deal architect

Oracle’s Vertical “Simul” Chess game

When my daughter, Rita was younger, she was a chess fanatic and good enough to be ranked number 1 among Florida girls. She wrote a column about chess and technology for me 12 years ago here. 

I take no credit for her talent, other than I chaperoned her to countless tournaments around the country. I remember she was particularly fond of the pre-tournament activities where kids could play blitz, bughouse and other modern day variants of the game. Quite often there would be a treat where a grandmaster would play a “simul” – walk around a room and simultaneously play against 20 to 30 kids over a couple of hours. While supposedly in fun, kids would be highly motivated to beat their handicapped competitor, who in turn certainly did not want to lose face by being checkmated on too many of those boards. Indeed, the great Bobby Fischer included one of his simul games in his classic, My 60 Memorable Games.  

I have watched Oracle play a game of “simul” when it comes to vertical investments. It makes a move in an industry, then moves on to another. Its most recent move is to acquire the healthcare vendor, Cerner for $28 billion. While it has long been acquisitive, this will be its biggest ever purchase. Vendors play all kinds of games when they talk commitment to industries so one of the “Vinnie Vertical’s” filters is how many operational users and practitioners, not just back office users touch a piece of supposedly vertical software. That would include shop floor workers in manufacturing, claims adjusters in insurance etc. Cerner clears that filter. Its electronic health records are used by many doctors and nurses and it has emergency room and other clinical coverage.

I must admit I still don’t see the end game on this chess board. Maybe because I have not seen the end game for other industries even after decades. At Gartner in the late 90s, I witnessed how Oracle put together a promising consortium for the CPG industry. That included IMI for order processing, Manugistics for demand forecasting, Indus for asset management and Datalogix for Process Manufacturing. Individually, the components were impressive. As an integrated ERP offering however, as one client put it. “it looked like they had just met in the lobby and put slides together in the elevator up to see us”. Likely unfair to Oracle, but to me SAP, Intentia (now part of Infor) had far better integrated offerings for that vertical.

Starting in 2004, Oracle went deeper than partnerships. It garnered an applications foothold in several industries through acquisitions like Retek in retail, JD Edwards (via PeopleSoft) for manufacturing, i-Flex in commercial banking, Portal in media and telco, SPL Worldgroup in utilities, Primavera for project oriented industries and MICROS for hospitality and other point of sale settings among others. However, again we have not seen a “land and expand” across the application landscape in these verticals. Or tight integration with its Fusion back office applications. In fact, I wonder, to use a grocery industry metaphor, if they are just loss-leaders to allow Oracle to sell its database, tools and infrastructure to those sectors.

Oracle’s NetSuite acquisition in 2016 promised more contemporary industry functionality in the cloud especially with its services and retail capabilities. But, best as I can tell, the functionality has not spread. It continues to sell PSA functionality to project based businesses when the recent excitement is around field services in asset intensive markets and the trend towards servitization in many industrial sectors. In retail, the pandemic taught us eCommerce is necessary but not sufficient. Automated warehouses, last mile delivery and micro-fulfillment are even more important. NetSuite could have sold that functionality like hotcakes. Instead, tens of thousands of merchants have gone with services from Amazon and Spotify for their scale in fulfillment.    

So will Cerner be the launching pad for a much bigger healthcare presence for Oracle or is it a yet another one-time foray? In the US, healthcare is definitely poised for massive change. It costs a whopping fifth of our GDP and our outcomes are not that impressive. COVID has shown starkly the underlying health of many Americans is pretty poor.  Worse, the COVID politics have reduced trust in the medical community. There is growing impatience with the massive inefficiency in the sector. And yet, there are several positive signs. The speed at which the vaccines were developed and distributed through the cold chain was impressive. We learned to accelerate clinical trials and health systems learned to expand critical care capacity and make staff mobile across states. We have finally embraced telemedicine after decades of trying. Our trackers and new digital clinics are allowing us to collect tons more health data. The competitive landscape keeps evolving with every major tech vendor dabbling with digital health initiatives.  

