Last week I was at Workday TechSummit, Dreamforce and SAP Palo Alto Labs. When run together in that fashion, the contrast in styles and approach to the enterprise provides a good opportunity to compare and contrast the three vendors up close and personal.
Last year, Workday assembled a motley crew of analysts, critics and media types for the first time at its Pleasanton HQ. Almost from the get go, the company's agenda was knocked off kilter as we peppered the executive team with questions. At the time, the company was in stealth mode for all practical purposes. A year on and Workday is coming out of its shell. It doesn't go un-noticed that the recent Release 14 attracted a warm response, especially as it was accompanied by the announcement of winning Thomson Reuters as a new customer. This year, co-founder Aneel Bhusri was much more assured, introducing us to Flextronics, its flagship HR customer. It talked confidently about the strengths of its technology approach. That left most of us in listening mode and sharing a light mood.
In the last few weeks, I've been putting Workday's financials through its paces. There is a lot to like about the company and its solution. Its use of tagging to overcome the rigidity of accounting coding structures is blindingly simple yet incredibly powerful, especially for operational BI. I'll have more to say about the specifics over the coming months but I can say that a year on from when we last saw it, the solution has improved to the point where it a genuine enterprise contender.
From conversations I've had, is clear that Workday is delighting its early customers with its fresh approach to HR and financials as two of the three legs upon which ERP is usually understood to stand. How that scales remains to be seen, but Workday, while often dubbed PeopleSoft 2, is nothing like PeopleSoft 1. My sense is they have brought much of what made PeopleSoft great in the 1990's and left behind 90% of what didn't work out so well. They've then layered an entirely different philosophy that centers on service and transparency.
One of Workday's differentiating strengths is its ability to both listen and act upon advice it believes is sound and informed. That's surprisingly rare in the applications industry where success fuelled egos get in the way of common sense.
What makes Workday fascinating is that they are reinventing categories where you would have thought the bulk of the work has been done. That is disruptive. Both Oracle and SAP need to pay close attention. Here's a tasty morsel - they're already managing 2 million employees.
While much of the pizzazz at Dreamforce was about the so-called Social Enterprise six things stood out to me:
- The introduction of DRO, an encrypting technology designed to overcome the legal problems associated with data location in territories like Germany and for those customers that insist on holding onto certain data for their own security concerns.
- Jabs at Microsoft yet an announcement of Sharepoint integration
- The rolling out of Infor and Kenandy as cloud based manufacturing ERP and the lesser known Rootstock working with both Salesforce.com and FinancialForce.
- Wheeling out Burberry as a flagship customer while showing a napkin that revealed a surprising amount of detail about Burberry's technical landscape
- An interesting if vague discussion about SELA - Social Enteprise Licensing Agreements during Marc Benioff, CEO Salesforce.com's media Q&A.
- A discussion with JP Rangaswami, chief scientist Salesforce.com where he talked about the common needs of CIOs he meets - guess what? Nothing much has fundamentally changed. They want support for lean operations and an ability to improve growth.
When taken together, these are all about meeting the needs of the big enterprise and not about the SMB market that has fuelled the bulk of Salesforce.com's past growth. Social enterprise might have been the catchy headline, but the subliminal subtext is that Salesforce.com is now going after the big elephants in the enterprise market.
Will they be successful? That depends. I am seeing chinks in this seemingly unstoppable business. Developers I spoke with discussed a slew of problems that make integration work a royal pain. Others hint at basic problems with data governance in Chatter. All that is balanced by the speed of innovation among tier 2 SI's. Check this video featuring Appirio.
The biggest issue I see is around SELA. On reflection I do not believe Salesforce.com has much clue about enterprise pricing. It can buy in that expertise but assuming it reaches $3 billion in sales, using the current metrics as a guide, it won't have 3.75 million users under its management. It will be a much larger number. That will occur because of necessary changes in the deal values of the larger enterprises. How it gets there remains to be seen but make no mistake, Salesforce.com is vulnerable. If it stumbles in any way the company will have to quickly learn how to manage in a different environment. Right now it doesn't have that expertise and Benioff remains bullish.
I wasn't expecting much from SAP because we're so close to TechEd, an event where SAP likes to haul out its latest technical innovations. I was both pleasantly surprised yet deeply frustrated though not quite in equal measure.
SAP is steaming ahead with mobile applications, an area that impressed me when at SAPPHIRE Now. SAP claims to have a $0.5 billion (that's with a B) pipeline for mobile technologies. That's an eye popper. The iPad demonstrations I saw were more advanced than I anticipated. Some of the mobile talent management apps, while capable of much criticism were good looking, and in some places, on a par with Workday. The next release of Sales On-Demand contains significant ease of use and reporting enhancements to a solution that is already looking good. A call with an internal executive managing sales demonstrated just how well SAP has done in getting a solution together that its own people are happy to use. How often do you hear that?
Sanjay Poonen, corporate officer SAP hinted at a bunch of HANA applications, an area that has been undergoing rapid change in the last few months and which has also caused significant developer angst among some of its best customers and partners. Recent improvements show a commitment to problem solving that in the past would have been on a six month or yearly release schedule.
SAP has many of the components in place to develop and roll out an enterprise app store but, like many other vendors it is struggling to figure out a deliverable monetization model. It still hasn't worked out how best to encourage developers onto its platform without insisting upon eye watering fees. Apple provides the clue: $99, but no, that doesn't satisfy SAP.
As always seems to be the way with SAP these days, it takes two steps forward and a half or one step back.
The pace of technical progress is accelerating with the company talking about building apps in days and weeks instead of the many months or years to which we are accustomed. That represents a genuine change. It has a slew of mobile apps - who knows about that other than a handful of invited guests? Why are they not making a big deal out of the good stuff they have? As Brian Sommer said during one meeting: SAP needs to start acting like the global leader it is, talking and demonstrating thought leadership instead of behaving reactively like every other incumbent sucking on the teat of maintenance revenue.
I look at some of the issues around pricing and am puzzled at just how naive the company seems to be. Figuring out the basics of pricing at scale when the Apple AppStore has already provided plenty of clues should not be hard. Along with others brought up on perpetual license pricing, SAP is terrified of leaving money on the table. In doing so, they ignore the fact that at scale, SAP could get much more revenue than it does by concentrating on traditional licenses while also spreading its risk. I've done the math. The opportunity is much bigger than SAP recognises. The current pipeline is only impressive because of current demand. It won't last in a flaky economy. What then?
Over dinner, Phil Wainewright reminded me of a well known psychological condition. The more people point out flawed logic to someone who believes their entrenched position is correct, the more it convinces the person of the rightness of their position. The position may seem utterly insane from the outside but makes perfect sense to the subject. That's a good way to describe the way SAP views some topics.
Which is holding a winning hand?
Workday is elephant hunting and using its success in HR to drive a wedge into the finance department. Functionally, it has much to commend it and customers trust Workday to deliver, even if it is deficient on some functionality. That's a great place to be but they still have to crank the sales engine as hard as they can in advance of the planned IPO.
Salesforce.com has tremendous momentum behind it but some are asking when it will hit the Siebel wall? I see vulnerabilities but there is no arguing its growth and forward guidance. Neither is there any denying the enthusiasm and energy of its CEO.
SAP has bounced back and has a mass of solutions that have yet to hit the cash register. Some solutions are stuffing the best looking pipeline in its history - allegedly. But SAP has its own challenges, most of them self inflicted.