deal architect

SAP Nation 2.0 Excerpt: S/4HANA questions

In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.

2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 3 over nearly 30 pages grades S/4 and identifies areas for improvement.

- Albert Einstein has been credited with the enigmatic quote of “Everything Should Be Made as Simple as Possible But Not Simpler!’ In keeping with its new “Run Simple” branding, perhaps SAP was trying to keep the S/4HANA messaging simple. This chapter will explore the many questions that still need answering:

• When will SAP catch up to functionality that reflects dramatic changes in every industry?
• When will SAP environments be truly “simplified”?
• When will the SAP cloud become world-class?
• Will Fiori be able to keep up with rapid advances in UX design and expectations?
• What are the economics of moving to S/4?
• What will SAP do about all the sprawl?

SAP Nation 2.0 Excerpts: The S/4HANA launch

In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.

2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 2 looks over 20 pages on the launch in New York and subsequent updates in Orlando and elsewhere.

- As an innovation author, I find one of the most enjoyable topics to write about is the birth of new products and initiatives. Product launches have become increasingly sophisticated. You have to marvel at how Apple managed the launch of the 3G version of the iPhone in 2008. It was launched in 22 countries, followed by 50 more countries over the next few months. The logistics of producing tens of millions of units with its contract manufacturer, Foxconn in China, then shipping them around the world via FedEx and coordinating with hundreds of country- specific phone companies has raised the bar for complex yet well-coordinated product launches.

I have also written about new versions of humbler products like Lexmark printers, more complex products like Boeing planes and breakthrough data centers like those at Facebook. I like to talk to the designers marketers and project managers about how they decided on which features to include, the engineering challenges they faced, the launch logistics and the risks they balanced.

So when McDermott announced a next-generation product in February 2015, “our biggest launch in 23 years, if not in the entire history of the company,” I was excited and went back and re-read some of the case studies in my books and the questions I had asked of each.

- On that day in New York Dr. Plattner and Leukert only had 45 minutes for their presentation. However, they have elaborated their passion for in-memory computing in a 300-page book, The In-Memory Revolution: How SAP HANA Enables Business of the Future. The book (with the obligatory disclaimer that it is not “official SAP communication material”) describes the genesis of the S/4 product starting back in March 2012 and internal debates at SAP on how best to design a “nondisruptive” next gen product.

- Maybe we have all been spoiled by Apple product launches, and in particular by Steve Jobs’ signature “one more thing” portion of the speech where he usually introduced something spectacular. McDermott’s “one more thing” (at SAPPHIRE in Orlando) came across as odd. He chose to have his staff demo the Concur (a 2014 SAP acquisition) travel expense management product. Now, travel administration is a nuisance in most companies, but from the largest application vendor in the world you expect bigger initiatives.

- I asked an executive at a flagship customer in one of SAP’s major industry groups if he thought it would be ready to move to S/4 by 2020. His response: “I think 2020 is too aggressive. SAP’s 25 industry groups will massively compete with each other for R&D investment dollars...”

- If you analyze Enslin’s comments, the S/4 adoption to date is modest. Simple Finance has been talked about for over a year and you would expect more customers to be live. Logistics functionality will not be available till later this year, and it is not that interesting to many of SAP’s customers in banking, services and other industries. Many of the early adopters like Shell are trying out multiple projects—so, the “137 running projects” Enslin mentions are at a small fraction of the 900 plus customers who are supposed to have bought S/4.

- The SAPPHIRE event in Orlando, three months later, did not shorten the list of questions and it looked like SAP would have to keep clarifying the scope of S/4. When you are dealing with complex enterprise software that is not totally unexpected, but it sounded more like a “rolling launch” where the final shape of S/4 would not be known for months, or even years.

SAP Nation 2.0 Excerpt: The Sprawl

In time for Labor Day weekend reading, Amazon is launching 2.0 on Kindle today. It is starting to show up in book stores (print on demand at CreateSpace ). As with previous books, I will be excerpting 10% of the contents over the next few weeks.

