deal architect

A key word for 2019 - authenticity

Happy New Year to all my readers!

I have spent the last month extracting from hundreds of pages of transcripts of my interviews for SAP Nation 3.0. I am struck by the frank comments from so many customers about SAP, its partners and its competitors. They realize these will be read by their peers at other customers and I appreciate their willingness to share. I know some of the comments will be used for competitive advantage. Fair warning to folks in the field – if you use it that way, bear in mind I have similar access to your customers and information about your products :)

Similarly, reading my notes from meetings with Franck Cohen, Rob Enslin, Nick Tzitzon and others at SAP, I see an openness which is refreshing. I give credit to Stacey Fish, my contact at SAP. She sets up calls/meetings and mostly observes even when we may be ganging up on her execs. She may ask me what I thought afterwards, but rarely does she push an overt agenda.

So, here is my request of other vendors – converse more with us, don’t just pitch. Don’t just outbound communicate to us,  invite our inbound requests. Open up more access to your customers. I love how Plex invites us to join their Customer Advisory Board once a year. If not,  not to worry, we can access customers through many other channels.

But do encourage your execs to be authentic. On that point, I see a trend for executives to talk about corporate “purpose”. I admire executive commitment to diversity and social good, but in the end as an analyst I am expected to focus on  functionality, architecture and economics. When I talk to customers rarely do they say “corporate purpose” was the reason they selected a vendor. It may have been a tie breaker, rarely a item which counts for more than 10% in their scoring matrix.  

On the other hand on functionality, architecture and economics I expect many more detailed conversations. As you will read in the book, SAP is in far better shape than people give it credit for. But SAP, its partners and its competitors have all missed out on many, many market opportunities in the last decade.

It’s a new year, and a very new market. Look forward to many more conversations.

Two HCM institutions

As Workday Rising kicks off in Vegas, it is time to also recognize two other HCM resources which allow us to keep annual tabs on the changing face of HR

HR Executive magazine announces their annual list of top products

“This year’s winning products represent the full gamut of priorities facing HR leaders: from employee financial wellbeing to learning and development to talent analytics. As was the case in the last few years, a number of leading solutions are in the area of talent acquisition and screening. The 2018 winners also illustrate the increasing prominence of artificial intelligence and machine learning in emerging HR technologies.”

The Sierra-Cedar 2018–2019 HR Systems Survey White Paper, 21st Annual Edition focuses on strategies, processes and vendors in six primary categories and 54 individual application areas.

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.

Is vendor information flow too lumpy?

Charles Phillips, CEO of Infor recently hosted a virtual fireside chat. It’s something I have encouraged him to do in the past. It was only a half an hour or so and one of my analyst colleagues said it had a feel of “declaring victory after 5 years”. I passed on feedback to his AR team that he should do similar every quarter or so, and pick a different topic to drill deeper into – an industry or geography or a specific product area.

I miss Stan Swete’s updates every time Workday had a new release (they are up to release 31). He would crisply march through new features and also give a quick update on the state of the company.

What I am getting at is I would like vendors to do more phone briefings, not just present at longer in-person events. This is especially true of smaller vendors like Zoho, FinancialForce, Ultimate and many others. It is not that easy for analysts to fly to day-long events for each.

While I would prefer these in a group call, I am happy to take individual briefings as well. With the caveat that these are briefings to add to analyst body of knowledge, not a commitment to write something right away on the briefing topic.

The other feedback I have received from several clients is how removed events are from product reality. There are 50 shades of grey when it comes to features and maturity. What they present to us in analyst briefings under NDA is often are not available to purchase till 3-4 years later. What is shown in user conferences is 1-2 years out. What you get in response to RFPs and competitive evaluation demos is a more realistic representation of current state of product. It is only during implementation that you realistically understand maturity of that release and the quality of implementation resources familiar with that functionality. Finally, it is only when customers periodically talk to each other about their experiences do you get a feel for the real quality of a particular release. That’s another reason we need a more continuous information flow and conversation with vendors about “as-is” not just a “to-be” state presentation common at vendor events.

Of course, I can hear AR reps at vendors groan. They have a tough enough time coordinating information flow even in the current state of affairs. More continuous conversations with pesky analysts?

