deal architect

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!!

Time for Oracle Nation?

I have analyzed Oracle applications business since the early 90s - first at PwC, then Gartner, now at Deal Architect. I have long been a Larry Ellison admirer, much less so of his company's applications. It has been a perennial, promising, second ranked "Avis" in the applications market. The problem is their "we try harder" mission often gets distracted by the company's database or tools or infrastructure business. I get excited every few years, but they always seem to lose momentum. Reading Steve Miranda's comments in Seeking Alpha, it may be time to get excited again:

"It is the industry's most complete set of cloud applications and consists of more than 1,100 different modules. We have applications for every business function from finance and HR to supply chain, manufacturing, sales, marketing, and customer service. Our portfolio also includes dedicated applications for industry verticals."

If the 1,100 modules cover a wide range of global and vertical angles, it  would make them by far the vendor with the widest functionality in the cloud. See my post about the poor Glo-ver coverage in enterprise apps. 

I have thought about writing Oracle Nation in the past focusing on its application business history over the last couple of decades. It is a rich motherlode to mine: 

- Lots of very interesting executives - Larry, Mark Hurd, Ray Lane, Charles Phillips, Thomas Kurian among the many who have shaped its applications journey

- A wide tapestry of application software companies which have been acquired by Oracle

- Changing mix of competition - Microsoft, SAP, Salesforce, Workday etc.

- Legal and other spats with DOJ, SAP, Rimini Street etc

I have hesitated in the past because of several reasons

- Many a gossipy book has been written about Larry, so I understand why Oracle is a bit wary of authors. That is not my angle - I write about companies not personalities. I have plenty of contacts at Oracle customers, partners, alum but but without open access at Oracle, the book would be incomplete.

- My style is case study heavy. I like to interview a broad range of customers across countries and industries. I have not seen that range of customers - sure Oracle has them, but will need help there.

- As a couple of my analyst friends have (snarkily) asked - what new will you present in the book? Their point is Oracle is the bully in the industry, not well-liked - how will I be able to change that perception? 

Frankly, my job is to present the facts based on lots of research and let the reader decide on the perception. As another analyst once told me "You can make a brown paper bag sound interesting". 7 books in the last decade have given me plenty of practice.

Two decisions I have to make in the next few months:

- The first is a business decision. Based on feedback to my recent book, SAP Nation 3.0, I sense a book on Salesforce/Workday and other SaaS leaders may generate more of an audience. Even more would be one on PaaS and IaaS using Amazon, Microsoft and Google tools. 

- Secondly, I have to make sure this is not another case of "mission accomplished". In 2006, Oracle had (way) prematurely celebrated "Halfway to Fusion". I need to ensure the 1,100 modules in the cloud, as Steve claims, cover a wide range of global and vertical angles and have a reasonable number of customers in production. 

Likely make a decision before the end of the year. Readers - help me out with your thumbs up or down and why.  

Infor: Part of the bigger Koch puzzle

I was excited when Charles Phillips and his team arrived at Infor in 2010. I looked forward to them executing to their vision they would focus on various verticals like healthcare and hospitality. Over the last few years I have become less excited as they have not delivered operational functionality for those verticals, but more horizontal financials, crm, and hcm functionality.  

I am not just picking on Infor. I have been clamoring for more "Glo-ver" functionality. After 20 years of cloud apps, we have too much of the horizontal stuff in English-speaking countries. Customers are not waiting and they are finding plenty of solutions to fill geographic and vertical niches. They are going to startups, SIs and are even filling the gaps themselves.

Which is why it is interesting to see (courtesy of Bloomberg, sub required) the other tech investments Koch Brothers have been making in addition to that in Infor.

Then you look at the breadth of the Koch empire across industries

Sure they are going through a variety of digital transformations in these subsidiaries and could commercialize that in the form of solutions to bring to market.

So, the opportunity for more "Glo-ver" is at the Koch level. I hope they start presenting to us at that higher level of vision. That would get me and many customers a lot more excited.

Is Oracle having an application fire sale?