2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 1 looks over 10 pages on the SAP landscape in which S/4 was introduced

- SAP’s runaway success in the ‘90s came about because its R/3 product dramatically reduced enterprise sprawl…Today, SAP’s cloud competitors are using that very argument against it. Dave Duffield, co-founder of Workday likes to describe having customers on a common code base as the “power of one”. Zach Nelson, CEO of NetSuite touts “one product for many industries”.

- SAP’s product portfolio has exploded, and in the last decade there have been nearly 50, seemingly disconnected acquisitions. That has led Mark Hurd, CEO of competitor Oracle (itself very acquisitive), to sarcastically observe,”I guess we could buy a Dairy Queen.”

- Next, there is the sprawl around SAP’s core applications at its customers. According to Panaya a tool vendor “More than 50% of SAP shops have 40+ satellite applications. Of these less than 10 are SAP applications.” CAST Research Labs has analyzed customizations at several major SAP customers and found most of the customizations were sizable, with many of them high-risk, according to its benchmarks.

- Finally, there is significant growth in the partner ecosystem. At its Global Partner Summit this year, SAP announced it now has 13,000 partners—a five-fold increase in the last decade

- The wide diversity in SAP’s portfolio and its customer base is vividly on display in its advertising budget. This runs the gamut from radio spots promoting the Concur product to small businesses, SuccessFactors billboards at competitor events, corporate branding at hockey stadiums, three-page spreads in The Wall Street journal, hot air balloons and HANA commercials which ask “Can a business have a mind, a spirit, a soul?” It would appear every taxi driver, sports fan and New Age practitioner who can influence software decisions is being targeted. This marketing carries over to social media where SAP executives and fans rave about individual products as if they represent the whole SAP economy

- On this side of the pond, in a patriotic July 4 (U.S Independence Day) guest column titled, “A nation of underdogs,” McDermott wrote:

“From equal tights activists to entrepreneurs, our nation’s history is rife with stories of people who believed the impossible was possible. Indeed, a notion that an underdog can win—whatever his definition of winning may
be—is part of our country’s DNA. It’s a truism I know firsthand.”

- McDermott could inspire the “underdogs” in SAP Nation to tackle the sprawl challenge. With his sales background, he has proven his ability to generate new revenue. The SAP economy, however, does not need more selling. The economy needs "un-selling”—delivering on previous promises, lowering prices to reflect new market realities, and more predictable results. If McDermott can pull that off it could be his lasting legacy at SAP. Dr. Plattner has certainly raised expectations with his own “end of history” statement. After introducing the next-gen product, S/4HANA in early 2015, he told a journalist, “If this doesn’t work, we’re dead. Flat-out dead.”

SAP Nation 2.0 Excerpt: Industry next-gen software experience

In time for Labor Day weekend reading, 2.0 is starting to show up in book stores (print at CreateSpace and ebook at Amazon). As with previous books, I will be excerpting 10% of the contents over the next few weeks.

2.0 looks at the prospects of S/4HANA which SAP launched in February of this year. Chapter 4 looks over 25 pages at next-gen software projects in the industry over the last two decades to provide benchmarks on how the S/4 rollout is likely to progress.

- Floyd Teter has a front row seat for the evolution of Fusion, first as a customer, and now as a consultant. He is also a respected member of the Oracle ecosystem as an ACE Director and active participant in the Oracle Applications User Group (OAUG) and the Independent Oracle Users Group (IOUG). Because of his influential role, Oracle has given Teter sneak previews of Fusion as it evolved.

- A much more sobering next-gen story comes from the JD Edwards experience as it migrated its ERP solution from the proprietary IBM AS/400 platform to the open, client/server world. Through the 1990s, Michael Schmitt held several senior positions at JD Edwards, including GM, Central Europe, and SVP of Sales and Marketing. He described to me the next-gen product experience at JD Edwards.