Come on, while most of us do not have the endless bank of fables Brian Sommer has access to, we are full of all kinds of useless trivia. We are pretty fun to converse with. Try us

Start of tech event season

This past long weekend my wife and I were at two restaurants and one hotel, each of which was planning to shut down for a week or two for maintenance, to give employees some needed time off. I turned to my wife and said maybe we should also take a hint.

Not likely – Labor Day marks the start of the second half of tech event season. In general, I only accept a third to half of events I am invited to. The decision matrix has become more complex over the years

a) If it is an event aimed primarily at analysts and maybe a handful of customers that gets a high priority

b) If I am speaking, if the event will give me new materials for a consulting assignment or materials for books or many blogs the priority goes up.

c) If the analyst relations team highly customizes the agenda and arranges for customer meetings and relevant partner meetings the priority goes up.

d) if the event adds something interesting like Plex does with plant visits the priority goes way up

e) If an event is being streamed, it actually gets low priority to travel to

f) If it is an event I was at in previous years, it often gets low priority.

g) if it requires somersaults to get to the event, it gets low priority. It seems like some weeks have 4 to 5 interesting events in far flung cities.

Two events I am definitely not going to this year – Oracle OpenWorld and Dreamforce, both because of e) and f). I have decided on some, still considering others.

We live in a many to many world and often its like ships that pass in the night. Some vendors get offended when you decline an invite. Some analysts get offended when they are not invited to an event. I am much more of the mindset that it is September and October and I should be shutting down for some maintenance

Why we all need to draw bigger circles

A few days ago, I wrote about Bill Joy’s advice “If you cannot solve a problem, make the problem bigger. If you draw a bigger circle, you start to see several systems you can work on.”

Reading James Farrar’s post “Diginomica and the Salesforce Counsel of Despair”, I kept thinking we could all heed that advice.

I have a lot of respect for James and what he is doing for Uber drivers. But I wonder how  much he has factored the consumer pov. I moved most of my business to Uber a few years ago because I found taxis in many cities unhygienic and surly.  But recently, especially arriving late at night at my home airport I have noticed Uber drivers have been playing games – shopping around and canceling rides after they commit. I complained to Uber after I saw a female customer stranded at 2 am. Uber sent me a nice note but did little to investigate. In contrast, this week in New York city I took two yellow cab rides (cannot remember the last time I had) and three Carey Limo rides. Clean vehicles and pleasant drivers including a couple who fed my curiosity about the history of the city’s bridges. And I said to myself, thank you Uber for forcing the entire market to evolve.

That of course also raises the bar for Uber and for its drivers. And I wondered if similar is happening in London where the leg room in black cabs are always a treat for my 6 ft 2 frame. And where taxi drivers are famous for The Knowledge – a 150+ year tradition of learning every nook and cranny of the city. In other words, Uber was not going to have easy competition in that city and probably needed to compete more on price.

I wondered if James had surveyed a broad sample of Uber drivers like Tony DiBenedetto, former CEO of Tribridge did as he told me in an interview for Silicon Collar. He decided to sell his car and started taking Uber everywhere.  In addition, he started journaling each experience and told me about the drivers he met

Most of them were not ex-taxi drivers. I would say 50% of the people who drove me in that first month had a second job. It was everything from young kids just trying to make it, to retired people, or people who were bored. One of my drivers was a helicopter pilot who for two weeks a month worked for the big oil companies in New Orleans. The other two weeks he just didn't see himself doing nothing. He's ex-military, and so he picked up the Uber thing to basically not be bored. I thought that was interesting. The retired people were all pretty similar: They wanted to get out of the house or make a little extra cash. I'd say 5% to 10% were in between jobs. There's no question that it fills a gap in employment. It allows for people to run their little businesses, and still do Uber as a supplement. All the drivers love the flexibility.

Which brings me to some of the points I made to James on Twitter

• I admire what you are doing. Personally, I am generous to Uber drivers and like talking to them on my trips. Having said that when I wrote my recent book, Silicon Collar, I found our economy supports 800+ occupations and new ones every year...UK is likely similar..
• I am at other end of spectrum. we have 6m unfilled blue collar/trade jobs. Been so for a decade. Why do workers not want them?
• so If Uber makes you miserable, look around. Lots of opportunities. It's similar to advice I give to many young workers not happy in their careers. 

So, honestly, no offense to the kind man, but not sure I can relate much to James’s point that Uber “takes advantage of sweated labour with workers in London earning as little as £2 per hour.”

