Posts Tagged ‘sap’

Salesforce held its winter Cloudforce meeting in San Francisco last week.  For many the meeting seemed like a reiteration of Dreamforce and to be fair there was some overlap but each time they tell the story, the company adds new wrinkles that cause people like me to pay attention.

What caught the attention of many analysts was the emphasis on enterprise computing, the continuing roll out of the social enterprise strategy and two new products Salesforce and Salesforce Rypple.  One at a time.

Social Enterprise

We really should talk about the social enterprise first because it drives the broader enterprise discussion.  It appears from the rich videos presented at Cloudforce that the social enterprise envisioned by CEO Marc Benioff is alive and flourishing.  We heard from Burberry’s, NBC Universal, Kimberly-Clark, HP and Toyota about how adopting social business techniques has changed their businesses by giving them greater interface with customers and the chance at greater profits.

Though the language and the videos were mostly from Dreamforce, each customer company was represented this time by its CIO who testified that the effort and company direction were real.  The difference was that at Dreamforce we heard from CEOs about their social enterprise strategies.

What’s interesting is that Salesforce is not trotting out examples of companies that are much smaller than it is.  Just the opposite.  In every case, the customer company is equal in size to Salesforce or much bigger which only bolsters its case.  Salesforce has identified a need and is delivering a different, and by the testimony of the CEOs and CIOs a better, approach to doing business.  This approach appears to be becoming the social enterprise standard for the early part of this century.

Enterprise Computing

At a press and analyst Q&A after his keynote, several of us asked about the pronounced emphasis Benioff’s keynote had on enterprise computing.  In his on stage discussions with CIOs, Benioff had observed that these customers also use SAP or other enterprise solutions and he’d asked the CIOs about their experiences bringing SAP back office systems together with Salesforce.  Those experiences were generally positive, though at least one CIO stressed that simplification was still his goal.

Benioff observed that no company of any size at all buys from a single source.  “These companies like what we have in the social enterprise,” he observed.  At the same time they are committed to their back office investments.  “They’re telling all of us that they want us to work well together and that’s been our strategy.”

So now it appears that a new round of rapid adoption of the social enterprise has begun in some of the largest companies on the planet.  If this is a typical ramp up we should expect to see a stampede in the next year, which will only make Benioff’s self-appointed job of becoming a ten billion dollar company easier to reach.

Bring on Sustainability

Back in the Clinton administration, the president, at the urging of his vice president Al Gore, invited an assortment of politicians to the White house for a conference on the environment.  The Kyoto treaty was up in the air at that point (the U.S. never signed it).  But there was an urgency in many quarters to attempt to get something done for the environment by reducing CO2 emissions.  It shouldn’t have been controversial because the approach was along the same model as phasing out chloro- fluoro- carbons, which had caused the famous ozone hole over the Antarctic.  That effort had been led by the first president Bush.

Regardless, the meeting blew up.  Rather than accept the administration’s leadership, conservatives took to the opposition as if it was any other issue that they needed to oppose and the environment has been a contentious issue ever since.  This has plenty to do with what comes next.

I am not a global warming denier refusnick (the double negative is intentional).  I believe the preponderance of the evidence and just to keep this moving, if you are on the opposite side of the discussion, please indulge me.

It struck me during Cloudforce that regardless of the political stances, businesses are hardnosed and they do what’s best for them financially.  With fuel prices again rising, the marketplace is demanding less expensive and therefore less carbon-intensive approaches to executing their business processes and vendors are beginning to respond.  That translate to travel avoidance through the use of surrogate technologies like embedded video and bi-directional communication and that’s what the Salesforce demos offered.

At the Q&A, Benioff reiterated the importance of being able to address customers through a multi-channel approach, to meet them where they are.  There was no crusading involved, just the solid business logic of satisfying customer demand and leveraging all technological possibilities to do it affordably.  That’s when it became clear for me that this is how the free market handles challenges like the environment.  Regardless of what the pols on either side think or do, sustainability is now crossing the chasm and becoming a business imperative.  It’s subtle but it’s happening.

New Introductions

The new news form Cloudforce was not highlighted that much but it is important in its own right.  The company announced availability of Salesforce and Salesforce Rypple.  I’ve written about Salesforce Rypple, the socialized employee management tool elsewhere.