- Frank Scavo, President of Strativa, a California-based
management consulting firm that helps companies evaluate
software alternatives, commented in an interview:
“None of these acquired products had been written purely with the Microsoft technology stack. Axapta, for example, had been written in its own development environment (MorphX), in its own language (X++), using Oracle as its preferred database. Project Green was aimed at converting the four products to Microsoft technology and unifying to a single code base while retaining the best features of each product”

- Since they arrived in late 2010, Infor CEO Charles Phillips and his team have been reinvigorating the company which Phillips has called the ‘world’s largest start-up”. Infor has over 70,000 customers and over $2.5 billion in revenue and Phillips has invested in rationalizing and modernizing the inherited portfolio. To start with, Infor has chosen to focus on 15 vertical CloudSuite modules (such as automotive, fashion, and food and beverage) and three horizontal ones (including corporate and human capital management). I interviewed Cindy Jutras, President of the ERP analyst firm Mint Jutras.

- The common thread across all the next-gen projects described in this chapter is that in the enterprise world, new products take years to develop and then to mature. In the interim, vendors often meander or waver in their commitments. Customer bases, in turn, take decades to migrate. SAP has a massive development army at its disposal, so the S/4 product creation process may be quicker. Still, the scope is daunting. In the Plattner/Leukert book, they describe the need to tackle 400 million lines of code in the SAP Business Suite.

SAP Nation 2.0

I am pleased to announce Amazon is taking Kindle eBook preorders for the sequel (click on the badge on left). My company is also taking bulk orders (50+ copies) for the print version. Amazon will offer print on demand for smaller batches when the book is out in early September.

Here is the high level description and attached below in PDF format is the pre-edited preface of the book with details on the chapters.

“In this fast-paced sequel to SAP Nation, author Vinnie Mirchandani updates many of the dimensions of the SAP economy, as big as that of Ireland. The context: In February 2015, SAP announced its next-generation ERP product, S/4HANA. Since then, SAP and its partners have relentlessly marketed the tag word "Simple."

When you factor in SAP's growing product portfolio (much acquired, but not integrated), the customizations and satellite applications at its 300,000 customers, and its ecosystem of 13,000 partners, a different word comes to mind: “Sprawl.”

Will S/4 reduce this sprawl? Will S/4 allow SAP to better compete in the cloud? Will the S/4 rollout mirror that of other next-gen enterprise products over the last two decades? How can customers protect themselves in an economy where new products often result in premiums and overruns?

Anyone with interest in SAP - as competitor, customer, employee, investor, partner - will benefit from pondering the questions in the book. Customers will also profit from its nine strategies to optimize environments on their own while they wait for the SAP promise of Simple.”

Download Preface Aug 5

Sequel to SAP Nation

Another week or so of research left on my sequel focused on the S/4HANA impact on SAP Nation. If production goes without a hitch, the book should be out end of July in eBook and paperback format.

I have done my usual 360 degree research:

SAP materials

Various S/4 keynotes from the New York launch and from SapphireNow

Dr Plattner and Leukert book – the In-memory revolution

openSAP course on S/4HANA

other sites and materials

SAP customers

Interviewed several on their plans for S/4

Analysts and tech media

Reviewed Gartner, Forrester, CAST, other materials on state of SaaS marketplace, ABAP, private and public clouds, 

Reviewed materials from Diginomica, Constellation, ZDNet, SCN and other sites for S/4 reports

SAP partners

Interviewed people at partners with knowledge of Fiori, HEC, other elements of S/4

Reviewed TCO and Business Case models for S/4

Other product launches

Review of launches I have written in previous books/blogs – Apple, Boeing, others to compare how SAP has done with S/4

Other industry next-gen projects

Talked to analysts and other participants on industry track record over last two decades with next-gen products and customer migrations and likely S/4 path

SAP Competitors

Feedback from them on churn they are seeing in the SAP customer base

Now need to apply my usual humor and other filters to make the book readable and not too much of a tech manual. And to relentlessly edit out the word “simple” from the draft. 

