Posts Tagged ‘sap’


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 Salesforce.com’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 Force.com, 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.

 

Shark Jumping at Dreamforce

Posted: December 10, 2010 in CRM
Tags: , , , , ,

Microsoft's gambit didn't pay off

 

Microsoft’s gambit backfires

It didn’t have to be this way.  Microsoft and Oracle and others used the Dreamforce week as marketing opportunities with questionable success showing that it’s better to do nothing than to try to get cute.  Each company’s attempts were either half hearted or backfired and only served as statements of “We’re number two!”

I was in San Diego and Cannes several years ago when Salesforce got cute around the edges of the competition’s user soiree and it worked and now it seems like everyone wants to be cute.  San Diego and Cannes were Siebel events.  In San Diego, Salesforce set up tables outside the convention center and gave out Krispy Kreme donuts and coffee to Siebel users.  It was a lark, a joke that was so innocuous even Tom Siebel played along and was seen on tape quaffing some coffee.  In Cannes a little French panel truck circled the Palais de Congress with the famous, or infamous depending on your world view, Salesforce no software logo.

These were simple pranks that have a long history in politics and were pioneered by the late Dick Tuck, a Democratic operative who once famously hired a group of obviously pregnant black women to picket a Nixon rally with Nixon’s own campaign signs which read, “Nixon’s the one!”  Yes.  After Nixon won the election one Donald Segretti was appointed to be the GOP’s answer to Tuck.  He was implicated in the Watergate fiasco and went to jail as I recall.

Twain said, “History doesn’t repeat itself, but it rhymes” and this week we saw it rhyme in San Francisco.  Oracle hung a sign on the side of one of the Moscone buildings that proclaimed “Oracle #1 in CRM” they did nothing else to bolster their claim and by the end of Dreamforce I am sure Hemingway would have said that it hung a “flag of permanent defeat”.

In contrast Benioff has crashed the Oracle party in the last two years to deliver a mature and positive message.  He can afford to.  As one of Oracle’s largest customers he can have it both ways but while taking advantage of the situation he remains above board (for the most part) and starts his speeches with the words, “We come in peace”.  It’s funny when David tweaks Goliath but it doesn’t work backwards.

Oracle's only effort

The contrast with Microsoft’s overreach in San Francisco could not be more glaring.  Microsoft borrowed from the book of Segretti with a campaign that attempted to pun on the word force.  People on Segway two wheelers scooted around in front of the Moscone with posters of a supposed user and a headline reading “I didn’t get forced”.

The picture was supposed to be of a real customer who decamped Salesforce for Microsoft but we never found out who he was or what company he worked for.  The campaign was supported by a full-page ad in The Wall Street Journal on Monday and for a few hours things looked a little dim for Dreamforce.  Not to worry though.  On Wednesday morning, the “user” showed up right on stage at Dreamforce fresh from SFO and parts unknown.

Here I think Larry Ellison’s tutelage and ancient Chinese warrior philosophy took over.  Benioff did what we would hope any CEO worth his perks would do.  He asked what was wrong and promised to do better then he publicly asked the entire Dreamforce audience to invite the prodigal customer to return to the fold.  Of course he agreed.

In all likelihood the customer was an actor or a model who stood for a Microsoft photo shoot.  What’s remarkable is that he wasn’t under contract with Microsoft for a longer term, which would have prevented him from being present at Dreamforce.  Instead the Benioff marketing machine simply rolled up Microsoft’s campaign and stuffed it back from where it came.

I hate to be hard on Microsoft because they are nice, hard working people and they have good products and a clear vision.  But I am simply relating the facts that were everywhere to be seen.

Even after ten years of watching Salesforce play chess while they played checkers, few people in the industry understand that Salesforce is thinking several steps ahead of them.  For instance, just as the whole cloud computing discussion looked like it was leveling off and achieving a kind of parity between the multi-tenant and single tenant camps, Salesforce came along and upped the ante again by introducing database.com, the Heroku acquisition and Chatter.