Salesforce is also interesting.  The next iteration of its Sites solution, this product is a cloud-based content management system (CMS) that is part of the platform and capable of helping organizations to quickly develop social websites.

As a user of an earlier generation of CMS I can attest to how powerful it can be to define a page and let the software figure out how to fill it with content at run time.  Moreover with the social platform as an integral component I expect that the websites that generates will enable a more engaging level of interaction with customers.  It’s also possible that with Heroku as another part of the family that what defines a website is about to be expanded significantly.

Finally, Cloudforce also filled a necessary spot in the ongoing marketing conversation.  Microsoft Convergence is happening this week and other vendors including SAP and Oracle will be having events in this quarter so it was important for Salesforce to raise its profile.  OF all the things you can say about Salesforce, you should always be mindful that this is a very good marketing organization.

News out in the virtual world is that some analysts have trimmed their sails regarding Oracle’s financial picture.  The company missed its revenue forecast last time and today the financial guys are concerned about competition in the database business and lack of strong market support for the company’s hardware.

Competition from companies like SAP with its in-memory database solution offers potential to disrupt part of Oracle’s database business.  Oracle also has a memory based strategy and there are other factors to consider.  For instance, how do SAP customers feel about buying their database services from their application provider vs. from their database company?

The same kind of question can be asked about hardware from Oracle, traditionally a software company.  Oracle’s purchase of Sun a couple of years ago changed that equation and you can argue that Oracle is more of a hardware company than SAP is a database company but I think this all misses the point.

Whether we’re talking about in-memory databases, very large computers, data storage and analytic appliances, we are seeing fundamental disruption in multiple markets.  What’s interesting about these disruptions is that the incumbent leaders in these markets are leading the creative destruction themselves.

In a more conventional market disruption we could expect a crop of small companies flying under the radar to create products and nip at the heels of the big guys for a few years until — Oh my gosh the sky is falling! — the moment when the little guys tripped up the big guys.  That’s not happening here.  The big guys, especially Oracle, are doing their own disrupting.

Perhaps it’s because hardware is no longer a place where Steve Wozniak can put a few chips together on a breadboard and invent the new, new thing.  It takes big bucks and lots of R&D to build what Marc Benioff derisively calls a new mainframe or the data storage and analytics appliances the Oracle has brought to market in the last two years.

Oracle has done its job, it has brought out some impressive next generation technologies and it has seeded its biggest customers, the early adopters, with the gear.  It has also received good reviews albeit with some first generation glitches.

Wall Street is doing its job too, though you might want to question the rationale.  The Street has a ninety-day time horizon; we know this.  But disruptions have their own internal clocks and they don’t kowtow to the analysts.  So we have a situation in which Oracle is having some lackluster results regarding market uptake of its newest and priciest products.  Not to worry, I say.

The alternative to really big iron is widely distributed iron and it will be interesting to see how this plays out.  A widely distributed scenario can use smaller and older technologies, but you lose economies of scale, even in a cloud computing situation.

So although Oracle is experiencing slower demand for its new products, I think the situation is temporary.  The new gear strikes me as the disruptive innovation that the market needs and we are going through a normal process of market uptake.  The only difference between this and a more conventional disruption is that as a big public company, Oracle is going through this in full view of all the critics.

Salesforce’s Pragmatism

Posted: December 19, 2011 in CRM
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Marc Benioff, CEO of, has often said that tactics drive strategy at his company.  That’s the opposite of what we think of regarding how decisions should be made especially in big companies.  The image is often of high-level decisions being refined into finer grained activities until you have tactics.  Much of this is encoded in the acronym GOSPA, which stands for goals, objectives, strategies, plans and actions.

So what’s going on when a high growth company like Salesforce decides to work backwards?  Some might say that whatever it is should be continued because it works and while that seems like an easy answer, it is quintessentially pragmatic and there is much to say in favor of pragmatism especially when it is diametrically opposed to dogma.  Nonetheless a little analysis wouldn’t hurt here.

This is all brought into high relief by last week’s announcement that Salesforce would buy a small human capital management (HCM) company, Rypple, and that Salesforce would next field a cluster of applications around HCM or HR which it named Successforce.

Critics immediately started by stating the obvious, that a single shot HCM application based on Facebook was not the rock on which to build a magnificent cloud based human capital application set.  They were right, too, but the situation was like a very good hockey ref trying to officiate a baseball game.  They missed the point by calling high sticking on the man in the batter’s box.