Enterprise Software Churn: The NetSuite edition

This continues a series showcasing customers which are adopting two-tier, ring fence, third party maintenance strategies or outright replacing their core enterprise applications. Previous posts have highlighted UNIT4, Microsoft, Rimini Street , E2Open and Infor. 

NetSuite has shared with us many similar examples:

In two-tier settings

The agricultural cooperative, Land O'Lakes has been rolling out NetSuite across several global locations while continuing to leverage J.D. Edwards. EnterpriseOne, Endeca and other Oracle products. ASICS which produces high performance footwear, apparel and accessories is rolling out NetSuite as it expands across S.E. Asia while using SAP for corporate functions.

Replacements

Brother Max, which focuses on care and feeding products for babies and toddlers replaced SAP’s BusinessOne with NetSuite. Penguin Computing has replaced SAP R/3. RedBuilt, the commercial construction contractor, replaced SAP and PeopleSoft functionality. Point6, maker of high performance apparel and Lovesac, a furniture maker replaced Microsoft Dynamics. As MongoDB, the database vendor, accelerates its growth it has replaced Intacct. Slingshot Sports has replaced Sage Peachtree.

Today, NetSuite also announced a far reaching alliance with Ultimate Software, the leading cloud HCM vendor and that should open up significant new  opportunities for both and cause ripples in other sectors of the software industry

Individually, you could dismiss them as small cracks in the frozen tundra, but there are many such cracks if you use a wide angle lens. I will continue to profile other such “snapshots” and show why I believe they are an indication of  coming significant churn in the enterprise software market.

Enterprise Software Churn: Infor’s co-existence scenarios

When I was researching SAP Nation, I was impressed with how many customers are swapping out software, moving to third party maintenance, “ring fencing” the core solution with specialist tools, and implementing two and three tier strategies – different solutions for headquarters, large and small subsidiaries.  I presented a sample of case studies in the book.

I have been running a series of blogs following up on the book research - see earlier posts on UNIT4’s successes in the UK local government sector, Microsoft in two-tier settings, Rimini Street for third party maintenance and E2open in “ring-fence” scenarios.

Infor, as the third largest ERP software vendor, has been sharpening its message over the last few years with its micro-vertical strategy, a significant focus on UX and by leveraging Amazon’s formidable infrastructure cloud. It has also been integrating its own portfolio of software assets with its ION middleware. They obviously prefer to win customers outright, but I was impressed they shared with me a long list of customers where they co-exist with SAP and other ERP software in two-tier, surround and replacement settings.

Examples include Peters, the leading Australian ice cream maker. Upon being spun off from Nestle, they replaced SAP with Infor M3. Mahler, a Nestle sub in S. America, continues to use Infor supply chain and other functionality. The Commonwealth of Pennsylvania and Kellogg, the cereal company both use Infor’s Enwisen for their HR shared services around an SAP ERP Core. Akzo Nobel, the global paint and coatings company and ABB Power Technologies AB have a variety of Infor functionality surrounding SAP. 

 I expect them to continue this momentum.

Individually, you could dismiss them as small cracks in the frozen tundra, but there are many such cracks if you use a wide angle lens. Over the next few weeks I will profile other such “snapshots” and show why I believe they are an indication of coming significant churn in the enterprise software market.

Bruce J. Rogow on SAP Nation

Bruce J. Rogow is the closest to a Yoda in the IT Industry. With his background at Nolan, Norton, then Gartner, now as principal at IT Odyssey (where he crisscrosses the country in his car visiting CIOs and cataloging their successes and challenges) and  ICEX (which facilitates knowledge exchange programs for Enterprise Architects and Data Center Executives from large, mainly global firms), he has seen just about everything in our industry.

He kindly took the time to read SAP Nation and over a nice dinner gave me plenty of feedback. The book has been fortunate to get plenty of media and Amazon reader reviews, but this was one of the most comprehensive - he showed me his dog eared copy.

