deal architect

Brian Sommer guest column: The origin story of "Digital with Impact"

Vinnie’s readers might not know that he and I frequently team up on larger client projects. Yes, we’ve been arch-enemies at times but have done lots of deals and even launched a dot-com together.

About two years ago, we noticed a number of client projects that weren’t coming to fruition. I distinctly remember Vinnie one time opining that “51% of all ERP selections were ending up with a no-decision conclusion”. I was seeing something similar, too.

As time wore on, we individually and collectively encountered many projects of various names that were prematurely being halted. Some of those project names are in the following exhibit.

While Vinnie loves to document transformation successes in his books and his New Florence blogs, I thought more energy was needed around the digital misfires that were all too common.  I wanted to find out why we always seem to read about the same 8-10 digital transformation success stories in the business press and never about the ones that didn’t make it. 

And so began a journey….

Early into this journey, I noticed all manner of projects getting digitally washed with the digital transformation moniker. Many projects were a simple “introduction of digital technology to a process”. This isn’t transformation: it’s incrementalism. I also ran into lots of consultancies and integrators who were rebranding their ERP practices as some sort of transformational journey guides. They weren’t. In fact, little of what I encountered would really qualify as transformational or a project that was going to harness vast amounts of new data types (e.g., IoT sensor data).

But there were the great clients and companies that really wanted the holy grail. Sadly, many of these went looking to their old technology and integration partners for solutions. And, even when Vinnie and I would try to tell them what they were going to find, they just wouldn’t believe us. Radical new solutions and business models may require you get new partners who truly understand the modern digital world.

My research into the space took me to numerous firms, factories, industries, geographies, etc.  I can’t even begin to tell you how many business journals and other reference materials I also poured through. What I learned was that there was no one reason that these projects suffered. But patterns did emerge. And in those patterns, I also saw the way forward for other firms.

The book, Digital With Impact, is designed as an executive guide. It takes readers through four phases that must be completed if a digital transformation project is to be successful.  And, as straightforward as those four phases seem, there are significant pitfalls in each of them.

While this summary won’t do the book justice, these phases are See, Think, Reconcile and Transform. The See phase is where transformation teams need to get out of the office and kick the tires of dozens or hundreds of new innovations. They need to see what the art of the possible is with new technology, new business models and emerging competition. The Think phase is where the team starts designing radically new (not incrementally improved) processes, businesses and more. The Reconcile phase looks at the company’s resources (e.g., employees, skills, capital, plant & equipment) and compares them to the new project requirements. Just because a firm can dream up something big doesn’t mean they can get it done. The Transform piece is something a lot people actually have experience with; however, the scale of these initiatives could make even the best people wince.

Digital misfires often occurred when firms tried to skip or shortcut one or more of these phases. Surprisingly, many firms flat out tried to go straight to transform without doing any real research or developing new designs. I just can’t emphasize enough that firms must do the work if they ever want to get the rewards.

Vinnie and I even made some visits to non-clients to assess their digital savvy. Amazingly, some didn’t see any need or urgency to change. Some, incorrectly, think they can get to a new (but undefined) future state on their timetable without any concern re: net-new competitors. You had to be there for some of these meetings!

Somewhere in the middle of this work, Vinnie and I met in Chicago to spend a day or two documenting exercises and activities that companies could use to work through these phases. Since then, I added more exercises and experimented with several of these with real business people. Not surprisingly, many people are very close to their job/company and find ideating radically new business concepts to be hard to do. I’m starting to think my business cards need to reflect my real value add to clients: pusher. I push people out of their familiar comfortable business world and into one that is unlike anything in their past.

I finished up the manuscript a few weeks ago and started to shepherd it through the publishing process. I got some great feedback on the manuscript from a number of tech leaders and colleagues. And, thankfully, their feedback was positive and I even snuck a few of their better suggestions into the book itself.

If this book helps just one team be successful, it was worth it.

Brian

p.s., a big thanks to Vinnie on his pushing to get me to write this.

Influence, Intelligence and SAP

Last week, in the Enterprise Irregulars chat room I said in a thread "Analyst Relations at vendors generally want to influence v. seek intelligence. So they want analysts to say nice things about what they can offer today. As important should be influence of their own R&D. This is how our market and competition are changing and how our offering should change. But how many vendors really want to hear that from an analyst?"

Well, I have to eat crow.

At a meeting SAP organized for analysts this week in Utah, they actively sought feedback on messaging they are planning for their SapphireNow event. They also shared plenty of detail on their $ 8 billion acquisition of Qualtrics. Xs and Os were definitely in the air as it coincided with their X4 Experience Management user event in town . SAP has been looking at datasets which integrate Qualtrics experiential data with operational data from its own systems.  It was all under NDA (at least for a few weeks till SapphireNow) but the conversation with many of the senior executives was refreshingly open. I cannot remember the last time we have had so much candid conversations with a vendor.

Two other things stood out for me on this trip. We got to see the Xs and Os in a very different setting. Stacey Fish and Craig Cmehil of SAP, Jon Reed of Diginomica and I helped kick off a hackathon at Brigham Young University. The dataset the students worked on included employee data from SuccessFactors and related survey data from Qualtrics. Thinking back to my own student days, I would have been intimidated by the assignment. But these young men and women have already used ERP software and data visualization tools in class and in internships. It was invigorating to see their enthusiasm.

I enjoy presenting at campuses around the world on themes from my books. This session coincided with the 14th birthday and 6,000 post anniversary of the New Florence blog. I told these young ones I was amazed my blog was going strong after all these years - for me so much innovation is the sign "it's a great time to be alive" like it was in Florence during the European Renaissance.