Which brings me to Salesforce. As James points out, it has become an icon for corporate activism

Salesforce has been at the vanguard, if not the barricades, in Silicon Valley’s fight for social justice. It has been an evangelical champion of equality claiming it as nothing less than a ‘higher purpose’ for the company. Salesforce weirdly refers to its workforce as the ‘Ohana’ (Hawaiian for family) and pursue four pillars of equality — equal rights, equal pay, equal education and equal opportunity. To its great credit, Salesforce has taken principled stands against discriminatory public policy proposals in Indiana and Georgia albeit in the name of the Ohana.

I am a Marc Benioff fan and have written about him in several of my books and blogs. I consider him a cloud computing pioneer, a colorful and generous tech exec whose conferences have reshaped the somewhat drab enterprise software market.

But I do wonder if in his activism, Marc has drawn a large enough circle and asked his customers if they are comfortable with that profile. As I wrote in Salesforce is vulnerable I am not sure many of them are. Many would prefer Salesforce focus on its economics and expanding its functional footprint as a cloud leader.  

I like activism at an individual executive level, I am less comfortable with it at the corporate level. It attracts activists for hundreds of causes and they hold you to ever higher standards. As a customer advocate, to me customers deserve way more attention than activists or for that matter, even Wall Street.

Having said that, I am glad Salesforce is not canceling their contract with the US Customs and Border Patrol (CBP) agency. According to Bloomberg, several hundred Salesforce employees have sent a letter to management

"Given the inhuman separation from their parents currently taking place at the border, we believe that our core value of Equality is at stake and that Salesforce should re-examine our contractual relationship with CBP and speak out against its practices,"

That makes me wonder if these activists have drawn a big enough circle around the CBP which has the hugely unenviable job of enforcing a broken immigration system. As I wrote here

The 3 million a year (immigrants) arrive here through a dizzying array of (over 200) preferences and visas – and many do with no formal paperwork. There is the F1 direct immigrant preference for unmarried sons and daughters of U.S. citizens, and their minor children. Not to be confused with the F-1 Student Visa which has restrictions on when and where you can work. Many F-1 visas get converted to immigrant visas when their employers hire them after graduation. Many of these lanes have not been well monitored. The H1-B visa, the so-called “Genius Visa”, was originally meant for highly specialized skills, PhDs in Astrophysics and such but they mostly got used for much more mainstream software developers. There has been so much abuse of the spousal visa that Congress had to add a specific section about it to the Immigration and Naturalization Act. Then there are diversity lottery and investor visas. And yet in spite of all these lanes, we have in addition millions of undocumented workers.

This week to celebrate the 40th anniversary of my own arrival in the US, I played tourist on my trip to New York and took a ferry to Ellis Island and Liberty Island. I took a photo of a quote from a century ago which to me reflects the attitude of majority of immigration officers I have met. In those 40 years, I have entered the country countless times as I have traveled to over 70 countries. Yes, a few are jerks, but the vast majority are good, caring workers trying hard to enforce compliance in a relentless flow of humanity.

Which brings me to Diginomica. James comments about them

When I raised the subject of the staff called for boycott of Dreamforce on twitter last week, Dennis Howlett complained bitterly about my use of language. In his post he mischievously raised the spectre of a trade unionism of long ago, Marxism and even the Soviet Union. He even compared me to Derek Robinson, a 1970’s trade unionist and member of the Communist Party of the Great Britain. In several Diginomica articles including this one, a consistent complaint from Howlett is the supposed politicisation of my union’s dispute with Uber.

I don’t know much about trade unions and socialist/communist ideologies. I do have a keen interest in Diginomica. collaborate often with their team. I quote them, they review my books, and quote me. There is mutual respect.

Having said that, I have told Dennis several times they need to broaden their circle when it comes to global coverage. Particularly since the arrival of President Trump, European media coverage of the US has been negative, even snarky. While they are entitled to that pov (Lord, many Americans are even more critical), I think in being fixated on US warts they miss out on plenty of non-US coverage.

It’s fine to criticize the US for leaving the Paris climate accord, but publications like Diginomica should have been all over Germany’s track record on renewables. After basking in the glow as a Green Chancellor for years, Angela Merkel is poised to miss her own modest targets. As I wrote here

Yet, in spite of spending hundreds of billions of euros on subsidizing renewables, Germany will struggle to meet its 18% renewables target for 2020. The country continues to rely heavily on its coal and lignite, and more recently on natural gas from Russia.