All of the major enterprise software vendors have at least one human capital or human resources offering.  SAP just bought SuccessFactors for $3.4 billion, Oracle has PeopleSoft solutions and Workday, headed by PeopleSoft’s founder, Dave Duffield, is also in the game.  The market is estimated at $6 billion annually, which represents a nice revenue stream for all vendors.

As the preeminent social software vendor, Salesforce bought Rypple, a social HCM solution and announced Successforce, at least in part as a means of showing that it intends to be a player in every niche that conventional software companies play in.  Salesforce could do no less because it has to show that all application areas both conventional and some not invented yet are addressable by a cloud and social solution.  This is a good and probably necessary strategy and though it may have been percolating along for some time, the tactical announcement may have been dictated by recent activity.  The announcement also takes some of the spotlight off of the SAP-SuccessFactors activity.

Starting with a social aspect of HCM makes a fair amount of sense because in one stroke it says Salesforce is in the market and no one need ask if Successforce will leverage social media to support business just as the other Clouds do.  Of course, the pressure is now on Salesforce to deliver broad HCM functionality, which may entail additional acquisitions or a rapid development process or both.  I have no idea what the company’s tactics will be but I am sure they will reflect some pragmatic thought on their part.

On an otherwise slow news week there was a story emanating from a Gartner analyst, Dennis Gaughan, at a recent Gartner talk in Australia that I found interesting on Business Insider.

The headline told the story, as good headlines often do.  “What Microsoft, Oracle, IBM and SAP Don’t Tell Customers” identifies, in Gaughan’s opinion, the primary strategies or approaches to the market employed by the big four software companies.  There’s room to quibble with this but there are also elements of truth.  I hope you’ll click the link and read the rather short piece, here are the major takeaways.

  • Microsoft mainly wants to protect its Windows and Office franchises
  • Oracle products don’t really work well together
  • IBM wants to take over your IT strategy
  • SAP confuses customers with pricing

Got that?  I wonder how many readers came away from the article saying, so?

Didn’t we already know this in our bones?  And, more important, aren’t these simply strategies for locking in customers and getting the maximum footprint in customer data centers?

IBM has been running IT strategies at its customers for a very long time.  That’s not new nor is Microsoft’s fetish over Windows and Office.  Dynamics CRM has an Outlook interface because the company tells me, that’s where people spend their day and they already understand the interface.  Fair enough, but do they understand the interface primarily because they’ve been trying unsuccessfully to use Outlook as a CRM system all along?  Client-server was a boon for windows and cloud computing is a major threat.  Why else is Microsoft trying to sell their idea of an operating system for the cloud?

And can anyone take Oracle’s claim of systems engineered to work together seriously?  A few years ago the company said that customers should use their products as they come to minimize breaking systems.  And when Oracle bought Sun they immediately extended the blanket to cover hardware.  In last week’s column I quoted Dave Yarnold CEO of ServiceMax who wondered in print if the universal devotion to SAP’s ERP (and I must say ERP in general) might be sapping companies’ ability to creatively engage the marketplaces they serve.

Nope, sorry, nothing really new here.  As they might say in court if you’re an IT executive, you knew or should have known all about this.  But what is new is that this kind of news or information is surfacing and it is surfacing at a time when people are thinking differently about their futures and companies are trying to keep up.

The legacy systems of the twentieth century that mediated the manufacturing economy have proven inadequate to the task of keeping up with the increasingly mobile and socialized customer.  Moreover the customer is increasingly turning to the cloud and to subscriptions for all manner of things that were once considered products but are now delivered as services.

The news in the article I quoted is not that the big four have tried for a long time to—legally—control their customers.  The news is that Gartner said it and the speaker acknowledged that the information was culled from Gartner’s experience with its own customers.  To the best of my knowledge Gaughan has not been reprimanded for speaking bluntly and Gartner has received no law suits for the honesty, but it’s early.

No matter, what this indicates to me combined with other things I’ve been reporting on are two things.  First, IT customers are getting restless and starting to speak out.  This may be the beginning of a cascade.  Second, the vocalized dissatisfaction rising in the market may indicate a turning point in the paradigm.

Paradigms are remarkably stable.  They may crumble for a long time accumulating pressure for change but never reaching a tipping point.  But then, seemingly without warning a catastrophic event causes a shift.  There is nothing foreordained to the effect that today’s big four will be tomorrow’s.  They have big installed bases and tremendous market presence and that might delude some people into thinking that they are too big to displace.