On the drive, we had conversations about changing developer communities, a theme I also cover in the book. Open Source, ML in China, Industrie 4.0 in Germany, changing investments in Silicon Valley. We talked about movies about developers and geeks - War Games, Tron, Pump up the Volume and many others. It was a useful reminder of the constant turmoil that technology brings. It's exciting and scary at the same time.

Being around the SAP management team this week, you could not help but sense the restructuring SAP is going through. Dennis Howlett describes it in his own Hollywood terms here. Open as SAP may be, I stayed away from prying too much. There are legal and other sensitivities during such corporate initiatives. As an individual, I sympathize with those that get hurt during such moves. However, in my book, I point to many opportunities SAP has missed so I think we will see even more change. And, whether SAP changes or not, the world around it is changing rapidly as our conversations at and to and from BYU brought out in spades.       

Having said all that, SAP is an aberration when it comes to openness. I see too many vendors seek out a string of positive tweets at their events, limit access for conversations with execs, express annoyance at even the slightest negative comment. What is concerning is many of these comments come courtesy of their customers but they would rather have not have them publicly repeated. I expect to get unhappy comments from other vendors in the book. They would prefer I only pick on SAP. So, for the most part my observation about influence v. intelligence still applies. Will it change? I hope so, but after 25 years at Gartner and since, I am also pragmatic.

What I can do, is to compliment vendors like SAP when they do show openness. And hope it spreads around the industry.

Bruce Cleveland - Part 2 - thoughts on current enterprise market

In Part 1 yesterday, Bruce Cleveland talked about the framework in his new book, Traversing the Traction Gap. Here we talk about partnering and white spaces in the market.

Most enterprise vendors now offer their own platforms. Could they use your framework to develop a vibrant network of startups on their platforms?

At Siebel, we used partners to dominate – I know the word is overused— the industry.  We grew from initial product release to $2 billion in revenue in 4.5 years. In 1999, Deloitte named Siebel the “fastest growing company in the US” with a staggering CAGR of more than 750,000%.  We only accomplished this because we (by “we” I mean Tom Siebel) put significant resources (personnel and capital) into building a technical platform and a robust ecosystem to support it. 

Tom knew he had to “remove the constraints on the growth of the business.” We needed systems integrators who were trained and certified on Siebel implementations. We needed to our applications tuned to run optimally on various hardware systems. And, we needed numerous third-party applications that could interface and interoperate with our application suite.

Consequently, Tom charged me with building the Siebel Alliance Program. Tom had created our first systems integration partnership with Andersen (now Accenture).  He also had created our first hardware relationship with Compaq and our first software partnership with Microsoft.

I simply took Tom’s initial ideas and those partnerships and developed a scalable partner program from them.  We began the Siebel Alliance Program with Accenture, Compaq and Microsoft and over the course of three years we accumulated a total of 750 partners. These partners generated about a $B of additional annual license revenue for Siebel and helped us ensure that those licenses were implemented successfully. By partners, I don't mean they were reselling Siebel applications.  I mean we partnered with them to market, sell, and implement our joint solutions. We were compensated on our products/services and they were compensated on their products/services.

So, as you might imagine, I am a huge fan of partnerships. We won the Forbes award for the most innovative partnering program in the technology industry at the time and every technology company knew how powerful it was. It wasn’t a secret.  I find it interesting – with all the success we had with the Siebel Alliance Program - that none of the incumbent technology companies have replicated its form or function.

I believe the current technology platform leaders have a tremendous opportunity to develop a similar program. Sure, they all have partner programs, but those programs don’t really put a lot of skin in the game. By that, I mean, they don’t obligate the leaders to do much or to invest in their partners beyond providing basic access to some technology and lightweight market awareness. 

For our program, we actively recruited and hired hundreds of MBAs from the top universities as well as industry professionals and chartered them to create joint business plans with our partners, advocate for our partners with our product and sales organizations, and held the Siebel Alliance organization accountable for helping our partners achieve their revenue and market share objectives. We built specific marketing programs – brand and demand gen – that partners could sponsor to generate leads for themselves. We put skin in the game.  

The program was so successful that Harvard Business School wrote a business case study about it. So, I'm pretty proud of it.

 Today, though, for the most part, the large technology platform companies offer what I call “paper partnerships”.  Those partnership don’t obligate either party to much of anything.  They're not “skin in the game” partnerships so they are anemic, at best. 

Most startup teams have little experience partnering with these large technology providers. And, even if they do, they have found that those companies offer little that their startup can benefit from. There's little provided by the large company that is likely to generate significant market awareness or revenue for the startup. For example, startups need to know who, from the partner’s organization, wakes up every morning worried about helping the startup to succeed; where are the demand gen programs they can co-invest in to generate awareness and interest in the startup’s products?  Which teams inside the large company are held accountable for achieving the market share and revenue objectives of the startups in their partner community? The answer? None. Those partner programs are essentially worthless – at least as far as the startup community is concerned. 

Salesforce built an App Store and prospective customers can certainly search for and find add-on applications and products for the Salesforce ecosystem there. However, that's a pretty lightweight endorsement for startups. Who is held accountable within the four walls of Salesforce to wake up every morning, ensuring that a particular partner has the leads it needs, generating a robust pipeline, and helping the startup to convert that pipeline into revenue?

I don’t mean to call out Salesforce. At least they developed an innovative approach and put a lot of energy behind it. And, they have done some advanced partnering with Vlocity. Vlocity was founded by some of my former Siebel colleagues.  What's Vlocity doing?  They're building vertical applications on top of the force.com platform. 

