They call it Base Camp. I shun boots on this hot day and I do not have the inclination to camp. I want to go anywhere but to a Base Camp. I am tired and cranky.
As the alarm rings, my experience last year hangs heavy in my mind. I struggle to get out of bed at 4:00 AM. The day is a scorcher. As I travel to the SAP headquarters, I watch the sun come up. I am a late night person, and rarely see a sunrise. I am a bigger fan of sunsets. I question if this will be a waste of my time.
When I arrive, I am crowded into the back of a packed room of analysts with a promise to hear about innovation. I am skeptical. To my pleasant surprise, I was wrong. I think that I witnessed two suns rising last week: the one on the east coast from my car window as I traveled to Newtown Square and the promise of a new SAP. While the event failed to deliver for me on many fronts, my mind is reeling with all the possibilities of what SAP could become (especially if SAP can get out of its own way). I feel strongly about this. So, I have broken this blog into my thoughts into three areas: Raving, Ranting and Craving.
Let me start with the positive.
Content. Wow! My mind, post event, is spinning about the possibilities for SAP. I am full of thoughts of what can happen at the intersection of mobility, analytics and the redefinition of enterprise applications. I feel that SAP is teetering on a tipping point equivalent to the mainframe to client server push or the launch of ecommerce. While I gave SAP tough love last year on last year’s event of not having “enough there there”, I left this year’s event questioning if SAP truly understands the impact of what their new push means for them, the market, and the potential to help companies address enterprise application problems. Unlike SAP Netweaver or Oracle Fusion, I think that this thinking could redefine enterprise applications.
Last year, I left the event feeling empty and frustrated. This year, I leave feeling full and excited. I went to the event thinking that SAP would become the ERP dinosaur. I leave the event thinking about the world of possibilities. This is a good thing…. (I reflected hard today on the evolution of the ERP market with Lawson announcing their layoffs with the acquisition by INFOR. Who would have predicted this event five years ago? The technology market is not kind to companies that do not keep up.)
Wisdom. Hidden throughout the standard presentations were a number of gems. My favorites:
- “When it comes to mobility, we need to think about the design of mobile applications first before we think about the enterprise delivery.” I agree. Effective mobile applications cannot be built from the enterprise out. In fact, enterprise applications need to be built from the outside-in as well.
- “In-memory computing is analogous to an 8-track music tape powering iTunes.” It is an amusing, but effective analogy. While we can laugh, we should cry. The fact that our sophisticated enterprise application stacks are dependent on a mechanical disc drives is sad irony.
- “The mistake that many make in talking to us about HANA is that they believe that it is an application migration path. They are better off, if we can start anew.” For clients this is good news and bad news. I write more about this below.
- “We need to think about commodity management differently. ” I say, AMEN! Bring it on! It cannot come fast enough. Companies are struggling. Supply chains are in a constrained supply environment. Commodity prices are rising and enterprise applications have no real goo solutions to translate go-to-market strategies to buy-side commodity strategies. Organizations badly need applications that span the organization horizontally. I strongly believe that this shift will outdate conventional Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) applications.
Thanks. We, as analysts, do not often say thanks publicly. My hat is off: the team at SAP did a great job yesterday. I want to start by saying, “thanks!”
As an analyst, it is hard to get good information about SAP. I shun SAP’s Sapphire event and I have found SAP Insider to be less valuable as the years have passed. This creates a dilemma. I struggle with how to get the right level of information easily. I think SAP also struggles with how to effectively communicate to folks like me. So, I want to start by giving kudos to SAP for taking the time and making the effort to host an analyst day for industry thought leaders. It was unique event and shows a commitment to the market that is unequaled by any other technology provider that I cover. I also want to commend the speakers from SAP for side-stepping normal vendor posturing and hubris to be more open, honest and giving in their views. This takes courage. As an analyst, it is tough to sit through eight hours of marketing hype and positioning that does not help to answer client questions. I value honesty, and I have never seen SAP executives more honest, real and giving. It was a gift. Thanks.
Technology disruption is a classic case of “who moved my cheese?”Change in applications happens faster than organizations can absorb upgrades, enhancements and new releases. The political dynamics have pitted the Chief Information Officer against Line of Business leaders that are frustrated. IT costs are high, systems are inflexible, and for many, the latest releases did not deliver against expectations. For many SAP clients, this is the unfortunate reality. Clients are tired. The release of Netweaver, the acquisition of Business Objects, and the increases in maintenance costs have not gone down well, many line of business leaders in organizations that I work with are MAD. Today, they just don’t want to buy anything that SAP is selling, but this will dissipate if the technology shift warrants the investment. In the “base camp”, there was no reflection of this world reality. (This is an industry trend. The sentiment with Oracle users is worse, but reflects the same themes of expense, inflexibility and failed promises.)