Alternatively, though, major market shifts don’t happen because the leading vendors fail.  They happen when the leaders become irrelevant to the problems they provide solutions for.  We haven’t been a primarily manufacturing economy for a long time yet our enterprise software is built to support it.  Hand in hand with the irrelevancy of the old regime, the free market boasts a huge number of vendors with robust solutions that are more relevant to the moment.

Multiple economic drivers are in place and that should make the new year very interesting indeed.

There was a guest post on the Forbes Magazine blog last month that I can’t get out of my head: “For Enterprise IT, Time to Move Beyond SAP.”

For the record, I am an ERP dilatant — I know about it but don’t follow it with the same passion that I follow CRM. And as far as SAP (NYSE: SAP) is concerned, I have rarely met a bunch of smarter business people who are also rather nice. I have no issues with either, but as an observer of macro trends, this was a surprising article for several reasons.

First, someone else wrote it. The headline sums up my observations about ERP, but until I read the post by Dave Yarnold, CEO of ServiceMax, I thought I was unique in that line of thought. Glad I am not.

Second, and more interesting, is Yarnold’s assertion that legacy ERP has been an impediment to business, at least in recent years. That really got me, because I thought that was my mantra.

Third, it points to the cloud and modern technologies as the emerging solution.

It all goes quickly to the business model of the 21st century: services on demand. Vendors — at least the smart ones — are looking for ways to convert their product-centric businesses to services for some very good reasons. When you sell a service, like software for example, we all know the customer is liberated from the need to purchase hardware, operating systems, middleware, database and applications. Customers are also liberated from the need to hire high-priced talent to administer and maintain all that technology.

I hate to sound happy about reducing demand for all those talented people in the middle of a recession (I know it ended a while ago, I’m just waiting to feel it). But that’s what businesses and economies do. If something can be shown to be extraneous to the business’ core mission, you must reduce or eliminate it or you will become uncompetitive as a result.

It’s not just software that comes as a service either. Some of my favorite examples are the companies that were profiled in The New Yorker about a year ago that provide wardrobe as a service. If you like Gucci bags or designer clothes but can’t afford to own, these companies will provide articles of clothing as a subscription.

But let’s get back to the impediment for a moment. According to Yarnold, who was speaking about a colleague, “He’s an IT veteran who has been running SAP software since the ’90s, who came to the realization that the efficiencies it afforded them have completely eliminated the creativity, growth and innovative thinking the company once prided itself on.”

That’s bad enough, but Yarnold goes on, “Companies had to conform their business processes to the way SAP’s rigid software ran. Much of the uniqueness that enabled companies to differentiate themselves was squeezed out in the name of SAP. I can’t even guess at the number of meetings I’ve had with senior company leaders over the years where creative new business ideas were shelved because ‘it didn’t fit into SAP.’ Is it possible that this long-term adherence to the SAP way has in some way been at the root of the lack of creativity, competitiveness or the loss of manufacturing jobs we now bemoan in our economy?”

I wouldn’t go that far — you can’t lay everything at the feet of SAP, and this analysis does not take into account life before SAP. Companies bought it because it solved a business problem (let’s call it “legacy ERP” because there are other vendors in the space, like Oracle).

Legacy ERP, like all products you can mention, was designed and built for a particular place in time, specific business needs and processes tied to manufacturing. If legacy ERP no longer meets the need, it’s because business changed. We’re a services economy today, and about 70 percent of GDP is tied to services, not manufacturing. Companies like Zuora go even further and have called the present model “the subscription economy.”

Subscriptions enable businesses to change more rapidly, and the above-mentioned “creative new business ideas were shelved because ‘it didn’t fit into SAP'” are a reality.

The subscription economy is real. In this world companies like Workday and Zuora have taken prominent positions, and the marketplace is taking note. This morning, Zuora announced its Series D financing as well as increasing its footprint in Europe. The company raised US$36 million in new funding, including money from Dave Duffield, founder and coCEO of Workday, and Marc Benioff, chairman and CEO of (NYSE: CRM). Also, in the first three quarters of this year in which Zuora had a presence in Europe, the company announced that it has $2.5 billion in contracted revenue from its early customers.