Salesforce saw a need to have much deeper vertical versions of their platform.  That's what we did at Siebel (create vertical solutions of Siebel) and David Schmaier led that initiative as the executive VP. David is the founder and CEO of Vlocity. David and his team are replicating what we did at Siebel for Salesforce and it's going very well. 

I'm an investor in Vlocity, and, to your point about partnering, it's an example of what can – and I think should - be done between technology platform providers and the startup ecosystem.  As this example shows, it's not just about partnering with systems integrators. 

If you want these partnerships to amount to anything there needs to be alignment and shared objectives. For example, if you want to garner the attention of the partner’s sales organization, there is nothing like making partner revenue a part of the sales rep’s quota.

The truth is that partner programs as conceived and implemented by the current technology platform leaders just don’t do much for startups – in terms of market share and revenue - and therefore it shouldn’t be surprising that those programs aren’t valued by startups.

Apple has done well in its ecosystem – with the App Store - but the consumer world doesn’t require face-to-face interactions. In the B2B world, people's work reputations are on the line when they make a buy decision. And, in almost all cases, there are multiple decision makers who must be convinced.  For B2B, startups need brand credibility from the platform provider. This happens when they implicitly endorse the startup by working closely with them. 

In the consumer world, a startup can “borrow” the brand of Apple because if their application is admitted into the Apple App Store, it tells consumers, "Look, we vetted this product. It adheres to our rules." 

Conversely, I don’t think that Salesforce’s App Store does a lot for startups. It’s essentially a digital catalog with some ratings/rankings. That’s not enough for most businesses to make a buy decision. If you speak with startups about the Salesforce App Store and ask them if it is a significant source of revenue for them, I think you will find that for most, it isn’t.

Startups lack credibility.  They lack access to prospective customers.  And, they lack sufficient marketing dollars.  This is where the enterprise vendors could really help startups.

I had hoped that the technology leaders would have adopted at least some of the best practices we had created with the Siebel Alliance Program. Tom Siebel and his new company, C3, are developing a similar program to what we had at Siebel Systems. So, I believe the principles are as valid today as they were back then.

When you look at the cloud apps market there are so many white spaces - major geographies, industry verticals etc - and they do not seem to be targeted by established vendors or even by startups. How are investors like you guiding them through these white spaces?

Cloud computing with its subscription business model - and delivery and usage model -has democratized business application software. Prior to cloud computing, it was prohibitively expensive for smaller companies to acquire and implement enterprise-class applications.

But, by dramatically dropping the cost of these solutions, I suspect it has constrained the application providers’ ability to support smaller geographies and industry verticals.  Going after smaller markets that require significant translation and support infrastructure at much lower price points isn’t practical. 

Even with traditional (re: higher priced) enterprise software, it was always challenging to create localized versions of products for a specific market.  Most US companies started out with the English speaking markets and then typically moved to countries such as Germany, Spain, and France with relatively large populations.  But, when they were asked to support a Dutch or Finnish version, it was seldom worth the upfront and ongoing cost.

For a large company to continue to grow at a significant rate, it needs to acquire or build new solutions that add significant revenue streams – quickly. In that context, let's talk about SAP and Salesforce.  One is a classic enterprise technology company with primarily a perpetual license business model.  The other is the "modern" cloud computing company with a subscription business model. 

The challenge with both of those organizations is that to grow meaningfully they have to build or acquire something of meaningful size.  Moving into a small geography requires the same resources or at least the same FTE costs that might be invested in something else and could generate a much larger impact.  So, it should be little surprise why we are seeing these large companies look to make large acquisitions and avoid niche industries and geographical markets. 

To your point, one might think, “Hey, if these market leaders are not seeing a lot of companies growing fast enough to make a measurable impact on their top line why aren't they helping smaller companies to grow so that they can eventually acquire them?”

Technology leaders may want to look at making investments in smaller technology companies where they see strategic value. These leaders can protect their interests by exchanging an equity investment and access to their channels with a Right of First Refusal (ROFR) that allows the leader to acquire the smaller company when it reaches a certain revenue threshold, at some predetermined price based upon a number of factors such as the acquirer’s stock multiple at the time. 

With the respect to investing in and expanding the number of verticals supported, there may be a dearth of deep domain expertise inside some of the larger technology companies to do that well. I don't know whether these companies have initiatives to try to hire subject matter experts from industry to help them drive their product management.  They may and I'm just not privy to it. 

I do know that Salesforce took a run at creating vertical solutions and it wasn't as effective as they had hoped, at least not at the time. This is one of the reasons that led to their investment in Vlocity.  I think this makes the case that the technology leaders, at least those in the B2B markets and not normally inclined to partnering, could really benefit by embracing partnerships. 

Instead, it looks like the majority of them sit back and wait to see which startups “make it”, without their help, and then acquire the few that do. This seems rather silly because by doing that they have to then compete in the open market – and pay a premium - to keep them out of the hands of competitors.

What do you find interesting in today's enterprise space?

Roughly every ten years, new technology is introduced that dramatically changes our work and personal lives.  In the 60s it was mainframe computing. In the 70s it was minicomputers. In the 80s it was PCs. In the 90s it was client/server computing and in the 2000s, it was largely cloud and mobile computing which spawned “digital transformation”, beginning in the consumer markets with companies such as Amazon, Apple, Facebook, NetFlix, Google, etc. Digital transformation has now moved full speed into the enterprise markets.