I invited him to write it up and share the review. Whether you have read the book or not, I encourage you to read his commentary as it is one on the state of CIOs – in SAP world and beyond.

“Overall, I found the book very informative related to many of the aspects of what has been one of the two or three most dominant Information Technology Master Platforms of the past twenty plus years. Vinnie has put a number of issues and questions on the table.

As I read the SAP Nation the following thoughts developed:

1.Soft Factors: I have found from my experience that most of the challenges and failures with SAP (and other ERPs) relate to soft factors of behavior, culture, cultural resistance, lack of detail thinking, politics & ownership, inability to adjust to the nuances of the business and CEOs who are quick to agree to an ERP but wouldn't understand or force the change required. Much of the blame for this should be laid at the feet of the 3rd parties, pundits and CEOs who ignored or paid lip service to these issues and blindly pushed their self-serving agendas forward. The book brought out many other technical aspects I hadn't been privy to. The comments in the book by John Dean (former CIO of Steelcase) absolutely resonate with my experience.

2.True Management Consultancies: Where are they when we needed or need them? There used to be real, objective, independent Management Consultancies that saw an ethical barrier between evaluation/risk management/making recommendations and being the “doacy”. Unlike management consultancies, “Doacies” are firms whose primary revenue driver is the large project work of design, implementation or ongoing operations. These “Doacies” masqueraded as management consultancies that would benefit far more from the gigantic implementation project than an objective analysis of client need and capability. If the companies who hired doacies to do the evaluations were naïve enough to not realize the conflict of interest, they deserved the problems they encountered. Business in general suffers from the current “consultancies”.

3.Why Hasn't the Market Worked?: I agree with your premises, but it makes one wonder…if SAP is so widespread, over resourced, under efficient and prone to failure/problems….. Why hasn't the market worked to bring forth successful alternatives? If this huge, lethargic, self-serving SAP Nation is focused on feeding at the trough, why haven’t other alternatives emerged over 20+ years? Not even the supposed  “IBM monopoly” lasted this long?

4.Another Estimation Approach to Size SAP Nation: Start with the total overall spend Globally Total IT Spend (GTITS)? This would include the failures, write-offs, etc. CIOs tell me that 25-40% of their total IT spend is associated with their ERPs (ERP%). What % of ERPs is SAP (%SAP)? So, it becomes a rather simple equation= GTITS x ERP% x %SAP. Then add #5 below.

5.Your Estimate of SAP Nation is Conservative: Folks who have implemented or tried to implement an ERP tell me that the costs of internal business resources are equal to or more than the cost of outside or IT resources and software. SAP Nation doesn’t include these costs.

6.Prisoner of Their EgoSystem: It is not just SAP that becomes a prisoner of their own EgoSystem. It has happened to almost every major vendor as I said in my contribution to SAP Nation. It is amazing that Lou Gerstner was able to pull a Lazarus with IBM.

7.Assimilation & Organizational Change: Deploying an ERP or HANA or whatever does not equate to use, assimilation, adoption, benefiting from or the obtaining the change associated with a major system.  These are the major failings to me. Failure to get material benefit is far more concerning than a cost or time overrun. The doacies, SAP, pundits and others don’t seem to be concerned with use, assimilation, adoption, benefiting from or obtaining the change associated with a major system other than the opportunity for follow-on work. Vinnie could have written an entire book on this.

8.The Guys in the Cloud are Great, but What Does that Have to Do With Legacy Firms?: I keep hearing about all of these spinoffs or green fields that are able to totally use a cloud based ERP approach. Great. However, these green fields or fresh starts have little relevance to the issues of a legacy, established firm. Given, there are examples of legacy firms being able to convert a portion of their ERP to a Workday or other cloud based approach, but has anyone done a forklift, total migration?

9. Demand Chains: As you mention in the book, the focus of IT is now expanding to include the front office and revenue generation & business development as well as the Internet of Things (IoT). Over the next decade we are likely to see platforms emerge for the generation of revenue or the demand chain much as we have seen the evolution of ERP for Supply Chain and back office administration.