If this was poker I’d say that for ten years the rest of the industry has been calling while Salesforce just keeps raising the stakes.  If you’re going to win at this game you’ve got to leapfrog but the establishment never leapfrogs because it would upset their hegemony in the legacy base so you get the situation you have.

Much as I enjoy these confrontations I hope they stop.  The clear lesson from this week is that you can over do it.  And when the spotlight is on Salesforce, Oracle, Microsoft or whoever, that company has the public relations advantage.  They have millions of dollars staked on a successful outcome and some skunk works prank by a competitor is not likely to achieve anything positive for the simple reason that it’s ad hoc and the principal vendor has been planning the event for a year.

The real winner in the vendor effort to leverage Dreamforce this week was SAP.  They didn’t pay much attention to Dreamforce but they did try to leverage the fact that a high percentage of the analyst industry’s best and brightest were in San Francisco.  When my work in San Francisco was done I went down to Santa Clara for a day-long briefing.  SAP simply wanted to share with us what they were doing in the product area to take advantage of cloud computing, social and other technologies.  They’ve got some good things in the works and while they’re just as competitive as any other vendor, they simply decided to let their products and services speak this week rather than their marketing department.  It was such an adult thing to do.


Interesting how many vendors who compete with Salesforce are drawn to do something at Dreamforce.  Most that I have spoken with figure that the thirty thousand people who descended on San Francisco are too big a target to miss.  I can understand small companies taking advantage of the situation but the big guys are all doing something too.

Oracle has a banner on a building across the street from one of the Moscone buildings proclaiming Oracle #1 in CRM.  SAP is having a competing analyst event in Palo Alto and the limos are running back and forth.  Microsoft issued a challenge to customers to take a look at its competing products with a full page ad in The Wall Street Journal.  They’re also working the streets with some evangelists.

Speaking of the streets, there is an aspect of camp meeting and religious revival around the Moscone with all the attendees walking around with their credentials around their necks.

Marc just came on stage.  Pictures coming soon.

 

Oracle v. SAP

Posted: November 24, 2010 in Economics, Technology
Tags: , , ,

Oracle won its lawsuit against SAP in federal court.  Oracle had complained that a now defunct subsidiary of SAP had unlawfully used its intellectual property to provide third party support to Oracle customers and the jury agreed.

There are so many levels in this situation that I can’t get to all of them but one that interests me is the idea of a third party disintermediating the primary party (Oracle) to deliver a service that costs less.  This kind of thing happens all the time in the economy and the issue, as far as I can see, is that the third party made use of Oracle property without paying proper license fees.

I get all of that and I agree with the decision—you have to pay for what you use.  On the other hand, though, the existence of the third party in the first place poses an interesting question for everyone and casts a shadow on the conventional software business model.  Support fees are often calculated as a percentage of the license fee and both are rather steep with enterprise software, in part because of vendor lock-in.  So there’s a built-in incentive for customers to seek out any way they can find to lower their costs.

The idea of lowering costs is as old as capitalism because margin is, well, margin—the difference between what it costs you to deliver a product or service and what the customer pays for it.  But enterprise software customers have been complaining for years about high prices, especially the price of support and those costs suggest to me another example of the unsustainability of the conventional model.

Back when the addressable market for software was a relative handful of companies that could afford big iron, high prices made sense, if only because the cost of development, maintenance and all the rest had a smaller base to amortize the costs against.  But today computer hardware is cheap and abundant and it can even be rented from the cloud.  Software has become much more complex and labor intensive—and costly—in part because the addressable market has grown but so has competition.

If you compare the high costs of enterprise software with what’s on offer with cloud computing you see some big differences.  For years SaaS vendors have touted the advantages of a single monthly fee that includes not only hardware and software but all of the labor associated with service, maintenance and ongoing development.  It’s this model that is catching on in emerging markets in part because those markets simply cannot afford to support the old model.

So while I see the Oracle v. SAP verdict as just, I also see it as a milestone in the march to cloud computing.  The conventional enterprise software paradigm is hugely expensive and unsustainable in the long term, not only for customers but sometimes for vendors too.