I believe digital transformation - digital disruption - is such a big transition it will require multiple decades.  I think it has a chance to undo a lot of the current market leaders in every industry.  To your point, maybe vertical providers will emerge and dominate the markets due to digital transformation issues.

The emerging opportunity in the enterprise is in systems of intelligence. This is where I think vertical solutions can dominate.  Systems of intelligence use the data generated and captured by systems of record and systems of engagement to enable companies to derive better business insights, faster and far more accurately than ever before.  I mean real-time insights and real-time responses, without humans involved, that can be triggered via key business events and moments of value. 

Here is an example in the retail space. Let’s say I'm walking through PetSmart and I'm a repeat PetSmart customer. I’m a member of the PetSmart loyalty program. If PetSmart has implemented a system of intelligence and placed beacons throughout the store, I have PetSmart’s loyalty application on my phone, and I provide my permission to send me offers, PetSmart can enable brands to generate contextually-relevant real-time offers to me as I walk through the store.  An offer could be from a brand I don’t normally buy for my dog. The system of intelligence has access to POS data from my prior store purchases. PetSmart makes $ by serving up the competitive offer and if/when I decide to redeem the offer in a coupon that could be set to expire if I walk out of the store without making the purchase. Powering this type of application requires a different type of computer and systems architecture. 

The biggest opportunity may come from vertical systems of intelligence built on top of the older systems of record and systems of engagement.  In my PetSmart example, it means that you've got to be able to interface with an existing point of sale system, not replace it. This is where I would advise B2B application startups to focus. Trying to replace the existing systems of record and engagement is tough to do. 

Trying to rip and replace technology is hard to do.  Building next-generation systems of intelligence that utilize the existing systems of record and engagement is far easier.  That's what a lot of the startups we work with are doing.

Bruce Cleveland - Part 2 - thoughts on current enterprise market

In Part 1 yesterday, Bruce Cleveland talked about the framework in his new book, Traversing the Traction Gap. Here we talk about partnering and white spaces in the market.

Most enterprise vendors now offer their own platforms. Could they use your framework to develop a vibrant network of startups on their platforms?

At Siebel, we used partners to dominate – I know the word is overused— the industry.  We grew from initial product release to $2 billion in revenue in 4.5 years. In 1999, Deloitte named Siebel the “fastest growing company in the US” with a staggering CAGR of more than 750,000%.  We only accomplished this because we (by “we” I mean Tom Siebel) put significant resources (personnel and capital) into building a technical platform and a robust ecosystem to support it. 

Tom knew he had to “remove the constraints on the growth of the business.” We needed systems integrators who were trained and certified on Siebel implementations. We needed to our applications tuned to run optimally on various hardware systems. And, we needed numerous third-party applications that could interface and interoperate with our application suite.

Consequently, Tom charged me with building the Siebel Alliance Program. Tom had created our first systems integration partnership with Andersen (now Accenture).  He also had created our first hardware relationship with Compaq and our first software partnership with Microsoft.

I simply took Tom’s initial ideas and those partnerships and developed a scalable partner program from them.  We began the Siebel Alliance Program with Accenture, Compaq and Microsoft and over the course of three years we accumulated a total of 750 partners. These partners generated about a $B of additional annual license revenue for Siebel and helped us ensure that those licenses were implemented successfully. By partners, I don't mean they were reselling Siebel applications.  I mean we partnered with them to market, sell, and implement our joint solutions. We were compensated on our products/services and they were compensated on their products/services.

So, as you might imagine, I am a huge fan of partnerships. We won the Forbes award for the most innovative partnering program in the technology industry at the time and every technology company knew how powerful it was. It wasn’t a secret.  I find it interesting – with all the success we had with the Siebel Alliance Program - that none of the incumbent technology companies have replicated its form or function.

I believe the current technology platform leaders have a tremendous opportunity to develop a similar program. Sure, they all have partner programs, but those programs don’t really put a lot of skin in the game. By that, I mean, they don’t obligate the leaders to do much or to invest in their partners beyond providing basic access to some technology and lightweight market awareness.

For our program, we actively recruited and hired hundreds of MBAs from the top universities as well as industry professionals and chartered them to create joint business plans with our partners, advocate for our partners with our product and sales organizations, and held the Siebel Alliance organization accountable for helping our partners achieve their revenue and market share objectives. We built specific marketing programs – brand and demand gen – that partners could sponsor to generate leads for themselves. We put skin in the game.  

The program was so successful that Harvard Business School wrote a business case study about it. So, I'm pretty proud of it.

Today, though, for the most part, the large technology platform companies offer what I call “paper partnerships”.  Those partnership don’t obligate either party to much of anything.  They're not “skin in the game” partnerships so they are anemic, at best. 

Most startup teams have little experience partnering with these large technology providers. And, even if they do, they have found that those companies offer little that their startup can benefit from. There's little provided by the large company that is likely to generate significant market awareness or revenue for the startup. For example, startups need to know who, from the partner’s organization, wakes up every morning worried about helping the startup to succeed; where are the demand gen programs they can co-invest in to generate awareness and interest in the startup’s products?  Which teams inside the large company are held accountable for achieving the market share and revenue objectives of the startups in their partner community? The answer? None. Those partner programs are essentially worthless – at least as far as the startup community is concerned. 

Salesforce built an App Store and prospective customers can certainly search for and find add-on applications and products for the Salesforce ecosystem there. However, that's a pretty lightweight endorsement for startups. Who is held accountable within the four walls of Salesforce to wake up every morning, ensuring that a particular partner has the leads it needs, generating a robust pipeline, and helping the startup to convert that pipeline into revenue?