It’s fine to criticize US on trade tariffs, but in their coverage of manufacturing markets, I wish Diginomcia would ask why more non- US companies do not make and hire more here like BMW has with its SUV plant in S. Carolina. It is a tenet of modern business to make as close to demand, not cling to old Ricardian principles of comparative advantage.  Besides its vast market, the US has some of the best energy economics in the world, very competitive state and local incentives and our labor equipped with modern automation and accustomed to making newer, smarter products is no longer uncompetitive. 

Same with our immigration. It’s fine to criticize when we do inhumane things like separate mother from child, but drawing a bigger circle would also mean pointing out factoids about our broken immigration system. It would mean asking the uncomfortable question why undocumented immigrants entering from the US South used to be mostly single men, now entire families are trying to enter. Have we been sending signals their chances of entering the country improve that way?

It would also mean asking why with global affluence growing – you only have to visit Dubai, Singapore or Shanghai or go see Crazy Rich Asians - to ask why the world is not following the decades of US leadership and becoming similarly generous to immigration. Why does Japan with its acute aging workforce not take in more? Why did rich Arabs not take in the Syrians who trekked across Europe? From a language, religion, weather, cuisine and many other perspectives that would have been the logical destination for those refugees. Yes, these are troubling questions but ones I wish European publications would ask even as they intensely criticize US policies.

Finally, James invokes the Pope. “Last weekend the Pope visited Ireland and had to face up to the consequences of generations of abuse and misuse of power.”  My wife and I are not much into formal religion. My wife was brought up in Catholic Ireland, and I myself went to school founded by Catholic missionaries. But we are global citizens and visit cathedrals and stupas and mosques wherever we travel. Having said that, we are disgusted with the abuse disclosures in the Catholic Church.  Again, though I invoke the larger circle. My sister-in-law spent hours braving the crowds to see the Pope in Dublin that weekend. There are countless millions like her who look up to the Pope. Who am I to question that much faith and loyalty?

I respect personal activism, not so much corporate activism. But as an analyst, I like to be objective and unemotional when looking at issues.  And following Bill Joy’s advice, I would love all of us to similarly draw bigger circles. We need to stem the current epidemic of guilting each other about failing on some moral benchmark or other.

Who will claim the Enterprise “Western Frontier”?

This summer while researching for SAP Nation 3.0, I have also been reading plenty about the young nation of the US in the 1800s. The comparisons to the enterprise vendor market, two centuries later, in the 2000s are striking.

In 2000, enterprise vendors had many reasons to feel good about themselves. The Y2K challenge had been met - customers could breathe easier. ERP software had allowed enterprises to replace hundreds of fragmented, departmental solutions. New customer facing, supply chain, industry specific opportunities beckoned. A growing proportion of corporate IT spend was with outside vendors – “buy” had trumped “build”.

As you looked at who would dominate the coming century you could say IBM, Microsoft, Oracle, SAP, infrastructure vendors like HP and Verizon. At Gartner we even thought SIs like Accenture would become enterprise integrators and move to the top of the food chain.

The US, then the original thirteen colonies, in 1800 was a young, skinny country. 2/3rd of the population lived within 50 miles of the Atlantic Ocean. Under British rule, the Royal Proclamation of 1763 had declared the boundaries of the colonies as the Appalachian Mountains. Any travel or settlement beyond the mountains was illegal. Even after independence the country had not grown much. The Mississippi river was the western border. You could have put bets on the Americans, but also British, the French, the Spanish, even the Russians on who would take over North America. Each had a foothold across parts of the continent. May be even the Dutch or the Portuguese who were colonizing parts of the Caribbean and S. America.

In his inaugural address in 1801, President Thomas Jefferson talked about a nation "with room enough for our descendants to the hundredth and thousandth generation."  Jefferson was off by a wild margin.  Within five generations, by the end of that century, the country had citizens from "sea to shining sea". The Americans had won out handily – it was actually done by the middle of the century, though the Civil War which followed could have changed that trajectory.