Legacy ERP might still control the market, and it may take a long time for the upstarts to gain significant share. A comparison with Salesforce is instructive. Salesforce was a key reason Siebel topped out as a $2 billion company, though it was many years before Salesforce gained the same revenue level. In the same way, the presence of Zuora, Workday and companies like them indicates the high water mark for legacy ERP.

Legacy ERP is ill-suited to the demands of the subscription economy, and it is comparatively expensive. As the ERP replacement cycle gains steam, no vendor, incumbent or otherwise, should take its position in an account for granted.

Mark Twain once quipped, “Everyone complains about the weather, but no one does anything about it.” We could say much the same about legacy ERP, but now it appears that there are credible alternatives coming on line.

ERP’s Disruptive Moment

Posted: October 26, 2011 in CRM
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At Dreamforce Zuora, like many other emerging companies allied with, decided to hold a user group meeting.  As long as the customers jointly held by Salesforce and Zuora were in town the logic went, why not have them in for a day of education, listening and a pep talk form the boss.

It was a fine idea.  Customers came to San Francisco a day early to hear Zuora CEO Tien Tzuo tell his audience that conventional ERP would be dead in a matter of a few years.  He used the word dead too.  Such an outrageous statement could have easily been taken as so much hyperbole from a leader who had raised tens of millions in venture funding and showed the world a new way to bill and collect for subscription services, which are increasingly coming to dominate the economy.

Tzuo’s statement began to look significantly less flamboyant and even on track on Tuesday as he and Workday c0-CEO Dave Duffield announced an alliance between their companies to drive some nails into ERP’s coffin.  Workday financials and Zuora billing and payments is a solution that will help enterprises take the steps they need in order to compete in what Tzuo calls the “subscription economy.”

Xxx The step requires a big change in business model for many companies as they pivot and begin to sell their output as services rather than products.  Unlike products services can be changed fluctuating according to need.  But until now, there was a limited number of ways that companies could bill and receive payment for their wares and the software — from companies like Oracle and SAP — that supports one time product transactions is not easily turned to billing for subscriptions.

The drive for demand for subscriptions can be traced to two key events — the social revolution boiling around us and the economic funk we’re in.  Social media like Twitter and Facebook has given people a new understanding of the “power of now.”  We expect instant answers from the connected universe, rapid solutions to problems and just in time information and increasingly we’re expecting that kind of response from our vendors.  If we buy something online we expect to adjust the purchase and amend the conditions of use as often as we need to.  We’re also broke.  As individuals and companies we might be able to afford the monthly payment but not the bolus of cash required to buy things.  Together, these two phenomena are driving the need for subscriptions.

What’s a company to do?

The only thing a smart vendor should do is to say, “Sure let’s do business with you the way you want to interact with us.”  Simple right?  That’s where the billing system comes in.  Companies wanting to get into the subscription economy have to deal with balky back office billing, payments and financial systems that don’t make this style of commerce easy.

Realistically, if you can’t bill and collect for your output you can’t realistically engage with your customer as your customer wants.  Many companies are trying to make their obsolescing billing systems play in this new world but it’s like death by a thousand paper cuts.

The subscription business model runs on thin margins and relies on automation for everything from selling to service to billing and payments.  If you need to insert human labor into any of this such as to make all the changes and upgrades that people expect today work in your billing system, then you end up running an unprofitable subscription business, and who wants that?

So that’s the disruptive moment.  Old billing systems and an increasingly restive customer base beginning to move to new and nimble competition all signal a need for a new business model.  The model exists but the software that enterprises now have doesn’t support the new model.

ERP is ripe for disruption and ironically I’ve heard some of them talk this year about the need to deliver their systems in a SaaS model, but that misses the point.  In addition to using SaaS principles for their technology, ERP vendors need to build product to support SaaS and subscription services.  They aren’t doing a very good job of it and that is why the Workday and Zuora announcement is so important.

Uber analyst Dennis Howlett over at ZDNet wrote a piece ruminating on the Gartner Symposium and colleague Larry Dignan’s summary of the meeting, “Enterprise IT: Here comes that deer in the headlights look again” that is well worth reading.  Together the articles wonder aloud how much time there is between now and the paradigm shift that will make so much of enterprise computing obsolete and even risky for enterprises to invest in.  Mixing metaphors, another way to put it — how long before the cloud vendors inherit the earth?