I tend to not focus so much on what vendors report to Wall Street and focus more on what they are delivering to customers, but three numbers jumped out at me in this Seeking Alpha article

Oracle cloud apps annual revenue of = $ 11.49 billion

Oracle apps modules in the cloud = 1,100

Oracle cloud apps customers = 6,000

That makes it average annual revenue of $ 1,741 per module per customer. That's way cheap for Oracle.

One or more of those numbers is likely off. I will let my financial analyst friends check into that.

Me - I am going to tell Oracle customers to invoke their "most favored customer" clauses and ask for software at that bargain price :)

Rimini Street tries to reshape AMS

I drove by the Renaissance hotel in Powai on the outskirts of Mumbai in India last month. It brought back memories - I had taken a client there 15 years ago on a due diligence trip as they looked to outsource their SAP application management, Basis support etc. Over the next few years I took several other clients to other Indian and E. European cities.

Then in 2010, I stopped doing so. The economics were just not as compelling, the staff quality was deteriorating/turnover was rampant, the overhead of dealing with staff often many time zones away added to an already complex environment. The offshore, and even domestic AMS model did not die, but it has been ripe for automation and a less labor intensive, more shared service/multi-tenancy model.

I have been encouraging Rimini Street for years to enter the market. They already support customizations to SAP and Oracle in their customer base. They have an agile, small team model. They could combine Level 2 and 3 support for customers. They have a generally happy customer base around the world, even if the publishers don't exactly show them much love.

They have finally entered the AMS market. Here is the announcement.

Is it too late? The AMS market is going through massive changes. SAP customers have been ring-fencing ECC with cloud solutions, and two-ERP subsidiary models. Many ECC customers will move to S/4HANA in the next few years. SAP has a whole new slew of products I describe in SAP Nation 3.0 - C/4HANA, SCP, SAC, AIN, IBP, Leonardo ML and IoT and on and on. It's not your Dad's SAP customer base.

Yet the ECC-centric AMS market continue to chug along at over $ 80 b a year. It was one of the biggest components in the models I had built of the economy in the first volume of SAP Nation.

So, it is good for customers to have another, quite different, AMS provider. In many ways, it is also good for SAP. Better late than never if SAP customers can see operational efficiencies in the Run phase. It will make them more willing to look at newer SAP products knowing they don't have to continue to live with circa 80s and 90s support models around today's products.

Control your own destiny when it comes to EOL of your packages

A recent Rimini Street survey says that in spite of the announced 2025 end of life for core applications in SAP Business Suite 7 ERP product and older versions, "Of the IT leaders surveyed, two-thirds state they either have no plans to migrate to S/4HANA (35%) or are undecided about moving to S/4HANA (32%) "

IDC, on the other hand, surveying 300 of its clients concludes "it’s not a matter of if companies will adopt SAP S/4HANA anymore, but when."

Steve Miranda of Oracle tells Diginomica "We're pretty comfortable with our strategy of supporting customers who are on-premise and want to stay that way (with support from Applications Unlimited) until the time is right for them to make a move. I feel good about that."

UpperEdge, on the other hand, argues that under pressure from Wall Street "So ready or not, Oracle will be trying to force migrations according to their own timeline."

Who to believe? In my recent book, SAP Nation 3.0 I had profiled several risk-takers, modernizers and diversifiers in the SAP customer base who have been refreshing their application portfolio. The biggest segment is still what I called Bystanders which are not moving - they make up about 60% of the base of over 400,000 customers. I had a whole chapter where I provide guidance to SAP to "tilt the bell curve" and energize the Bystanders.  

Others make similar points in the book

"Mueller of Constellation said, referring specifically to ECC and moves to S/4:

“The next two or three years will show if SAP can create the value proposition. We’ll see how much customers push back. SAP could say, ‘We listened to our customers and we will give you another two or three years (beyond 2025), but you have to pay not 18%, but 21% or 25% or maybe even 30% in annual maintenance.’

However, the writing has been on the wall and for years now. It should have been clear to every CIO that the innovation is happening on the S/4 side. Do you want to be in 2030, 11 years from now, with an ERP system that cannot run machine learning, which doesn’t have a good IoT story and so on?”