It had taken Jefferson’s Louisiana Purchase from the French in 1803. It had taken similar vision from later Presidents to keep adding to the country's real estate. Andrew Jackson tried to buy Texas from Mexico in 1829. He was rebuffed but after many twists and turns, President James K. Polk annexed Texas in 1845. After the Mexican-American War in 1848, he signed the Treaty of Guadalupe-Hidalgo in 1848 and picked up California. He also negotiated the Oregon Treaty with Great Britain in 1846. In 1867, Secretary of State William H. Seward negotiated the purchase of Alaska from Russia.

None of these expansions were easy to finance nor were they always popular. Jefferson was questioned if he had constitutional authority to sign the treaty with Napoleon. With the country struggling with debts from the Civil War, Alaska was called "Seward's Folly". While the leadership arranged for the real estate, it took grit and plenty of sacrifice for the population to move west. It was a trickle when Meriwether Lewis and William Clark did the epic Corps of Discovery trek to the Pacific in 1804. Their maps and commentary on various Indian tribes along the way opened up wave after wave of others who followed west on the Oregon Trail many as mountain men and missionaries, the Mormon migration to Utah and the California Gold Rush of 1849.  The floodgates opened up with the completion of the transcontinental railroad in 1869.

Yet, there was a continual westward pull with feeling of "It's written down somewhere - it's got to be". If people could not see it in the stars, hear it in political speeches, imagine it in their holy books, they did find it in what John L O'Sullivan wrote in the July–August 1845 issue of the Democratic Review "It is our manifest destiny to overspread the continent allotted by Providence for the free development of our yearly multiplying millions."

In contrast, as we approach the end of the second decade of this century, we see no clear winners when it comes to enterprise tech vendors. If anything the market has become more fragmented since the start of the century. A new set of cloud software companies emerged and became stronger - Salesforce, Workday, NetSuite. Yet, in two decades, cloud applications have barely scratched 20% of the addressable market across geographies and verticals.  Lots of white space to be captured.  Cloud infrastructure has taken off. Amazon and Microsoft have penetrated markets that were IBM and Oracle and HP’s to lose. 

IT integrators like Deloitte were challenged by Indian and other global delivery services firms. Products became smarter with sensors and satellites and software. Who largely benefitted from this? Contract manufacturers like Foxconn, Flex and Jabil. Foxconn itself employs many times the staff large IT services firms do.  Industrie 4.0 and IOT took off to the benefit of large asset makers like GE and Siemens. Enterprise vendors have done little to verticalize. CIOs are doing their own modernization with micro-services. These vendors claim to be process experts – talk of “best practices”. Guess what, the next wave of process automation is being led by customers who are trying out drones and robots and RPA with specialist solutions.

Consumers used to get dregs - decades after governments and corporations got technology innovation. Now, we talk about the Sunday night, Monday morning disparity. What consumers have at home and car is better than what they get in their office, in their planes, in the hotels they stay at. Who was responsible? Players like Apple, Samsung and Google. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Enterprise tech ignored consumer markets, even now only glibly talk about B2B2C – business to business to consumer.

There have been several trillion dollar markets since the start of the century. But in each case enterprise technology players have played cautiously, not invested enough in CAPEX and R&D. They keep gloating about their quarterly performance, customer “stickiness”, how much “digital transformation” they are enabling.

The good news - nobody has yet become dominant. Nobody has shown the vision of  Jefferson and Seward to acquire massive chunks of real estate

For various reasons I will discuss in the book I am betting on SAP to be near the top in leading the pack. Unlike an IBM or an Oracle, it still has at core an application and business process DNA. It has some of the most sophisticated customers across the world. It has blunted the threat from cloud vendors with its own acquisitions. Having said that it has also shown a tendency to make unforced errors. It has chased often after platform markets when it should stay application centric. It has disappointed its customers with Indirect Access and other ill advised licensing moves. Its partners continue to do poorly and cost its customers way too much cost and effort.  

The century is still young. Other enterprise vendors can still rally their troops with a Manifest Destiny call. From sea to shining sea still awaits.

Next-gen software executives

I was pleased to see Salesforce has appointed Parker Harris to its Board and promoted Keith Block to co-CEO. I have long been a fan of Parker – just brilliant and a nice guy to boot. I think the enterprise software industry has been incredibly lucky to have him, Stan Swete at Workday, Larry Ellison at Oracle, Hasso Plattner at SAP, Soma Somasundaram at Infor – some of the best enterprise architects all converge at the same time. Similarly executives like Keith, Bill McDermott at SAP, Tom Siebel now at C3 and others have taken sales to new heights in the last couple of decades.