Speaking of Dignan’s effort, Howlett writes:

He opens the analysis with:

While Gartner is urging creative destruction, I can’t help but be skeptical. If everyone could re-imagine IT and blow up old systems to delight customers, there would be no losers in the corporate world. As we know, there are plenty of losers and there will be thousands of companies that flop at people-centric system design.

I can imagine similar thoughts coming from many colleagues. How many times have I crapped on the idea of Enterprise 2.0 aka social enterprise?

But in the real world, IBM can’t find enough bodies. Accenture can’t keep up, Deloitte and Capgemini are both very busy. And that’s just in their SAP practices. SAP is about to confound the market with a great Q3. I’m betting Q4 will be a blowout. Oracle got Fusion out the door this month. Who says the incumbents are in trouble?”

Add to this the Workday-Zuora announcement this week from Workday Rising, a user conference, that the two companies would deliver an integrated and cloud based billing, payments and financials solution that will run circles around Oracle and SAP financials in the subscription business and you don’t need Tom Hanks to tell you, “We have a problem.”  Tien Tzuo, CEO of Zuora, did the honors when he said that conventional ERP was dead.

So why the upbeat financial results from the likes of SAP?  To answer this we need to take a small detour to the clouds.  Let’s look at airplanes, specifically the Lockheed Constellation.

The Constellation was/is a gorgeous aircraft with beautifully sculpted lines.  It’s design dates to the post-war period and its heyday was the 1950s.  The Constellation was something of an apex of aeronautical engineering offering speed, range, and the ability to carry lots of passengers.  It also had the most advanced engines in the business at the time — piston engines and those power plants made it the end of the line.  It was the last iteration of piston-propelled aircraft soon to be over taken by jets — the new paradigm.

It is no surprise that SAP posted good numbers in Q3 and, as Howlett says, it will probably do so again.  But SAP and Oracle are building Constellations and the strain in the implementation system he alludes to in referencing IBM, Accenture, Deloitte and the rest, exposes one of the Achilles heels of on premise computing.  It is as damaging as the workload and expense of keeping a piston aircraft flying.  Add to all this the other major deficit exposed by Workday and Zuora and you realize that the dominant positions SAP and Oracle have held are disintegrating.

The on-premise paradigm is effectively over.  It will stick around for a long time but we will only see it shrink.  The businesses with the smart money are getting out of on premise and trying to figure out the models they need to survive as cloud companies.

The paradigm has been under attack for the last ten years but the incumbents have always been able to fend off the competition, mostly because the attacks were one-dimensional.  Incumbents could deal with arguments that cloud solutions were less costly, easier to maintain or better to customize or integrate, but when all that comes together with the complaint that the on-premise solutions were made for a manufacturing rather than a services and subscription market, all bets are off.

Tien Tzuo was right, the on-premise paradigm is effectively dead.  Yes, it will take time to convert and yes, the technology conversion comes with a business model conversion or at the very least a big modification.  It’s also mandatory.  We’re moving into the jet age.

SAP is holding Sapphire, its annual user meeting in Orlando this week.  Sapphire is one of the premiere events on the IT tradeshow calendar along with Microsoft Convergence, Oracle Open World, Sage Insights and’s Dreamforce.  These events each draw tens of thousands of people from around the world and each has a distinctly different vibe.

Sapphire is solidly ERP and enterprise computing (yes, I know they have CRM), Open World is about enterprise computing too but with more emphasis on a rounded picture that includes the front office, SaaS and, even before the addition of Sun, there was a strong hardware element as well.  Microsoft focuses on front and back office but tries to appeal to a broader market of perhaps the Global 2000 with an array of front and back office solutions.  Dreamforce is, among all of them, the most forward looking.

Salesforce has taken a decidedly different path to the enterprise.  First, ERP is not on its radar.  Though the company has a small subsidiary that specializes in financials, it was an acquisition that demonstrated the power if, the company’s development platform.  Salesforce’s approach is to not look back at traditional financials but to imagine what the fully articulated front office will be and then to deliver it.  In the process, they have made huge strides in platforms, database, development technologies, social media for business and more.  The approach keeps them ahead of an increasingly crowded field of conventional front and back office computing.

Over the last few months I have watched as the ERP/CRM companies have all solidified positions relative to new technology.  Each offers a cloud computing strategy that supports multiple flavors of hosting including multi-tenant SaaS but also, and somewhat distressingly for me, solutions that amount to hosting a data center off premises in ways that don’t look much different from historic approaches.  In their uniformity they have basically kicked the can down the road for another decade — roughly the life span of conventional offerings.