I don’t mean to call out Salesforce. At least they developed an innovative approach and put a lot of energy behind it. And, they have done some advanced partnering with Vlocity. Vlocity was founded by some of my former Siebel colleagues.  What's Vlocity doing?  They're building vertical applications on top of the force.com platform. 

Salesforce saw a need to have much deeper vertical versions of their platform.  That's what we did at Siebel (create vertical solutions of Siebel) and David Schmaier led that initiative as the executive VP. David is the founder and CEO of Vlocity. David and his team are replicating what we did at Siebel for Salesforce and it's going very well. 

I'm an investor in Vlocity, and, to your point about partnering, it's an example of what can – and I think should - be done between technology platform providers and the startup ecosystem.  As this example shows, it's not just about partnering with systems integrators. 

If you want these partnerships to amount to anything there needs to be alignment and shared objectives. For example, if you want to garner the attention of the partner’s sales organization, there is nothing like making partner revenue a part of the sales rep’s quota.

The truth is that partner programs as conceived and implemented by the current technology platform leaders just don’t do much for startups – in terms of market share and revenue - and therefore it shouldn’t be surprising that those programs aren’t valued by startups.

Apple has done well in its ecosystem – with the App Store - but the consumer world doesn’t require face-to-face interactions. In the B2B world, people's work reputations are on the line when they make a buy decision. And, in almost all cases, there are multiple decision makers who must be convinced.  For B2B, startups need brand credibility from the platform provider. This happens when they implicitly endorse the startup by working closely with them. 

In the consumer world, a startup can “borrow” the brand of Apple because if their application is admitted into the Apple App Store, it tells consumers, "Look, we vetted this product. It adheres to our rules."     

Conversely, I don’t think that Salesforce’s App Store does a lot for startups. It’s essentially a digital catalog with some ratings/rankings. That’s not enough for most businesses to make a buy decision. If you speak with startups about the Salesforce App Store and ask them if it is a significant source of revenue for them, I think you will find that for most, it isn’t.

Startups lack credibility.  They lack access to prospective customers.  And, they lack sufficient marketing dollars.  This is where the enterprise vendors could really help startups.

I had hoped that the technology leaders would have adopted at least some of the best practices we had created with the Siebel Alliance Program. Tom Siebel and his new company, C3, are developing a similar program to what we had at Siebel Systems. So, I believe the principles are as valid today as they were back then.

When you look at the cloud apps market there are so many white spaces - major geographies, industry verticals etc - and they do not seem to be targeted by established vendors or even by startups. How are investors like you guiding them through these white spaces?

Cloud computing with its subscription business model - and delivery and usage model -has democratized business application software. Prior to cloud computing, it was prohibitively expensive for smaller companies to acquire and implement enterprise-class applications.

But, by dramatically dropping the cost of these solutions, I suspect it has constrained the application providers’ ability to support smaller geographies and industry verticals.  Going after smaller markets that require significant translation and support infrastructure at much lower price points isn’t practical. 

Even with traditional (re: higher priced) enterprise software, it was always challenging to create localized versions of products for a specific market.  Most US companies started out with the English speaking markets and then typically moved to countries such as Germany, Spain, and France with relatively large populations.  But, when they were asked to support a Dutch or Finnish version, it was seldom worth the upfront and ongoing cost.

For a large company to continue to grow at a significant rate, it needs to acquire or build new solutions that add significant revenue streams – quickly. In that context, let's talk about SAP and Salesforce.  One is a classic enterprise technology company with primarily a perpetual license business model.  The other is the "modern" cloud computing company with a subscription business model. 

The challenge with both of those organizations is that to grow meaningfully they have to build or acquire something of meaningful size.  Moving into a small geography requires the same resources or at least the same FTE costs that might be invested in something else and could generate a much larger impact.  So, it should be little surprise why we are seeing these large companies look to make large acquisitions and avoid niche industries and geographical markets. 

To your point, one might think, “Hey, if these market leaders are not seeing a lot of companies growing fast enough to make a measurable impact on their top line why aren't they helping smaller companies to grow so that they can eventually acquire them?”

Technology leaders may want to look at making investments in smaller technology companies where they see strategic value. These leaders can protect their interests by exchanging an equity investment and access to their channels with a Right of First Refusal (ROFR) that allows the leader to acquire the smaller company when it reaches a certain revenue threshold, at some predetermined price based upon a number of factors such as the acquirer’s stock multiple at the time. 

With the respect to investing in and expanding the number of verticals supported, there may be a dearth of deep domain expertise inside some of the larger technology companies to do that well. I don't know whether these companies have initiatives to try to hire subject matter experts from industry to help them drive their product management.  They may and I'm just not privy to it. 

I do know that Salesforce took a run at creating vertical solutions and it wasn't as effective as they had hoped, at least not at the time. This is one of the reasons that led to their investment in Vlocity.  I think this makes the case that the technology leaders, at least those in the B2B markets and not normally inclined to partnering, could really benefit by embracing partnerships. 

Instead, it looks like the majority of them sit back and wait to see which startups “make it”, without their help, and then acquire the few that do. This seems rather silly because by doing that they have to then compete in the open market – and pay a premium - to keep them out of the hands of competitors.

What is going on right now in the enterprise space that you think is interesting?

Roughly every ten years, new technology is introduced that dramatically changes our work and personal lives.  In the 60s it was mainframe computing. In the 70s it was minicomputers. In the 80s it was PCs. In the 90s it was client/server computing and in the 2000s, it was largely cloud and mobile computing which spawned “digital transformation”, beginning in the consumer markets with companies such as Amazon, Apple, Facebook, NetFlix, Google, etc. Digital transformation has now moved full speed into the enterprise markets.