Or as Wright of Accuride and Howlett of diginomica have pointed out, it’s tough enough today to recruit younger talent to an ECC and ABAP shop. Can you imagine what it will be like in 2025 or 2030?"

By all means, listen to all these perspectives, but in the end make your own hard-nosed decision. Actually decisions. Revisit them every year. The market is changing rapidly.

As I show in the book, the SAP world has dramatically changed in the last few years. So many new products - not just S/4, C/4, SCP, SAC, Qualtrics, AIN, BCP. So many cloud flavors. You should also get clarity on upcoming releases, especially around vertical and geographic functionality that keeps growing.

Oracle has an even more acute Bystander issue - by my estimate 80% of their customer base is in the Bystander category, and they have not been as forthcoming about their next-gen products. They keep talking about their financials, hr and crm - not so much about the rest of the enterprise. So, they have an even bigger challenge - and opportunity - to tilt their bell curve. As a customer, use it to your advantage.

Also take advantage of the market bounty. These are not either/or options. We live in multi-vendor, multi-cloud worlds.  In my book, EBSCO which went with Rimini for third party maintenance, describes how they continue to buy new products from SAP. I have talked to other Rimini customers who are moving to next-gen applications over a few years, and in the meantime move their legacy apps with significant customizations to Rimini.

Don't wait for a vendor-driven EOL date and then have to fight a crowd of your rushed peers. Plan how and when at your own terms. You should be deciding the EOL of your legacy applications.  

A dream team to negotiate with SAP

Geoff Scott, CEO of ASUG, wrote this in his foreword to SAP Nation 3.0

"For many years, licensing was a “third rail” topic: look at it, discuss it among yourselves but don’t ever collectively — as a customer contingent — touch it. That all changed in 2017, when SAP customer anxiety peaked due to several high-profile lawsuits against SAP customers over IA. ASUG’s involvement started with a proactive letter from the global user groups, led by ASUG, to SAP’s Executive Board. What followed next was a series of intense but productive discussions — real back-and- forth between SAP customers, user group leaders and SAP executives that soon expanded to customer concerns around sales and audit practices. There were many trips to Walldorf and meetings in Newtown Square."

So, I was pleased to be invited to be with Geoff and others at SAP HQ in Newtown Square this week. The others included Gartner analysts - not those that come up with MQs. Those that reminded me of my time there in the 90s. Buyer advocates who help in vendor negotiations. There were independent analysts like me. This was a dream team anyone negotiating a big contract with SAP should aspire to bring together to represent them.

Of course, SAP was represented by an even more formidable team. Their top attorneys and licensing experts, some of who have shaped its deals for over two decades.

We did not represent any particular named customer. We were there for SAP’s "first-ever" Pricing & Licensing Analyst Day.

We covered wide ground including

- why is SAP not making consumption of SCP a lot easier?

- when is SAP going to start delivering cloud price reductions like the 60+ Amazon has delivered over a decade?

- how does SAP expect to police rogue salespeople who dream up their own policies?

- who thought up the user-to-document count conversion ratios that are being proposed in Indirect Access scenarios?

- does SAP realize every time it tries to simplify an area, it actually adds more nuances and makes it more complex?

- does SAP realize it has lost control of product messaging to its SI partners and licensing messaging to user groups?

- when is SAP going to clarify EOL dates and implications for ECC?

SAP did not have definitive answers for many of the topics, but to their credit they only had a few slides under NDA so allowed for discussion around a wide range of its old and new products. And yet we just scratched the surface when it comes to its portfolio of products.

Oracle, Salesforce, Microsoft and other vendors came up often during the day. Not as positive examples SAP should emulate. But reflective of market reality. SAP is taking a lot of grief for Indirect Access and other licensing practices.  But other vendors have their own bag of tricks. And many of them pretend to be lily-white pure when it comes to such behavior.

Will other vendors have the courage to similarly open up to analysts? I would hope so but not counting on it any time soon. All the more reason to compliment SAP for convening the day. Hopefully our input will shape more positive behavior in the field.