In fairness, Oracle appears happy with its vertical investments. At an event I attended in 2014, late CEO Mark Hurd presented impressive industry metrics– 21,000 employees, 10% of total R&D, 26 industry specific acquisitions in the previous 5 years. And the payback – in the past 3 1/2 years, Oracle’s industry specific revenues had tripled, though he did not break out how the industry specific applications business had grown. 

It’s hard to tell where Oracle has evolved sector by sector. It loves to mostly highlight its financial and hr applications. As I have written before “Larry Ellison (uses) the ERP moniker in earnings calls and event keynotes, but never really discusses any operational functionality.” Larry has had other vertical opportunities, at least at a personal level. He has supercharged one of his passions, sailing with innovative technology as this article describes.  His friend Steve Jobs, gave him a front row seat as Apple launched its wildly successful retail store imitative. Not sure if Oracle has mined that advantage in the sports/entertainment and retail worlds. 

May be that is part of the strategy. Walk around the room playing at multiple industry chessboards. Smile a lot, say all the right things about "vertical clouds", but don’t disclose much. When you write a whopping big check for $28 billion, you get to write many of the rules.

So maybe, just maybe they are playing Go while everyone else is playing chess. Sun Tzu would surely approve.

Burning Platform: Innovations and vertical trends in ERP for SMEs

In the 64th episode of Burning Platform, we host Rainer Zinow, who heads product management for SAP’s mid-market ERP offerings and Jory Lamb, CEO and Founder of VistaVu, a SAP midmarket partner which also offers their own complementary products

In the Analyst Cam episode I ran yesterday, Rainer presented the positioning of Business One v Business By Design v S/4HANA 

Here, Jory kicks it off by presenting on a customer, SEF Energy which provides Industrial Field Services in the oilfield equipment vertical. It nicely brings out IoT, predictive maintenance, employee health and safety and rental revenue angles. We next discuss the wholesale and distribution sector where they similarly have verticalized offerings which are getting increased focus given the many supply chain issues during the pandemic. He talks about how they prioritize across SAP’s many verticals. He also discusses implementations and automating labor on their projects.

Rainer talks about agriculture and the food and beverage supply chain. He also shows off a book which he says describes hundreds of SAP micro-verticals and innovations with a SME focus.  That book is available here 

The two episodes bring out nicely SAP’s strength in the mid-market contrary to the market perception as them only being a choice for large, global companies

Analyst Cam: SAP's ERP portfolio for SMEs

As we have moved to virtual briefings, I have increasingly been excerpting short video segments (with permission ) as part of my Analyst Cam series. https://bit.ly/34eWDMD

On the best of days, it is difficult to navigate SAP’s very wide product portfolio. And from a marketing pov, S/4HANA and cloud properties like SuccessFactors get much of the attention. So, one of my goals this year was to get exposure to SAP Industries and to SAP offerings for small and mid-market customers. You can see my extensive vertical coverage summarized here.

Rainer Zinow, who heads SAP product management for its mid market ERP offerings has been very generous with his time over the last few months and presents below crisply on the positioning of Business One v Business ByDesign and also v S/4HANA. As he points out customers can be confident they will not outgrow SAP’s product portfolio.

We discuss plenty of topics of interest to SMEs including multi-tenancy, augmented reality, ML and in case of MNCs, the opportunities and challenges of two-tier implementations to blanket their smaller subsidiaries around the world.

He next invited Jory Lamb, CEO and Founder of VistaVu, a SAP B1 and BYD partner to join him to discuss innovations and verticalization for the SME market. I will run that as a Burning Platform episode tomorrow.

The two episodes bring out nicely SAP’s strength in the mid-market contrary to the market perception as them only being a choice for large, global companies

SAP SapphireNow: An early report

Let's start with the positives from the keynote last week: I loved Julia White's (the new CMO who has joined from Microsoft) omnipresence and bundle of energy. Christian Klein has come of age in the age of digital keynotes. He is so comfortable in the format. It was good to see Hasso Plattner again - wish we could have had our annual (unscripted) session with him.