I believe digital transformation - digital disruption - is such a big transition it will require multiple decades.  I think it has a chance to undo a lot of the current market leaders in every industry.  To your point, maybe vertical providers will emerge and dominate the markets due to digital transformation issues.

The emerging opportunity in the enterprise is in systems of intelligence. This is where I think vertical solutions can dominate.  Systems of intelligence use the data generated and captured by systems of record and systems of engagement to enable companies to derive better business insights, faster and far more accurately than ever before.  I mean real-time insights and real-time responses, without humans involved, that can be triggered via key business events and moments of value. 

Here is an example in the retail space. Let’s say I'm walking through PetSmart and I'm a repeat PetSmart customer. I’m a member of the PetSmart loyalty program. If PetSmart has implemented a system of intelligence and placed beacons throughout the store, I have PetSmart’s loyalty application on my phone, and I provide my permission to send me offers, PetSmart can enable brands to generate contextually-relevant real-time offers to me as I walk through the store.  An offer could be from a brand I don’t normally buy for my dog. The system of intelligence has access to POS data from my prior store purchases. PetSmart makes $ by serving up the competitive offer and if/when I decide to redeem the offer in a coupon that could be set to expire if I walk out of the store without making the purchase. Powering this type of application requires a different type of computer and systems architecture. 

The biggest opportunity may come from vertical systems of intelligence built on top of the older systems of record and systems of engagement.  In my PetSmart example, it means that you've got to be able to interface with an existing point of sale system, not replace it. This is where I would advise B2B application startups to focus. Trying to replace the existing systems of record and engagement is tough to do. 

Trying to rip and replace technology is hard to do.  Building next-generation systems of intelligence that utilize the existing systems of record and engagement is far easier.  That's what a lot of the startups we work with are doing.

The New York Times still does not get it

In 2006, I asked the question "Is the media biased?" I wrote "No this is not about being liberal or conservative. This is about how little MSM covers business technology as against consumer oriented technology. New York City is home to the largest number of Fortune 500 headquarters. The NY Times has a strong business readership..... Maybe NY Times journalists ought to step away from their Macs and Google searches and go visit some of the CIOs at the numerous headquarters in Manhattan."

In 2007, someone far more influential, Bill Gates pointed out

"The business computing market, which is way bigger than the consumer computing market, no one pays attention to it. Even in the Wall Street Journal, and you think, oh, this is the paper they're going to tell me about business computing; no, it's all about consumer computing."

Gates singled out the WSJ but the same applied to the Times.

So, over a decade later,  the Times now runs a story about how the city has "become a tech town". Clearly, with Amazon's recent interest (and then loss of interest) in Long Island City, and the growth of Silicon Alley, the tech intensity in the area has increased significantly. But those same CIOs I had talked about in 2006 have continued to spend tens of billions a year on tech. Wall Street has spent hundreds of billions since the deep recession in 2009 on building next-gen fintech. Agencies, another major NYC focus, have seen the swing to programmatic advertising and watched digital advertising become a $ 200 billion a year market.  

It sounds almost like Rip Van Winkle waking up from his 20 year slumber amazed how things have changed. No, New York has long been a flourishing tech town which the Times did not find that interesting. Consumer tech companies and sexier startups have made it bigger and more interesting to the Times but the underlying foundation has not disappeared and still does not get much attention.  

Davos: Not just for the elite

Alan Alper, VP and Editorial Director, has his fingerprints on most Cognizant marketing publications and events. He has been involved in the planning of Cognizant's presence and pitches at the annual meeting of the World Economic Forum for the last several years. For a variety of reasons, he did not have a chance to personally attend. He did this year and I caught up with him about his "rookie" impressions of Davos.

This was my first year onsite in Davos.  I was really struck by the fact that there really are two Davoses.  There is annual meeting, where the elites of the world in business, government, policy, and academia get together to try to take on the world's grandest challenges.  Then there is the outside the Congress Center, what we call the alt-dot-Davos experience in which there are popup presences and storefronts up and down the Promenade hosted by big technology companies; banks and brokerages and the economic development authorities of developing countries; and also, not-for-profit and NGO organizations all trying to get heard above the din.

It was fascinating to me to see what I thought was both a divergence and convergence inside and outside the Congress Center.  Inside the Congress Center, clearly the conversation was all about the 4th Industrial Revolution and the impact that globalization is having across our ecology, economies and social systems. There is the hope and the dream that technology - AI, automation, blockchain - applied correctly, can help to alleviate some of the bigger challenges --which is WEF's mission to make the world better. 

There was the continuing conversation inside the Congress Center of keeping up with the demand for talent, primarily in the digital world, how we make sure that folks are well versed in technology, trained, equipped to help society progress and to leave no one behind.  There were murmurs of the tech backlash,  how big-tech is grappling with issues of trust and data stewardship.  And questions about whether we are heading for a global recession.

On the ecological front, I think the talk that took people by storm, really grabbed at its heartstrings was that of Sweden's Greta Thunberg who did a presentation titled “Our House is On Fire.”  I think she stole the show.  I mean it was just so authentic and genuine, this 16-year-old girl who basically is telling the world leaders that if we don't fix the ecological issues of our world, we are sunk - and time's a wastin. 