I spent part of last week in the Seattle area at a small meeting Microsoft organized for analysts.  The purpose was to brief us on product positioning and plans and much of the meeting was covered by non-disclosure.  Consequently, I am at a loss for how much I can divulge in this setting, at least until things are announced.

I am fine with NDA information and the Microsoft presenters were generally good at stating what was on or off the record though there were a few times when the presenter said, “Some of this is NDA.”  “Great, I’d think, which part?”  And inevitably the presenter would default to, “We’ll get back to you.”  Not a big deal, just the reality of dealing with a big company.

Now, as a practical matter, though the particulars of the meeting were interesting, the non-NDA facts that are generally available on the Internet tell an interesting story fairly well.

At $62.484 billion in revenues, Microsoft is one of the biggest technology companies.  More than double the size of Oracle and four times SAP.  It is also about two thirds as big as IBM.  Of course, each of these companies got to its position in a different way and the comparison is less important than what these large numbers say about the market power that each, especially Microsoft, wields.

More interesting still is this consideration.  The last time the world paid massive attention to its back office computing needs was Y2K, a term made famous because companies everywhere had to update their back office systems to accommodate four digit date formats.  Rather than heavily edit aging mainframe and AS400 applications to account for the new millennium, companies en mass scrapped their big iron and took on lighter ERP applications that ran better and cheaper.

But that was ten years ago.  It was so long ago that client server was the main computing metaphor, social networking was barely on the horizon, CRM didn’t have an agreed on name and you could actually board an airplane without taking your shoes off.  A great deal has changed in the intervening decade, especially in software—enough to make it worthwhile to reexamine existing systems with an eye toward taking advantage of improvements to both economize and to take advantage of new business processes.

Forgive that small digression but it was necessary to fully illustrate this point: Microsoft is many things and one descriptor that should not go unremarked upon is that it is an ERP company.  It is an ERP company at least as much and maybe more than it is a CRM company at least by the measure that Microsoft has three ERP products.

The ERP replacement cycle, driven by a need for economy, plays to Microsoft’s advantage because it offers products that operate in the cloud as well as on premise and the company is agnostic about where the products run.  In fact, all competitors in the front and back office have come to the realization that running applications via cloud computing is a growth industry.  Oracle has a grid computing offering, SAP is debuting cloud friendly products, and a raft of smaller companies such as NetSuite are intent on becoming the next big thing just as many of today’s incumbents displaced mainframes a decade or more ago.  But Microsoft is different coming from a background of small and inexpensive systems compared with the big project and big license solutions from the traditional vendors.

Microsoft appears to be executing on a classic strategy of gaining footholds in key areas and expanding on them leveraging its low cost cloud infrastructure to tip the balance in favor of replacing ten-year-old ERP systems.

Much the same can be said of CRM.  Where first generation CRM systems are nearing end of life, Microsoft is confidently offering replacement systems that have been the beneficiaries of significant investment over the last several years.  These systems also run on cloud infrastructure, though cloud does not necessarily mean multi-tenant.

Microsoft and others—with the notable exceptions of companies like NetSuite and Salesforce.com—have decided to kick the can down the road with regard to multi-tenancy.  While multi-tenancy might have advantages, it is not advantageous enough yet to push the issue.  As a result, it may have to wait ten more years—until the next wholesale replacement cycle—until multi-tenancy becomes more of a standard.

So adding up three key factors — the market cycle, cloud computing and the market reach enabled by more than sixty billion dollars in revenues and the marketing budgets that implies—and a picture emerges of an imperative for change to lower cost systems that can easily drive the recovery in IT.

Of course business products aren’t sold in shrink-wrap at retail and success will depend on the performance of the partner ecosystem.  But the partners have been a solid part of Microsoft’s success all along.  Nonetheless, some attention to elevating their games will be essential if Microsoft expects to reach a new plateau in enterprise computing.  I think they know that.