However, this split schedule over 3 weeks has been tough to work with. I have asked for replays of several sessions for the Analyst Cam series so will get a chance to watch them in detail. Not sure when SAP can deliver those. I do miss not driving to Orlando and blocking out a few straight days on my calendar. Hopefully next year, Lufthansa will bring back its gorgeous 747-8 to Orlando - as a thank you to SAP executives for holding a live event.

3 themes from the keynote and my questions

a) Five Vertical RISE with SAP offerings

When RISE was announced earlier in the year, I thought it was too ambitious as I wrote here and here. I also thought it glossed over the SI/implementation portion which has been SAP's Achilles Heel for a long time. Books have been written about that:)

So, now they announce 5 vertical versions of RISE - for utilities, consumer packaged goods, automotive, industrial machinery and components (IM&C), and retail. I would like to understand how those 5 rose to the top. Given all the activity in Life Sciences around the COVID vaccine and therapeutics and SAP's strong presence in that industry, that would have been high on my list. Ditto with oil and gas which has been building a cloud for upstream functionality.

The good news is SAP (appears) to have taken a stand on the 5 verticals. In the past, going back a decade or longer there has been vague talk about "we are strong in 20+ industries" or "we are working with one of our large partners". My big question is what is new functionally for these 5 industries? So much changed in 2020 - hopefully RISE is not just a pricing package, but a major feature/function leap forward. Look forward to learning more about each of these industry solutions.

b) Business Networks

Christian summarized it well "Our new vision will build the world’s largest business community, enabling customers to easily connect with companies across supply chains and creating networked economies across industries.”  With so much supply chain chaos last year and continuing this year (Google for PPE, toilet paper, cold chain, Suez Canal) , it is bound to catch executive attention. But much of SAP's networks - Ariba, Fieldglass, Concur, AIN - deal with indirect spend - pencils, temporary staff, travel,MRO. I would love to spend some time with John Wookey and hear how direct suppliers and their tiers will become part of this network given those relationships tend to be tight and very proprietary in terms of contractual and IP protection details.

c) Sustainability

A decade ago, SAP was hot on sustainability. My concern back then was they were mostly focused on analytics and reporting of carbon data. Now you can argue "you cannot manage what you cannot measure". My point to SAP was don't stop there - work with your vast ecosystem and look for ways to get to the "source" - in factories, R&D, data centers and reduce the emissions, not just report on them. They did not back then. I hope they do this time, as they try again.

The other thing to watch is how they will navigate the politics. To me, renewable energy has hijacked the sustainability conversation, when the circular economy with reuse, better product design, packaging and other topics deserve as much attention. Christian brought up EVs a couple of times. There is much to like about the early wave of EVs. They have a much lighter BOM. With web sales, OTA updates, mobile techs they are redefining the auto experience. But I don't think we have asked the tough questions - what will happen to used batteries? How much will ubiquitous charging infrastructure cost around the world? Why are EVs still so much more expensive than internal combustion cars even with the much lighter BOM and direct sales models? And lets face it, an EV is only as clean as your public utility. The vast majority of utilities around the world still run on gas, oil and still way too much coal and in Germany, even dirtier lignite. So, I hope the analytics SAP presents reflect the TCO of EVs not just the positive angle that is being presented in our current infatuation with them. 

The good news is you can at least have these conversations with SAP. Not too many vendors I can even ask - how did you decide to prioritize those 5 verticals?

Burning Platform: Data-Infused Apps

In the 45th episode of the series, we have Pete Schlampp, EVP Product Development at Workday.

Last week, I had the chance to present to some Chief Data Officers. I made the point that 2020 was an inflection point for data and analytics. We saw countless new data streams - related to COVID-19 data, the new census, shortened sports seasons stats, polls from the turbulent US elections, countless supply chain disruptions and many more. We also saw a new generation of players that leverage enterprise data go public and otherwise gain prominence - Snowflake, Palantir and C3.ai among them.

Workday is better known for its transaction capabilities in finance, hcm and procurement but it has gradually become an analytics powerhouse with acquisitions like Adaptive, Platfora, Gridcraft and others. During the pandemic they launched several bite sized apps which leveraged their analytics which I profiled in the Analyst Cam including VIBE for diversity management  and Vaccine Management. 