Inside the Congress Center, there was a lot of conversation about making the world inclusive.  Yet, when I looked at some of the data coming from  WEF, only 23% of the delegates are women.  That's only up 1% from last year.  I would draw a comparison to what's going on outside the Congress Center where, at least in my travels, I  encountered many, many women who are involved and passionate about addressing the issues of the day. They led conversation on the caring economy and how to make FinTech work so that there is more democratized access to information services not just in the developed world, but also in developing economies.

There were a number of really interesting women events, one that was sponsored by an organization called Female Quotient that I dipped in and out of a couple of times.  I could barely get in.  It was standing room only.  Again, they were tackling all the big issues of the day.  It was great to see that, at least outside the Congress Center, women are playing a huge role trying to create a dialog around issues that seem to be vexing to most business leaders and to everyone else.

Tech Talk

Reskilling, upskilling, humans to thrive in the future of work, that was a big topic everywhere you went. The conversation about job losses was a little more subdued this year.  I think people are now finally coming to realize that the whole notion of fearing the bot may be overplayed and that it's going to be some time before AI and intelligent process automation will take lots of jobs from people. 

I think there are places where clearly the rote and routine jobs are going to start to disappear.  But the prevailing wisdom is that, to make businesses work, we need to make technology more appreciative of the human condition.  The future of work is not "no jobs".  There are going to be new jobs that open up as a result of AI and automation.  They're just different jobs than we've seen today. 

Most of the people that I spoke to reject the notion put forth in the infamous Oxford study that 40+% of all  jobs are at risk of being automated away.  There may be tasks that go away, but not full jobs.

We did an event on blockchain, that was quite well received.  I think, down the road, we're going to see places many places where blockchain will boost underserved communities by providing data  and services, what some people call micro-moment applications.  For example, we're working with MetLife on a pilot project in Singapore that enables women with gestational diabetes, once they take a test to see whether they are susceptible to it, and if they do contract it, are able to be compensated for treatment directly on their cell phones without having to file a claim.

The other thing that got attention was just the humanizing impact of AI, the more we can put an empathetic veneer on AI and how it can enable more genuine, authentic, and meaningful interactions and how we can guard against bias, be it intentional or unintentional.  These are things, with proper governance and structural changes -- such as AI offices that enable organizations to create and follow policies and procedures -- that will ensure that AI is used for good purposes and that deliver great experiences, while weeding out bias that can affect  black box algorithms.

I  stopped by the Facebook pavilion.  Unlike a lot of the big tech companies, they allowed you to come in and browse like you would in a gallery or a museum.  On the walls they displayed  this wonderful narrative about the impact of social networks.  You know, obviously it was a very positive spin, but I was very happy to see that they did treat the whole question of the unforeseen consequences from social networking, particularly the  misuse of Facebook as a purveyor of fake news, and how data privacy needs to be better protected. They could have buried it, but it was there.  They didn't hide from it.

People gazing and networking

For me, personally, it was really enlightening.  We ran into so many interesting people. We were walking down the promenade the first morning, and I ran into Tim Cook.  We exchanged glances, and I decided not to say hello to him because he looked like he wanted to be left alone.  Even though Apple didn't have a pavilion in Davos, they had a presence there, so that was interesting. 

We saw Prince William.  He walked across the street from our pavilion, the Hub Culture Pavilion. We saw the Queen of the Netherlands, who had a meeting in the Hub Culture pavilion. 

There weren't as many big name political leaders. I think Merkel from Germany was the biggest name.  Macron from France didn't come.  Modi from India didn't come.  Trump wasn't there. As I said, I think Greta Thunberg was the lightning rod.  I think a lot of folks were very intrigued by her presentation. 

I met a former WEF heavyweight, Dr. Frank Jurgen Richter.  He runs an organization called Horasis.  It's The Global Vision Community.  He's offered us a speaking opportunity at his upcoming event in Portugal.

The alt-dot-Davos

The general press tends to cover the pronouncements that come out of the Annual Meeting, and disparagingly comments on "Oh, it's all these elites and they all fly in on private jets and fly in and out." That may be true, but the ultimate Davos experience is really all about the activity outside the Congress Center, that’s occurring up and down the promenade -- the people who are trying to collaborate, and work together to solve big challenges that we all face.       

We ran into this young woman, Christine Moseley, founder of a company called Full Harvest, which is focused on creating a more sustainable food supply chain.  She had been brought to Davos by Bloomberg.  She had just received her Series A funding, and she's out hiring people.  A great opportunity for her to evangelize what she's doing. 

Again, it's all these young, bright people who descend on Davos and really try to make a difference.  I don't want to say it's just a millennial thing, but it's a lot of people with high aspiration and interest in giving back to society and making the world better.  I know that all sounds very Pollyanna, but it was true.

In my conversations with our WEF partners, I have to tell you they are very encouraging and supportive of this alt-dot-Davos experience.  In fact, we had a number of them at our Future Workforce event.  Eric White, who oversees the IT and electronics industry community that our Vice Chairman & CEO Francisco D’Souza  leads, came to our event. We had a number of WEF shapers both at that event as well as our blockchain event.  In discussions with them, they're glad to see the experience that is blossoming outside of the Congress Center.         

I think WEF has done a good job of making sure that you get this cross-section of people in Davos who can have influence, have input, and shape conversations and strategies that can at least theoretically start to address what needs to be done.  Then it's for everybody else to kind of pick up and run with it and take the theory and turn it into action.

They could say, "This is a security risk that we don't want to deal with."  We're all better for it because they allow this new experience to kind of layer on top of what they're doing in the Congress Center.

