PART 2- Why I think Snabe should say these things
About once a year, a very small group of influencers/analysts get to have a meeting with Jim Snabe, SAP co-CEO. It’s a pretty interesting group and an equally lively discussion ensues. Usually, it’s 3-4 of us and Jim. Jim gives as good as he gets and I suspect he enjoys trying to one-up the likes of folks like Dennis Howlett, Jon Reed, myself and others.
It’s in these discussions that different approaches to the market, competition and product development get discussed. Mark my words, this a conversation for the big boys and I’m glad I don’t have to sit at the children’s table.
This year, Jim drew for us variants of some of the graphics I used in the previous part of this piece. The flower/cloud exhibit and the timetable of software development graphics I used are similar to Jim’s drawings.
Jim knows that “core” is different for many customers and he’s perplexed by it. I think it’s the wrong concern. I believe the answer is to move almost everything to multi-tenant cloud software except those bits that truly must remain on-site. That’s right, everything should go to the cloud unless it’s an application or piece of an application that cannot tolerate any web latency. I used a warehouse package sorting example in the “Future Jim” remarks but there can certainly be other functions that merit this, too.
I also believe that some industry solutions, like the operation of a process manufacturing plant may be hard to put completely in a cloud environment. There’s something about the operation of a catalytic cracking facility that should have its own say as to when, if ever, its software gets upgraded - likewise for nuclear power plant operations.
And this is the heart of Jim’s biggest business decision to make: Should SAP build cloud solutions for the new customers to come or for the customers they already have? The answer I’d suggest is subtle. For a few industries, SAP will continue to enhance their on-premise products. While the rate of software upgrades will be slower in these products, cloud solutions could present some problems for these firms. However, the vast majority of SAP customers will want SAP to move to the cloud. They’ll want their accounting data, inventory data, orders, supplier networks, analytics and more in a single, in-memory database in a cloud environment. Jim needs to move SAP’s development here. He must move it in a big way, a bold way and powerful way that puts competitors on the defensive.
Jim also needs to address TCO reduction and value delivery. The current messaging from SAP is too muted. It’s there but it’s almost sub rosa. Jim needs to be LOUD about these points. And, he needs to talk up partners and how they’ll be a growing part of the equation. I think Jim should provide a step-by-step cost reduction work plan to his customers. He needs them to free up IT resources and start working on the strategic apps that will propel these customers competitively. He needs to give his customers a more precise roadmap of what’s going to remain on-premise, what’s going to the cloud and when. In doing so, customers can align their long-term strategic IT plans with SAP’s. Right now, customers are guessing where SAP is going and when they guess wrong, they will be angry (not delighted).
If I were a betting man, I’d bet that SAP on-premise customers will not see a reduction in their maintenance fees no matter how well SAP executes on its plan to reduce TCO. No, users should expect SAP to turn up the speed with which they crank out new products, new releases, etc. In SAP’s view, they’ll continue to ratchet up the delivery of value to customers and keep maintenance fees constant. Their only other option would be to reduce the volume of enhancements while reducing customer maintenance revenue inflows. That latter idea would be suicidal for them and put them in a material competitive disadvantage.
I saw a lot of scrappy entrepreneurs that have built new apps using HANA. Now this is the interesting part, the apps were built in a matter of days. And, while these entrepreneurs are grateful to have the SAP install base to sell into, their messages are kind of hard to ferret out. If this kind of activity is core to the future of SAP, it needs to be loudly, publicly discussed by SAP executives in the keynotes.
Jim’s got a tough job. He’s got a wide spectrum of product lines that run the gamut of small businesses to mondo-global behemoths. And, just about every one of these product lines has a significant number of applications serving numerous industries. The product portfolio is broad, deep, wide and extensive. Layering cloud on all of these product lines just doubles their development workload and spreads their R&D thinner.
It’s for these reasons that Jim needs to pick a winning product line or architecture for the future of the company. Whether it’s the Business ByDesign product line I mentioned in the first part of this piece or the new SAP HANA CLOUD PLATFORM SERVICES technology I’ve been briefed on in recent months, a choice must be made and the cutover of existing products to this environment must occur now.
I also think that specific partners, partners that can dramatically lower TCO and/or enhance value realization, need to be a more public part of the dialogue of the show. Partner names are infrequently discussed, in my opinion, and the most discussed ones are the big firms that sponsored some aspect of the show. I mentioned two partners, Panaya and VMware, in my piece but there are others.
Panaya, for example, has studied some 3000 SAP installations. They report that almost every one of SAP’s Enterprise Suite customers uses 50-60 SAP processes. These processes have almost 100% usage. However, some processes have only one user. It would be nice to hear Jim discuss how stats like Panaya’s will help guide their move to the multi-tenant cloud world.
In summary, I believe SAP and Jim should:
- Speak to the product needs of net new customers not just to existing customers
- Speak to two fronts: lower TCO and improved value
- Provide a solid roadmap for each customer regardless of direction that customer is currently taking (on-premise, virtual/private cloud, M-T cloud). This roadmap covers value realization within the existing deployment method and it must also include the strategy to move from this deployment to a multi-tenant cloud world.
- Create a loud dialogue of the progress in moving applications to multi-tenant platforms
- Embrace the knowledge and experience in partners in driving down the TCO of its solutions
- Generate a roadmap for customers to move to cloud solutions sooner than later
- Make the technical migration to multi-tenant cloud solutions their primary priority (over many of the requested functional enhancements)
Disclaimer – SAP provided air and lodging for the SAPPHIRE 2012 event – nothing more.