But readers know my view is we are approaching the end of Cloud 1.0 apps.  We will need additionally some new executives in the next phase. We should actually have been starting to groom them a decade ago.

Here are some teams they need, each with an appropriately empowered executive:

Business Process Visionary

I was in Anchorage, Alaska recently and noted that along with Memphis, TN it is one of the 5 busiest cargo airports in the world. Of course, I said thanks to FedEx.  Amazon is no slouch when it comes to logistics – started working with the US Postal Service on “postal injections” 15 years ago. Started putting Kiva robots in its distribution centers almost a decade ago and is now exploring drones and other automation. Amazon, FedEx and others have transformed logistics and supply chain processes. Global manufacturing has turned upside down with Apple moving completely to contract manufacturing. It is about to change again as companies produce close to demand and are rethinking automation on the shop floor. BMW’s ultra-modern plant in South Carolina is an example of that.

Startups have been teaching companies to apply data science to enterprise processes – Oversight Systems around payables and other accounting , Uptake around complex assets, Palantir around fraud detection. In fintech, startups have been transforming banking operations. Ditto with other verticals. Small businesses are using platforms from Amazon, Apple, eBay and others for their eCommerce, their fulfillment, their talent sourcing.  Less than 10% of Fortune 500 talent is on their direct payroll. Some of the remainder in on 1099s, but the vast majority in in their suppliers, their service providers, their franchises and their platforms. Talent management has become exponentially more complex with this diversity.

You know what – none of the major software vendors or their SI partners have helped with much of this. Part of the reason is they have mostly taken old processes and taken them to the cloud. They have “reskinned” their process maps with prettier interfaces,  not tried to rethink the processes for industry changes and automation opportunities. But after two decades, it is time for the application software industry to start leading again with process innovation, not just keep talking about tired old “best practices”

Customer-centric economist

Most vendors have smart CFOs who can talk ARR, Rule of 40 and other investor lingo. But most of them could also use a peer who also helps them speak to customer technology economics.

For decades now, customers have learned from multi-year outsourcing contracts. They expect benchmarking and continuous improvements when they give a vendor years of runway and control. They want to see Six Sigma and CMM type productivity improvements. Most software vendors go in expecting to raise prices when customers renew their contracts. The disconnect between buyer versus vendor expectations is startling.

Another area where software vendors have fallen short is optimizing the cost of migrations to their solution. It’s not rocket science to take someone from Point A to Point B. Its been done hundreds of thousands of times around ERP, CRM and other projects in the last few decades. But most vendors just expect customers to pay SIs to get them there.

Vendors understand Point B intimately – it’s their software. Their salespeople know which Point As to  target.  They could use an internal economist who can focus on how best to deliver the migration - with automation and with specialist staff - at scale to the customer base.

Ecosystem overseer

Most vendors have a partner management role. But it often reports to sales and has a revenue goal to help fund customer events, training and other investments. That’s certainly one role. A separate one should focus on quality and customer economics in the ecosystem. It is mind boggling that vendors let their own brands suffer based on failures and overruns in their SI partners. It is shocking how many let them violate their own commitment to multi-tenancy and no-customization proclamations.

Again, this is not rocket science. SIs have done hundreds of thousands of these projects.  A few years ago, I wrote about cloud vendors and roofers.

I said

Cloud vendors are doing themselves a disservice by going in with service partners who remind the CIO of the last “roofing job”. They need a newer ecosystem of partners who use automation for the migration, the integration, the testing – the roofers who use conveyors and digital cameras. They need roofers who are done in 2 days. Partners who treat it as a repeatable, predictable job not treat it as a work of art. Then watch CIOs talk to their peer neighbors and start making the move one after another. And watch the neighborhood start to shine.

So congrats to Parker and Keith. But we will also need a new and different set of executives as we move into a new phase in the software industry

‘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.

Digital – with Impact

This is the third in my midsummer updates around cloud computing, renewables and digital transformations.