In the land of the blind.......the one-eyed man is King

I only half-jokingly proposed that to my editor as the sub-title for SAP Nation 3.0. One of the reasons the book comes out, on balance, positive to SAP is because it is developing, acquiring, releasing a new generation of enterprise applications. Most other vendors are content to peddle their financial, HCM, CRM applications. They are enamored with infrastructure and platform markets. Let someone else develop applications. After 20 years of cloud applications, if you look at a grid by country, by industry, by business process, we barely cover 20%.

So, nothing against Tableau, but I would have invested in a variety of new industry applications. Instead, Salesforce keeps hoping its partners will develop them on its platform. And it has invested over $ 20 billion (including that in Mulesoft) in the last couple of years without growing its functional footprint.

But why just pick on Salesforce? Oracle and Microsoft are teaming up to take on Amazon. I would love to see them develop new industry applications. Microsoft continues to let its resellers verticalize its applications. The end result usually is small extensions not major operational functionality. Oracle made a number of industry investments like Retek and i-flex a decade ago but in recent times has mostly been talking about its horizontal applications.

The white space won't stay white for ever. I met a couple of Fintech execs in London last week. Plenty of similar execs in New York, Shanghai and Singapore. At the Workfront conference, conversations were about product design and creative agencies. Recent conversations with Cognizant have been about packaged applications in healthcare and insurance markets. Those with Plex have been about automation on the shop floor. Those with Zoho have been how they target markets like the UAE, Brazil and Nigeria. At Sapphire, Hasso Plattner told me several executives asked him about vertical operational functionality in the cloud.

Here's the irony. Most vendors covet Amazon's cloud infrastructure. Most customers on would also love them to develop the applications that run Amazon - its eCommerce, its fulfillment, its R&D, its logistics.

The time is ripe for a new generation of applications - and likely a new generation of vendors.

    

Teflon SAP?

In the ASUG Executive Exchange on Monday morning at Sapphire I joked that it was fitting that we had yet another rumor floating - would Bradley Cooper show up with Lady Gaga at her concert later in the week? I cannot remember a Sapphire with so much rumor and speculation in the build up to the event. I was impressed how SAP executives handled much of it during the event. In one on ones, however, several of them were hurt and even angry about the coverage. Even more striking was how little customer execs had heard about or cared about the chatter.

Some of the topics about which there has been some wild speculation

Qualtrics

Yes, it was an expensive acquisition - a "high-beta" one. I am not a big fan of M&A in software. But in my new book, I point out several trillion dollar markets SAP, Oracle, IBM and others missed out on in the last couple of decades - digital advertising, smart products, cloud infrastructure etc. So I cannot fault Bill McDermott for betting a pile of chips on his view that the "experience economy" is going to be a massive one. Not only will it differentiate SAP's CX offering it is already opening up product design, employee engagement and other new opportunities for SAP. It also allows SAP to benchmark and reshape its own product ideation and customer relations. And it has brought a new breed of impressive, high energy execs into the SAP ranks.

HANA

There was some really irresponsible "HANA is dead" speculation. I told several journalists and analysts weeks ago I was baffled by the talk. So it was nice to hear Hasso Plattner after lowering expectations that his was an "old-style", "low-cost" keynote then proceed to announce “SAP HANA is too good a database just to lock it inside SAP enterprise applications,” Watch this keynote where along with Gerrit Kazmaier, he set ambitious new goals for HANA and for the broader portfolio of SAP's analytical offerings. 

Layoffs

There has also plenty of talk about layoffs including some of my colleagues asking for more "openness" from SAP on the topic. I was in Salt Lake City with several of the execs as they were being announced and I could see the hushed conversations. I chose not to pry given the legal and HR considerations that surround such moves. Besides, as I write in my book, SAP has to evolve to a much more cloud, open-source, machine learning savvy culture. So do its systems integrator partners. So do its customers. Continuing with legacy customizations is a growing security and compliance risk. Much worse, it is a recruiting liability when trying to attract younger technical talent. The transitions at SAP are just a start. The ripple effects will be felt throughout SAP Nation. The sooner we start planning for them the better, and we should not just hammer SAP for kicking them off.