No one wants to tell their enterprise customers that the days of on premise computing are limited and that running a single tenant instance in a datacenter in another zip code is at best a temporary solution.  In 1999 we saw a controlled panic as companies worked to beat a deadline to update their systems to the four-digit date format of the new century.  In ten years we’ll likely see a similar event as some of the same companies realize they have simply exported their conventional data center problems — lacking some standards, upgrades that were delayed and fighting the cost of buying hardware — but that they have not solved them.

So the ERP companies now all look poised to go through the next ten years with architectures that are a jumble of old and new.  Moreover, they have all embraced similar strategies that support the idea of placing small systems, presumably in a cloud configuration, at their satellite locations while retaining a more conventional ERP system in the center to consolidate regional data.  This is a brilliant, though severely flawed, strategy in my humble opinion.

There isn’t a major enterprise vendor who doesn’t think that they’ll be able to sell their version of cloud computing and a satellite configuration to their existing customers but I think there’s some danger in that.  It looks like a classic retreat up market for the majors.

At the grassroots level there are companies like NetSuite, Microsoft and perhaps WorkDay that will not only take on the satellite work but their presence there will ideally situate them to grow up market and displace the legacy vendors.  It makes good sense.  As NetSuite CEO Zach Nelson observed at SuiteWorld last week, there has never been a software company that successfully invaded the lower reaches of the market from the enterprise but the world is full of examples of companies that grew up from the grass roots to take over important market segments.  If you recall, this is precisely what Salesforce did with Siebel.

NetSuite is already ideally suited for this work with front and back office systems covered as well as ecommerce.  Furthermore, the company introduced its ability to operate multiple divisions in different currencies with reconciliation across borders several years ago.  NetSuite increasingly looks like a grassroots company with greater ambitions and if the keep innovating around the full suite of ERP, I think the world will look very different in ten years.

The challenge for the legacy vendors is to get out of their comfort zones.  To take on cloud computing not as they wish it would be, complete with the fat margins they and their shareholders have grown to know and love.  Rather they need to better emulate the lean and highly competitive companies they need to sell to and who are nipping at their heels.

I am writing this before the first keynote of Sapphire, it will be interesting to compare this analysis with the proceedings next week.

Late addition:  Check out this short article in the Harvard Business Review for a similar take on the subject.

With the introduction of Sales OnDemand at CeBIT today, SAP has made plain its strategy for moving its customers to the cloud or whatever you want to call it.  SAP is fundamentally offering a hybrid strategy that enables its customers to dip a toe in the water and migrate over time.  Most major vendors with a legacy customer base are doing likewise.

So Sales OnDemand is made to work with both the SAP Business ByDesign base platform and to look and act somewhat like Facebook and Twitter.  There are some nice touches in Sales OnDemand and some interesting marketing.

Nice touches

The product looks and acts like its social progenitors and it uses the concept of a feed — as in each member of the group by default generates a feed that others in the group can subscribe to.  I think the same is true for important inanimate objects like the sales forecast but I don’t recall if that was part of the briefing.

The briefing did spend a decent amount of time focusing on the idea that selling is less about the exploits of a lone wolf today and more about the success of a group but not necessarily a group of co-equal people doing the same thing in different territories.  The new model is more like the hybrid selling model I have reported espoused by Anneke Seley and others where inside and field sales people, product specialists and possibly with a few marketers, work together to bring in deals.

That SAP sees this as a new and important style of selling as well as computing is important.  We in the industry generally see the introduction of new products like this as the continuation of a paradigm but I think that would be a misreading of the reality.

There is no doubt that the marketplace has changed in the last few years — buffeted by a global recession and a slow recovery.  But other important factors are playing on the market as well such as the continuing rise in transportation costs and slack demand.

There is no shortage of supply, which ought to warm the hearts of the most ardent supply-siders but demand is down in key areas due to demographic shifts — e.g. we are older and less prone to buy things.  But also, demand is shifting to a more globalized emerging world where a young and aspiring middle class is arising.

In this scenario, the confluence of social networking, analytics and traditional CRM is necessary.  Selling in this scenario is much harder than the original selling that captured the customer base in the first place.  SAP is not the only vendor to see this but they should still be saluted for moving in that direction.