As Aneel Bhusri, the Co-CEO recently said "the future is about data, insights and predictions" 

So it was nice to spend time with Pete, who has been the key architect of Prism Analytics which is the cornerstone of many of the apps. We also discuss his expanded role which extends beyond analytics, his world view of "data-infused applications", machine learning and the role of Workday partners and their domain knowledge in the creation of many more bite-sized apps.

 

Analyst Cam: Unit4 Executive Briefing

As we have moved to virtual vendor briefings, I have increasingly been excerpting short video segments (with permission from vendors), as part of my Analyst Cam series. 

Mike Ettling, CEO and Dmitri Krakovsky, Chief Product Officer of Unit4 joined me for a corporate and product briefing.

Mike spends time on the recent announcement that they have received a  majority investment from TA Associates, a leading global growth private equity firm and about the exit of the previous majority investor, Advent International.  He discusses what TA liked in the services verticals they are focused on to value them in excess of $2 billion

Last May, I had interviewed Mike about leadership during a crisis.  I asked him to provide an update and starting around 10.45 he invokes the Zulu philosophical concept of Ubuntu which roughly translates to 'I am because of who you are'. That has guided him through life and especially in the crisis that started last year. Later in the conversation, in keeping with the recent spat between two much larger competitors , I asked both of them if they wanted to take shots at any competitors. I joked they were 'boring" but I like their high road - "we focus on customers, not competitors"    

Dmitri provided an update on the ERPx release. In October, he had presented (starting around 28.00 here) about the rollout. They are on schedule with 15 early adopter customers across industries and geographies he describes.  Dmitri also addresses my point that the hyperscalers have gained momentum not just at the infrastructure layer, but also at the platform layer. How does an application vendor like Unit4 navigate this major shift in the industry?

We cover lots of other ground during the session. Dmitri will be back to present more details in a session later this week. 

 

Enterprise La La Land

I wrote last week we would likely hear more detail around application modules and customers and subsidiaries to explain Larry Ellison's claim during his earnings call about Oracle snatching customers from SAP. Bob Evans has interviews with executives from each on Cloud Wars. 

SAP's DJ Paoni's responded "Of the 100 or so customer names cited by Oracle, 80% are planning to make “significant investments” with SAP in 2021"

Steve Miranda of Oracle is more specific. But in some ways they both raise even more questions.

Steve primarily talks about HCM, SCM and EPM applications, three of the most fragmented enterprise application categories. HCM is still heavily outsourced, particularly in the payroll and benefits area. So is SCM to 3PLs and increasingly by merchants to fulfillment by Amazon or Shopify. The whole analytics space was turned upside down last year as I wrote here with many new data streams and many new players like Snowflake, C3 and Palantir, each of which had successful listings. 

I realize Steve did not have hours with Bob but when you are talking "ERP replacements" I would think you would talk major chunks like core financials, manufacturing etc. And if not manufacturing, vertical applications like retail banking, utility billing etc.  

Similarly with customer scope. He mentions Marriott, a company I know pretty well as a consumer, having spent over 4 years (yes!) of my life sleeping in their rooms. Many of their properties are run by franchisees who often have their own systems. They have a number of brands like Springhill Suites and Courtyard which have unique processes. Besides, a global company like Marriott has "one of each". Steve had them on a panel in 2014 (see here), Salesforce profiled them even more fully at their event in 2018.  If anything, it makes Paoni's point that customers continue to buy from SAP AND Oracle AND many others.

So, after reading the earnings call transcript,  my question was which modules and at which customer subsidiaries did Oracle replace SAP? Now I need to narrow that expectation much further - which features and how few users did they manage to move?

The good news is most customers realize Magic Quadrants and vendor marketing are the equivalent of a satellite snapshot when you are shopping for real estate. You use them to narrow the neighborhoods you should be looking at. The hard work comes later - lots of house tours, inspections, paperwork etc.

I was even more puzzled by Steve's point about speed at which the enterprise market is moving as he tries to explain how they stole customers from SAP    

He says "But in the past few years, that has changed dramatically, and I think the big reason behind that change is the speed of innovation the cloud offers." “But now, with the cloud, it happens every 90 days. That’s an enormous difference.”