10.Nokia: It is a Finnish and Norwegian company. This is the one factual error I could find in the book.

11.Moore’s Law vs. Rogow’s Rule: The world moves ahead in a balance between Moore’s Law (along with Newton and others) and my Rule which is: Despite Moore’s Law, things can’t move faster than civilization, culture and behavior can buy and assimilate stuff.

12. Asset & Financial Management: IT is and has been an Asset Management game as you allude to in the book. However, the players don’t seem to know the game, hire the right players, get the right tools or even develop the right game plan.

13. Falling for The Pundit/Consultant/Vendor Self-Serving But Irresponsible Demagogue Mantra: “You fools are spending 80%+ to keep the lights on!!! Shame on you!”  As stated in #12, IT is an Asset Management game. The basic management economics are depicted in this graphic that is a derivative of what Nolan, Norton & Company developed with clients many, many years ago.

 

You must start with the non-discretionary expense related to running and properly maintaining, supporting and enhancing existing applications. Prudent IT stewards start with what it costs to run their IT portfolio (Production Cost) of current & previous IT investments. Proper Maintenance, Enhancement & Support are a % of the production cost and are a must to preserve the value and contribution of the previous IT investments. Then, separate funding analysis is required to refresh or replace what you have and for new IT investments. Those NEW IT investments and some replacement investments result in an increase (drop down) of future Production and Maintenance/Enhancement/Support costs. Would you want to fly on an airline that did not know their M+E+S/Prod and shifted it to so they could only buy new planes…BTW, you get to fly on one of the old ones. This does not mean you don’t do all possible to have the most efficient production as well as M+E+S approaches. However, robbing Peter (P, M+E+S) to pay Paul (New Development) may make the current CIO look good, but beware what is left in their wake.

14. Getting Beyond the Procurement: Too much time and energy is spent on the procurement of an ERP by folks who in many cases do not have to live with it and are clueless. They do the wedding and the prenuptial, but others have to live with the marriage.

15. SAP Nation May Be Small Potatoes Compared to Outsourced Nation: The damage, loss of internal critical skills or lack of innovation being experienced in many firms by poor outsourcing is far more costly and impactful than SAP Nation. Perhaps Vinnie will look at that in the future. “

Unfortunate timing? Au contraire

John Appleby posted this review of my book on Amazon

“SAP Nation tells the story of SAP, with some customer stories. Whilst most of the information is in the public domain, Vinnie shares some amusing anecdotes.

Unfortunately the book tails off in the chapters around the customers that are committed to the SAP roadmap (which is a shame, because the failure stories are well told) and fails to deliver a clear call to action.

In addition, SAP announced its 4th generation S/4 HANA platform right after this book was launched and so there is no analysis of S/4 here.”

I posted this response

“John, thanks for the review

The timing is actually opportune. The three groups of case studies in book (you refer to fourth) - the unadopters, the diversifiers, the pragmatists -are actually pretty restless and if S4 is years out, many are going to emulate their peers I profile in those case studies.

BTW I gave SAP a chance to contribute 10 pages unedited on how things would be different going forward. They promised to contribute but had not till November so I had to release the book. To me they could have easily summarized S4 in that section. Clearly, they had not fleshed it by then. In Feb when they announced it it was still pretty high level. You, me Brian Sommer and several others have raised a ton of questions. Not sure what they will announce at Sapphire in May.

And when and if they do, I expect to release a follow up eBook with an update.

But for now, S4 is a statement of direction and I see many SAP customers strategizing along the lines of what this book outlines.

BTW the book in 3 months has been the most successful of the 4 I have written. Amazon sells the Kindle and the paperback version. The hardbacks which are only sold in bulk - orders of 25+ - directly by my company are about to enter their second print run. The first run was sold out within a couple of weeks, so the timing was actually pretty good.”

Thanks, John, you allowed me to pre-announce my next book