So SAP sometimes refers to the style of selling that it is gravitating towards with a reference to “it takes a village” and I suppose that’s a good analogy.  A village raises a child in the big picture though each member of the village may never have more than a momentary influence.  I get it and it makes sense, the village is the medium that enables everyone to contribute.  Selling needs a similar medium.

Long ago there was an organizational philosophy that everyone in the organization sells.  Of course, it wasn’t literally true but today it can be.  With a social SFA product like Sales OnDemand the people who need to know about and who can influence a deal can have access to the information that enables them to contribute.  As I said above, I get it.

Now for the interesting marketing

Why does SAP feel a need to compare its SFA product to Facebook and Twitter.  I understand the connection and having used the product briefly, I can say that the comparison is apt.  My quibble is that the comparison has already been made by others and it does nothing for SAP or any vendor to arrive later with the same message.

The important point about a product like Sales OnDemand or Salesforce and Chatter is that they harness Wisdom of Crowds techniques to, and please pay attention to this, generate or capture intellectual property for a company.  You might find it a stretch to call this IP, but what is it if it is not part of the knowhow, wherewithal, designs and patents that any company generates for the purpose of making money?

The information that pops out of a social tool that is tethered to a corporation for business purposes is unique and part of what that company can use to generate revenue.  If you think it’s not IP or valuable, ask yourself how many of your competitors would like to know what you know about your customers’ needs and preferences.  I thought so.

So any vendor that casually sticks a Facebook or Twitter tag on its products with less thought than a NASCAR team painting its car should take note.  Your product might have feeds and it might have a user interface that mimics a social networking tool but it is way more important than that.

It’s my understanding that SAP will spend the next few months in a rolling thunder campaign for Sales OnDemand and make a big splash at Sapphire.  I hope by then they find a way to communicate that Sales OnDemand is a new tool for a changed world.  Other vendors are moving this way and SAP’s offering appears to be a credible addition to the flock.


IT’s crumbling paradigm

Posted: January 20, 2011 in Economics, Technology
Tags: ,

Computerworld UK posts an interesting story by Antony Savvas today about some recently disclosed research from SAP’s EMEA group.  According to nearly five hundred respondents, IT departments are not spending enough on innovation.  Business innovation, that is, of the kind that makes your company more competitive.

According to data quoted in the article “a third of the companies said their current IT strategy is too focused on ‘keeping the lights on.’”  Well this is interesting but hardly surprising, in fact the number seems rather low — only about half what I’ve seen in other reports about U.S. companies.

The usual suspects get dragged in for blame including the economy — forty eight percent said the uncertain economic climate was holding them back.  This is a good report and a decent article and I don’t mean to be critical of them but I do take exception with the corporate IT departments that have let this situation fester for many years.

It should be no surprise that the lion’s share of any IT budget these days goes to the quotidian demands of operations.  IT had its flowering many decades ago when there was nothing and every department had to be automated, desktops needed to be populated and websites needed to be built.  Now that those systems are here, they have to be maintained and the only innovation is happening around the edges in areas like security, and rightly so.

But if innovation is on the agenda, and it certainly ought to be, then we can’t look at the budget and say there’s no room and we can’t legitimately say that IT should be getting a bigger slice of the corporate pie.  That’s every department leader’s solution, give me more!  But there are limits.

If IT innovation is down — and it needs to be resurgent to enable organizations to fulfill their missions of providing an acceptable return for all those widows and orphans out there — then innovation has to begin with how IT spends its money.  (Long sentence, I know.)

Actually, the beginning has been with us for about a decade in the form of cloud computing and all the monikers that precede it.  It involves nothing more complex than taking the sunk cost out of the data center and making it an expense.  The funny thing about an expense is that you can chop it off if it doesn’t deliver value but that’s a rarely understood concept in an environment where you buy everything and try to make it work.

Old guard purists will tell you that cloud computing still isn’t ready for prime time, that it isn’t secure, that it doesn’t allow us to do the really hard things or whatever.  Maybe.  All I know is that my credit card information has been stolen from more than one corporate data center but never from a cloud based system.

I also know that when technology paradigms shift they first get wobbly.  When a new technology shows up and runs circles around the old paradigm the early adopters get the message.  But old paradigms topple and mainstream adopters move only when a paradigm’s economic underpinnings crumble.  If you can’t afford to innovate in IT, the paradigm must be crumbling.