I think Steve is conflating the pace at which SaaS vendors deliver multiple releases a year -  bite-sized collections of fixes and features - with complete modules. The pace at which application vendors have delivered modular functionality in the cloud is actually disappointingly slow. Salesforce and NetSuite were some of the earliest SaaS vendors in the late 90s. In the 20 years since, if you chart a grid of available SaaS functionality by industry and country, we are not even at 20%. Try finding many insurance claims processing or fintech applications in SaaS mode. Try finding many which support regulations in Indonesia, Russia and Nigeria.

Over the same period look at what Amazon has done to shake up so many sectors. Watch my interview last week with Robin Gaster, author of a new book, Behemoth, Amazon Rising.

The problem is while both SAP and Oracle have brilliant enterprise architects at the top, they just don't have process or industry visionaries like Amazon does to completely reshape sectors. They are much more comfortable talking nuances of databases.

If anything, 2020 completely changed the definition of "speed" in every industry. We have all seen the amazing speed at which COVID vaccines have been developed, approved and distributed. Watch Jack Barrett, CEO of a community bank describe how they processed more PPP loans in a little over a month what usually takes them years  Watch Lou Von Thaer, CEO of Battelle describe how quickly their vaporized hydrogen peroxide-based Critical Care Decontamination System scaled when N95 masks were in critically short supply in March. In 4 months, they had disinfected and extended lives of over 2 million masks.  I had plenty more such sessions last year.  

So many new applications came to life in 2020 as I wrote last week.

"Telemedicine in health care, distance learning in higher education, mobile banking, PPP loan processing. vaccine management, HR diversity analytics, virtual real estate tours, remote field service, digital mortgages, eCommerce, warehouse automation, last mile delivery and so much more in every industry."

I would love to hear both Oracle and SAP talk about those applications. It's been a year since the pandemic started. That to me would be a better showing of speed.

Even better, Oracle and SAP should quit looking at each other. In the last decade, it wasn't just Amazon which grew much faster. Google, Facebook and agencies ran away with the digital marketing spend. Contract manufacturers like Foxconn and design firms dominated the product innovation space. GE, Siemens and others are leading the industrial IOT game.

Time for both to dramatically expand their TAM. Their market share of corporate technology wallets has been dropping for a long time. Sniping at each other only highlights they are living in the past. 

Oracle Earnings Call - a missed opportunity

Larry Ellison is one enterprise software exec I have not spent much time with. Oh, I have seen plenty of Oracle OpenWorld and other keynotes. I mean in a small group setting. He has always let Ray Lane or Charles Phillips or Mark Hurd deal with industry analysts - he spends a bit more time with Wall Street analysts.

And yet over the years, I have learned and admired so much of what he has done for sailing, tennis, hospitality, education, aviation, automobile, sartorial and other worlds. In a way, I am glad we don't spend much time with him - I would bug him with all kinds of questions about these activities.

Alas, we cannot ignore the less exciting world of enterprise software. One of Larry's strengths is that he has cultivated a pithy look and feel to Oracle branding. His taunting of competitors on Oracle earning calls continues that trademark marketing. To me, it's a version of the Avis "we try harder" positioning. It is a way of associating yourself with whoever is a market leader - Microsoft one day, Salesforce or Workday another day, more recently Amazon and SAP. As an added bonus, hopefully, that gets under the skin of those competitors and has them waste time and effort to prove he is wrong.

He spent 1,901 words in his prepared comments and more in the Q&A on SAP in last week's earnings call. More specifically, he named names - what he says are customers who have moved/are moving away from SAP applications to Oracle's. And he took out a microscope to measure the distance between where Gartner places both vendors on various Magic Quadrants. That may have SAP scampering for weeks to respond. And I suspect Gartner analysts and customer attorneys to speculate which specific modules and which global subsidiaries he was referring to.

Missed opportunity - especially since in relative terms, Larry does not spend much time talking about his applications. We are in early 2021, still in the middle of a global pandemic. Very few customers meddled in 2020 with their big, hairy, legacy applications. From what I can tell, there were not many moves to next-gen SAP ERP nor to next-gen Oracle.