New Florence innovation catalog: 14 years, 6000 posts

The New Florence innovation blog is celebrating two milestones in March. I started the blog in 2005 because enterprise tech was going through an innovation lull and I found inspiration in profiling progress in healthtech, cleantech, consumer tech and STEM topics. Honestly, I thought I would run out of material in a couple of years. After 6,000 posts, I can safely say I grossly miscalculated. 

I am glad I was wrong. In spite of all the doom and gloom around us, the blog's moniker continues to remind me this is what Florence must have felt like during the European Renaissance.

My sources of material have evolved over time.

1. some posts are seasonal - every major event, could be the SuperBowl, Chinese New Year, the President's State of the Union address, Warren Buffet's annual shareholder letter and many others provide a nugget to explore. It's fun to see how St. Patrick's Day celebrations have evolved over the last decade!
2. many posts come from my travels - I am blessed to be invited to many conferences. My family is made up of digital nomads so I get to experience or hear of innovation in airlines, museums, event venues around the world. I am also shamelessly curious and ask details about people, products and places others may not notice.
3. other ideas come from Barnes and Noble and from the Texture app - I spent a few hours perusing magazines at B&N every few weeks. I subscribe to Texture and scan 50+ magazines on my numerous flights. Those along with Google News and other subscriptions give me plenty of other ideas.
4. my books provide more fodder - the blog has a symbiotic relationship with my books. Patterns I see across posts become the germ for book ideas. Extra material from case studies for the books become blog posts. I also excerpt chunks from the books for the blog.
5. my advisory work gives me plenty of other ideas but I am usually restricted by NDAs so cannot use much of that material. However, my advisory clients benefit from a rich database of case studies and an annoying array of dinner time stories.
6. many ideas come from readers - their suggestions are always appreciated.

On average, each post takes 30 minutes to research and curate.  I usually validate the stories with a couple of sources, and look for videos and images to enhance each post. It is a labor of love, and I am grateful to my blog sponsors for their on-going support.

I am glad I did not run out of materials after a couple of years. The blog has brought me unbelievable positivity - researching innovation and excellence does that in spades.

Look forward to cataloging global progress across a few more thousand posts! 

Photo Credit of Arno River and Ponte Vecchio in Florence.

Signs of Spring in Enterprise Software

The country is seeing a welcome break from the polar vortex. Temperatures remind us of Spring. Well, may not quite - winter is not done, but there is clear hope.

It's easy when you look at Wall Street's reaction to Workday or ServiceNow results to forget reality.  The reality is that there are over a million SAP, Oracle, Infor, Unit4, IFS, ADP, qad and other enterprise customers who are stuck with 15-30 year old ECC, Siebel, Lawson, Agresso, MFG/PRO and other legacy implementations.  For all the success of Salesforce, NetSuite, other SaaS vendors, and new products like S/4 and Fusion, the vast majority of the enterprise is in the tundra. There are a variety of reasons as Holger Mueller, Cindy Jutras, Frank Scavo and others explain in my upcoming book, SAP Nation 3.0. I also have a section on what I call SAP's "unforced errors". Trust me, I also show plenty of mistakes made by SAP's competitors.

However, I found signs of spring as I finished editing my book manuscript. It has 50 case studies spread over 200+ pages describing how they are  trying out different strategies.

Here is a sampling of strategies:

• Trying out Leonardo ML and IoT at Costco and GEBHARDT.
• Ring-fencing ECC with many of SAP's cloud properties, as with SuccessFactors at Terumo BCT and components of C/4 at Pregis, or Workday at Sanofi and Salesforce at Unilever.
• Two-tier deployments with SAP ByD and S/4 in their subsidiaries.
• Migration from ECC to S/4 on-premise at Johnsonville Sausage.
• New implementations in the S/4 Public Cloud like at MOD Pizza
• Trying out relatively new on-premise, but impactful, SAP functionality like IBP at Louisiana-Pacific.
• Leverage of mobile, wearable, satellite and sensory data at variety of customers    
• Developing new ISV functionality on SCP as Vertex has done with their indirect tax app.
• Next-gen data using the SAP Analytics Cloud like at the Executive Huddle at the San Francisco 49ers statdium
• Moving to new licensing and hosting models like Bombardier with IBM.

We also are seeing blends from this growing toolbox of strategies. So, CF Industries is moving to S/4 in the cloud, and at the same time has shifted to TPM from Rimini for its ECC support while it gradually migrates. GEBHARDT has been implementing a variety of SAP cloud products around its ECC on-prem implementation. Additionally, it has developed a customer portal and set of predictive maintenance services using Leonardo IoT and AIN capabilities.  

In addition, I cover burgeoning developer and startup communities around ML in China, Industrie 4.0 in Germany, in Silicon Valley, in India and open source around the world.

The case studies are spread across 30+ industries and 10 countries. I did that to show diversity and to show that we are just getting started. So many process areas around the world and in most industries are waiting to be modernized.

In fact, I present such a dizzying arraying of SAP product acronyms and industry TLAs that my editors and early reviewers all recommended a section at the front of the book which is titled "Do you speak SAPese?". I expect we will gradually start to see similar groundswell of activity around other vendors.

Secondly, my firm, Deal Architect, is gearing up for intense 2-3 day offsite sessions to help clients take a look at the changing market. That confab should cover the fit of many of the strategies above, while also evaluating internal and external talent and fit with emerging technology trends.

Of course, winter is not done. What we have seen is just a glimpse of what is to come. Time to celebrate with Camus: In the midst of winter, I found there was, within me, an invincible summer.

The book is expected to be out in April, in time to celebrate Spring. In the meantime, I will post periodic blogs to remind us all the enterprise is finally starting to thaw.

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.