Over the last few months, I have been collaborating with my colleague, Brian Sommer as he works on a book titled “Digital with Impact”. Both of us saw the practice of Reengineering start off with much promise in the early 90s, only to lose steam in a few years. Companies bought into the false promise, encouraged by SIs, that packaged software available then would give them “best practices” and “reengineering in a box”. Many are still stuck with circa 1970 business processes and the on-going burden of those expensive systems. Both Brian and I worry something similar may be happening with today’s digital projects.

As Brian says “Today, digital isn’t simply a replacement for analog, spoken or other aspects of consumer or business activities. Digital in today’s business vernacular is about BIG change – not small changes at the margins.

Business leaders don’t need more encouragement to ‘go digital’. No, they need a path to define and achieve their transformational goals. That path comes in four phases: They survey the landscape and get quite educated on new technologies, competitive threats, new opportunities, etc. (SEE). Next, they synthesize this knowledge into a new to-be vision of the firm (THINK). Their next challenge is to make a frank assessment of how well their firm can complete this vision and what new resources or adjustments they will need to make (RECONCILE). Finally, these firms acquire the people, funding and more to make the change a reality (TRANSFORM). “

He is a firm believer that doing a software replacement with today’s cloud technologies is necessary, but usually inadequate for impactful digital projects. Most enterprise vendors have not kept up with new trillion dollar markets that have emerged in the last two decades, and do not have a big enough digital “vision”. Here are some examples of their myopia:

Products have became smarter with sensors and satellites and software. Who has largely driven this? Contract manufacturers like Foxconn, Flex and Jabil. Foxconn itself employs many times the staff large IT services firms do. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Cloud computing has taken off. Amazon and Microsoft have taken over infrastructure markets that were IBM and Oracle and HP’s to lose. Mobile computing took off. Who benefitted? Players like Apple, Samsung and Google. Industrie 4.0 and IOT took off to the benefit of large asset makers like GE and Siemens. Enterprise vendors have done little to verticalize. CIOs are doing their own modernization with micro-services. These vendors claim to be process experts – talk of “best practices”. Guess what, the next wave of process automation is being led by customers who are trying out drones and robots and RPA with specialist solutions – read Silicon Collar to see how little a role these vendors have played.

So, a bold digital strategy calls for assembling a broad team of vendors, not just pinning hopes on those who have done well in the past with back office processes or with IT infrastructure. 

It also helps to probe to see how vendors themselves are changing. Digital transformations at their customers significantly impacts their own product mix and business models - often traumatically. In the last few months I have had a chance to talk to two vendors – Cognizant and SAP - about their own digital transformations.

Rajeev Mehta, President of Cognizant, the outsourcing firm told me “We actually took our revenue guidance (to Wall Street) down in 2016. And we started seeing the impacts of our clients demanding, wanting to start looking at transformation. We started seeing our existing legacy footprint under threat."

That led to a revisit of their 2020 go-to-market strategy. That turned out to be fortuitous as an activist investor, Elliott Management started clamoring towards the end of 2016 to implement what they called a "Value Enhancement Plan".

I am working on a case study which describes the organizational, product mix and other changes at Cognizant, but one of the outcomes from their internal transformation is:

“Operating margins have improved steadily and the activist investor, Elliott Management divested their interest in Cognizant in May 2018, after a 50% jump in stock price just 18 months after they pushed for their reforms.”

I am working on a similar case study about the digital transformation at SAP. Christian Klein, COO and  member of the Executive Board of SAP SE, told me “we are tackling the whole value chain of SAP. We are looking end-to-end, so marketing, sales, finance, service and support, cloud operations, the cloud infrastructure. All of this has to work in harmony end-to-end. That's the first aspect of our transformation.  Next, we are infusing machine learning, IoT, predictive analytics, all this kind of new technology to also bring the intelligence into play to scale and to also get some synergies out of that.”

“It's about adapting business processes to the new digital age. It's about fixing the data architecture. Last, but not least, it's about change management, and taking the people with you because, at the end, everything that we do in the cloud, in system side impacts, in our case, our 90,000 employees and our 360,000 customers, so change management is a key aspect.”

Benni Blau on his staff shared with me details of ten projects they have internally worked on, and the success metrics they can show across marketing, sales, finance and other business areas.

There will be lot more on these and other case studies in Digital with Impact and SAP Nation 3.0 books in the next few months. 

Long and short. Don’t just do small d – digital. Do it with a broad team of vendors. And prioritize vendors who have been doing their own digital transformations and can actually show results from such efforts.