCormack and Dodge (M&D) unit, was an important practice area for PwC. M&D had released a new General Ledger 3.0, a product with a multi-dimensional code block and a number of other new features. They did not, however offer 2.X customers any upgrade software to get to 3.0. The thinking was the new product was so different, customers would re-implement. At PwC, we sensed an opportunity to develop a mostly automated solution - we ended up with a PC based configurator, a set of mainframe migration programs and a consulting package.

My team was surrounded by cynicism. Feedback from M&D was it would be too difficult, we were wasting our time. Feedback within PwC was why are we cannibalizing our service opportunity? Anyways we got it done (the master and transaction files were relatively straightforward, the control file where you stored allocation, report writer and other specs far more complex) but in the mean time, the market had moved. Clients did not want to migrate to another mainframe product. Indeed D&B itself has announced its Smartstream client/server product and that froze customer interest in 3.0. Ironically, having shown we could build a migration product, D&B called us a short while later and asked us to help them build migration tools to Smartstream. That is another story but I have always wondered why software vendors do not think of automated migrations when they design next-gen products.

So it was nice to see Larry Ellison present last week a modern day version of an automated upgrade that my team had developed. Its called Oracle Soar (to the Cloud) and the components are in the graph below.

The Soar functional scope is much wider than the General Ledger we focused on, it is going from a client/server to a cloud platform, and there are lots more client/server customizations to sunset – so it is several times more complex.

And I love the marketing pitch – it is the “last” upgrade customers will need to spend much time on. Later upgrades in cloud settings are handled by Oracle, in background.

My questions

- why did it take Oracle so long to develop this?

- why are other vendors not writing these for their products, and even those around legacy products of competitors?

- why are systems integrators, while bragging about automation projects at customers, not building these?

I know the answer to the last one. The SaaS model has shrunk hosting, application management and upgrade services that were lucrative in on-premise world. Implementations remain labor intensive and are good for business if you want to continue to sell rate-card based services.

The reality, as I showed in multiple case studies in Silicon Collar, is automation makes your workers smarter, speedier and safer. Automated migrations are clearly speedier. They also allow your consultants to focus on smarter, more creative work. And they are safer – at least in that they give you an advantage over competition which continues with hand to hand combat.

So, I hope other software vendors and outsourcers follow the Oracle lead here. 

BTW, spend the 40 minutes Larry Ellison, Beth Boettcher and Steve Miranda spend discussing Soar – worth your time even if you are not an Oracle customer.