Management changes

Nick Tzitzon, EVP of Marketing and Communications had told me "we have individuals in some cases who collectively have worked for SAP for 100 years, and who decided that it was time to try something else in their career. Does this not happen in every company?" Hasso Plattner was even more emphatic when he told a few of us that several customer executives have marveled at the smooth transition. He told us SAP is much "younger" now and he has never been more proud of the company. Watch this keynote and see the energy of execs like Christian Klein, Ryan Smith, Jen Morgan and others

Elliott investment

Geoff Scott, CEO of ASUG had to explain to an audience of customers who exactly Elliott is. That calm struck me as radically different from the panic I have heard from of my media colleagues. Yes, Elliott is a feared force as an activist investor but I am familiar with at least a few executives who have worked collaboratively with them. I liked Bill McDermott's comments during a Q&A “I’m very confident in our top- and bottom-line development,” McDermott said, and that he and the Elliott reps were “psyched” by SAP’s prospects. As I write in my book, there is a huge opportunity in "tilting the bell curve" - transitioning ECC and customizations, BW, S/1 to the new portfolio of S/4, C/4, SAC, SCP, Qualtrics, SuccessFactors, Ariba and many other products SAP now has to offer.

My book

Finally, I am bracing for potshots about my book. I had a chance to give my book to both Hasso Plattner and Bill McDermott. I warned them both it had many sections which would make them cringe. They were both gracious in their thanks - can I dare say they are mature enough not to expect a puff piece from me? But if hear some of my colleagues who have clearly not read the book, you would conclude it is an unqualified endorsement of SAP. I had a chance to sign several copies for SAP customer executives this week. Trust me they are not looking for fawning support of SAP when they talk to me.

No, Bradley Cooper did not show at the concert. But Lady Gaga was amazing on her own. I did not know much about her music prior to the concert but you have to admire her amazing pipes, incredible energy and her body of work. More importantly you have to acknowledge the sheer admiration she got from the audience. SAP is not everyone's cup of tea, but you have to similarly admire its wide body of work and the fact that it is the backbone for over 400K customers.     

I heard an executive say this week media attention on any topic lasts about 5 days. You wait that long and any PR crisis will blow over. That is not a compliment to our analyst/media side of the fence. We have to take the much longer customer view points when they invest in technology.

From my side, this week made me resolve to be even more careful in my reporting and to continue to validate my viewpoints with even more customer conversations.  

"I have never been so proud to be part of this company"

Said Hasso Plattner as we were wrapping up our annual Sapphire meeting with him. He told us he thought Bill McDermott's keynote this morning was the best he has delivered (I had walked up to Bill a few hours earlier and told him roughly the same thing, for different reasons as I describe below). He raved about Jen Morgan and her attention to detail. He is just as pleased with the other members of the new management team. He said customers have complimented him about the smooth executive transition over the last few weeks. He was energized and as we will see in his keynote tomorrow dispel rumors that have been swirling around HANA the last few weeks.

I liked Bill's keynote because it highlighted global companies like Apple, Under Armor, Shell, Tapestry and SAP itself tackling complex issues in product design, manufacturing, field service, joint venture accounting, retail and digital transformation. It is such a contrast to the competition which pretends that its financial and CRM cloud functionality is all that an enterprise needs.

The keynote and a sneak preview walk through we got of the show floor even as the roadies were still moving booth material in their fork lifts gave me the solid feeling that SAP is back as the dominant application vendor. There are 5 massive "neighborhoods" centered around People engagement, Network and spend management, Customer experience, Supply chain and the Digital core and a section on 25 verticals.

ASUG had invited me to present on themes from SAP Nation 3.0 to its Executive Exchange on Monday. It explained to them why on balance the book comes out positive about SAP. If I had waited till this Sapphire to finish, I have a feeling the book would have come out even more positive.

The Orange County Convention Center advertises 2.1 million square feet of exhibition space. Given the scope and ambition of SAP's application coverage, in the not too distant future, I think it will be able to use all that space.

Competitors watch out - you have one heck of an energized application vendor.