Instead, I would have liked Larry to talk about which vertical edge applications Oracle delivered to help his customers morph and survive in a "from-home" and pandemic economy. Telemedicine in health care, distance learning in higher education, mobile banking, PPP loan processing. vaccine management, HR diversity analytics, virtual real estate tours, remote field service, digital mortgages, eCommerce, warehouse automation, last mile delivery and so much more in every industry. Further, I would have liked to hear how Oracle services and his SI ecosystem have moved to virtual delivery. What has Oracle learned from autonomous database deployments that can be applied to application management? 

I would love to have those conversations in a small group setting with Larry. Nice bonus would be to have him talk about technology in this year's America's Cup, sustainability on his island, Japanese culture and so much else:)

The Analyst Cam: IFS Cloud launch

As we have moved to virtual vendor briefings, I have increasingly been excerpting short video segments (with permission from vendors), as part of my Analyst Cam series. 

IFS is hosting its Cloud Launch event today and tomorrow. You can register here to watch the packed agenda. I have excerpted about 20 minutes from today's keynote in the video below.

CEO Darren Roos had given us a sneak preview of the event here.  In his keynote today, he reiterated his messages around digital business models and "moments of service" and the role of cloud platforms in their delivery. At 3.43 Ann-Kristen Sander, Sales Director highlights the complex industrial and services verticals like aerospace and defense the IFS cloud is meant to serve. There are plenty of sessions on each industry in the next couple of days. At 4.11 Amy Eager, Technical Solution Consultant talks about the multiple deployment modes for the IFS cloud and portability across them. At 4.43, Cathie Hall, SVP of Product Experience describes the concept of Lifecycle Experience that comes with the IFS cloud.

At 5.46, Christian Pedersen, Chief Product Officer introduces an early adopter, "Pioneer customer", CIMCORP which provides robotics to automate warehouses and distribution centers. I included this segment in its entirety in the video below. I love all the scenarios presented including field service scheduling and mixed reality support. Very different from most enterprise vendor demos which mostly emphasize white collar processes and slick analytics and often ignore blue-collar, operational areas.

The whole event reflects the vibrant new branding CMO, Oliver Pilgerstorfer had described here .

Very nice start to the event.

The Analyst Cam: SAP Industry Cloud

As we have moved to virtual vendor briefings, I have increasingly been excerpting short video segments (with permission from vendors), as part of my Analyst Cam series. 

SAP hosted for analysts a Industry Cloud briefing last week. I have excerpted below about 15 minutes from an hour long session.

Peter Maier, President Industries and Customer Advisory kicks it off and I liked that he gave several examples of new industry functionality. SAP (and in fairness other large vendors) often talk about industry qualifications in generalities and about past efforts ignoring that every industry turned upside down last year.

I had interviewed him last May and you can definitely see progress. 

At 6.50, Peter and Kai Finck, who heads Industry Cloud Program respond to a question about industries where SAP has seen most momentum in the last year.

At 9.15, Svend Wittern, who heads Industry Strategy and Peter explain that business networks where SAP plays a big role with horizontal functionality from Ariba, Concur and others are increasingly moving to industry versions.

At 12.18 Ralph Stemler, who heads Industry Ecosystems mentions that strategy firms like McKinsey may be partnering with SAP and getting into the IP business with their industry knowledge

At 13.30 Steffen Schad, Product Manger, SAP Business Technology Platform talks about how partners and customers are starting to use the platform (including recent acquisitions of Signavio and AppGyer) to build industry functionality

Overall, I liked the momentum Peter showcased, but I still don't think SAP is thinking small enough. It has missed the boat on so much demand we saw for vertical edge apps like telemedicine, distance learning in higher ed, warehouse automation, last mile delivery in retail and food service, virtual open houses in real estate in the last year. It is still focused on big "intelligent enterprise" type positioning which will take years to flesh out.

Also, in the next briefing, it would be nice to hear much more specifically about how strategy firms (and the traditional SI partners) and low code tools are helping develop specific industry functionality. Similar about how RISE with SAP is being verticalized. 

Look forward to more of these periodic briefings.