Can we start over? In the area, of supply chain planning, can we just start again and build it on HANA? While it is promising to see some new supply chain applications –Demand Signal Repository and Sales and Operations Planning—released on HANA, the supply chain market hungers for a leader like SAP to change the game and drive dramatic supply chain improvements. Consider the current state….. In the supply chain world, companies wish that there was more “O” in APO. It was late entrant in an established market. When it came to functionality, it was largely an “inferior me-too” release in a market (Advanced Planning Solutions) that has moved on. Its strength is architectural.
Supply chain management is a market with no good option for a second generation solution. Currently, companies in multi-year roll-outs and infrastructure design are evolving to SAP APO. It is not because it is an ideal release, but because of issues with other alternatives. In many ways, it is winning the ugliest baby beauty contest. Even though it is hard to use, and lacks depth of functionality of best of breed, it is built to last. Today, I have five clients that are migrating from JDA/Manugistics to SAP APO. It has become the defacto standard. When SAP knows what to build, they do it well. The journey to APO has been layered by fits and starts in the evolution of the APS market. HANA is a good excuse start again. It is the opportunity to build the second generation supply chain planning application that the market needs and wants, and who is better to write it than SAP?
Doesn’t it take a village? During the session, there was an elephant in the room. The session yesterday was largely devoid of discussions on partnerships. While sales executives late in the day give SAP an “A” on partnership execution, I give them a D-. The only partnerships that have been successful in the software space are small, industry-specific technology vendors that are sold by SAP sales teams to extend deals. When asked the question, “of who are your successful software partnerships?” They listed ICON, Open Text, Smartops, Vendovo, Vistex…. I smiled. What happened to the Microsoft work on Duet, the Teradata work on enterprise data management, the SAS work on predictive analytics? I wish that SAP knew how to dance better in the ecosystem. Sadly, most SAP partnerships are sales driven. When it comes to tackling the opportunity in front of us, I think that it requires the mobilization of the ecosystem. (My score for Oracle for this would be far worse….)
The greatest issue may be SAP itself. Within SAP, there are two main drivers: license sales and delivering on the maintenance revenue promise to customers. Both of these drivers run the risk of strangling discontinuous innovation. This tipping point also includes software as a service (SaaS) as the delivery model. It is incongruous with the SAP license delivery model. And, I don’t feel that maintenance customers and the system of industry councils will drive this forward. In the words of Henry Ford, “If I had asked my customers what they wanted, they would have asked for a faster horse.” We are dealing with discontinuous technology here.
What about costs? Can we ask the line of business user to fund this development? The primary push back on SAP today is the cost of running a SAP architecture. The average client has three ERP instances, and has stomached higher maintenance costs and the purchase of Business Objects. Companies want these costs to go down not up. The discussion last week did not address this.
I live want to know more. I want to talk about how we can redefine applications based on in-memory processing. I am fascinated by what could be at the intersection of mobility, in-memory processing and the redefinition of enterprise applications. I want to move on. Not with my boots at a Boot Camp, but with my running shoes….
What I think that this means for you….
If you are the average supply chain executive that is stunned by the ERP quagmire–escalating costs, inflexibility, and failed expectations– and is struggling with what this means for multi-year roll-outs, these recommendations are written for you:
Don’t get diverted by bright and shiny objects. The market push of mobility platforms, in-memory processing and enterprise application redefinition is compelling. However, don’t get fascinated by bright and shiny objects. The upcoming Demand Signal Repository and Sales and Operations Planning releases planned for the fall on HANA are new and early. As such, it should be treated as should be evaluated as co-development. Instead of jumping with your check book quickly, work in industry councils to guide the development teams. Watch it evolve and shape the future, spend enough to drive the innovation, but it is not ready for swan dive.
The new concepts of SAP may not be a migration.We have a migration mentality. R3 to ECC6.0. APO 3.0 to 7.1. I feel that companies that will get the most value will not tackle this as a migration discussion. Instead, this is a discussion of what could be. When you have the opportunity to discuss this with SAP, unconstrain your thinking by today’s application definitions, enterprise software limitations, and yesterday’s thinking.
Learn from the past, but be open for the future. Think hard about the areas that do not work well in today’s enterprise applications, but don’t throw away the goodness of what we have learned in the evolution of packaged applications. While the code may not be a migration, the lessons learned are.
All the best to you and your team on this summer afternoon.
Let me know if you have any questions. I am busy finishing up my report on Sales and Operations Planning (S&OP) and have an extensive road trip next week planned with clients. Look for my tales from the road and may you have safe travels