SAP: avoid wearing The Wrong Trousers

SAP: avoid wearing The Wrong Trousers

Summary: How may people really understand what SAP is doing with HANA? Probably a lot more than we might give credit. But technology is not the story here. It's about the business.

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TOPICS: SAP
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When I think about SAP's long term business strategy, I am inevitably drawn to Nick Parks hilarious The Wrong Trousers movie. I see an allegorical similarity between the movie story line and SAP's unfolding strategy through 2020. Or rather the way it is popularly unraveled in the media. My interpretation of the story goes something like this:

Well intentioned invention stands the risk of getting hijacked for purposes it was not intended but the ever resourceful partner saves the day.

When I look through the glowing coverage of SAP's Q4 2010 results (heck, I was on that bandwagon to some extent), the praise heaped upon the company for revitalising itself combined with excited reportage about product strategy going forward, I can't help but wonder if everyone is missing the point.

Enterprise software is changing and in a few years time I believe it will be unrecognisable from what we see today. Right now, the emphasis in the public discourse is about features/functions/architectures located in business models that barely exist. We have a succession of buzzwords and phrases attempting to force fit 'stuff' into concepts like social business, cloud, big data and on and on. It is the same set of arguments that have always existed but in a world that is moving away from features/functions. Or we have product based competitive analysis. Always entertaining to insiders. Very occasionally, we stray into the fertile territory of vertical markets but only when subject matter experts chime in.

Elsewhere, I notice that Vinnie Mirchandani is almost alone in wondering whether the golden age of enterprise apps is done and that customers with IT resources are less interested in turning to the mega vendors but are instead more likely to spend on things that make a genuine business difference. His forthcoming book provides many examples of the direction he believes real software investment is going. His post entitled "The new benchmarks" makes the withering comment:

I thought this WSJ article about SAP focusing on Oracle was well – so 90s. If that is all SAP is focused on, it’s already in big trouble. Because the CIOs I deal with are working with a much broader portfolio of vendors than ever before, and every $1 for SAP has to be benchmarked against cloud storage, iPads, digital marketing and so much more.

I didn't read that WSJ piece in quite the same way but what Vinnie is seeing is typical of what I characterise as media trying to make SAP wear The Wrong Trousers. They are not understanding what SAP is doing. Not that SAP helps itself. Talk about being the No.2 database vendor by 2015 makes for attention grabbing headlines, based as it is, on the notion of kicking Oracle in the marketing nuts. But it is the wrong conclusion. It's not asking the right question. Here is why.

I had a fascinating conversation last week with a senior executive at Workday during which he said something that goes like this: Oracle Fusion is the last enterprise apps suite that will be built on a traditional, commercial relational database. Going forward, no-one who is building 21st century applications is thinking that way. If you believe, as I do, that the applications of the future are essentially services then the database becomes irrelevant from the buyer's perspective. It disappears, just like the operating system becomes irrelevant. Unless you're developing for umpteen flavors of Android. When applications are services, nobody cares about the plumbing. They only care about the business led deliverables. If that was all then you'd have to shrug, mutter something about commoditisation and say: 'So what?' But that isn't all. Not by a very long stretch.

The starting point is to understand that outside of upgrading or switching from clunk to cloud, no-one is ever going to buy another general purpose accounting, HR admin, CRM or other XXX system of the kind we mostly see today. Period. They may think that's what they're buying from a feature/function standpoint but that is not what they will buy. Those applications have been engineered for almost every occasion. When you look across all vendors, at that level, there is very little functional difference between any of them. Everyone knows this because they see a bleak new license future ahead of them, even if there is a long tail of maintenance revenue.

Everyone surmises that transitioning to the cloud, building mobile versions, adding social features or having high speed analytics represent the long term answer but they are all wrong. Those are just stepping stones. All they represent are incremental advances to the status quo. They don't of themselves deliver new value. In order to get to higher order value, you have to think much more broadly as Vinnie suggests, and as Phil Wainewright shows:

...startup CEO Geoff Newman described how the cloud has helped his company grow from an investment of less than £10k to become a multi-million-pound business in just two years. Recruitment Genius is what I would call a classic frictionless enterprise story, finding its niche by using the cloud to take friction out of the recruitment process — its service posts a company’s job ads to a tailored selection of online job boards, filters the responses and provides an online applicant tracking system where recruiters can sort the CVs and arrange interviews.

Behind the scenes, its use of the cloud to drive its infrastructure is equally game-changing. All staff work virtually, using Gmail, Basecamp, Dropbox and Voipfone to collaborate. The company stores its applicant CVs on AWS, saves its Java code libraries on Google Code and runs its SQL database on Azure, with all files backed up to JungleDisk. It hosts its other servers on UK cloud hoster ElasticHosts, its videos on Vimeo and achieves a distinctive web presence with online fonts from Monotype Imaging’s fonts.com. Even the programmers that develop the company’s online functionality are hired on-demand using the cloud and are paid by the hour. “We’re able to scale our workforce and our cloud computing as necessary,” said Newman.

With its lean infrastructure and operating costs, and its direct connection into online job boards and social media, Recruitment Genius is hollowing out the business model of traditional recruitment agencies — as the company says on its website, “In 2009 we realised we had smashed our own recruitment agency model, but in its place was something far more exciting and effective.”

Note: no mention of systems of record, social tools or analytics but only of systems that deliver to the business model.

Back to the SAP world. In conversation with an SAP HANA customer he made the telling point that going from having the ability to build a handful of reports to hundreds of reports doesn't help his business. More important, it hinders his ability to build a business case for further HANA investment. The glut of new information deliverable at light speed only helps if the business can ask the right questions and then implement the right processes to course correct at the speed of business. We are nowhere close to solving those problems. Instead, as an industry, we run the risk of simply speeding up and adding to the pile of crap we already have today.

Taking the social business direction doesn't help that much either. So we have new customers, we have new ways to market, we have more pull into the pipeline, we chop out sales overhead, we market a bit more effectively, we smash the operational silos. Now what? Where are the end to end processes that ERP promised us (and never quite delivered) and how do our people fit into this equation? More to the point, how do they cope in this high speed world? What happens when we have to start handling a multitude of exceptions? In short, where are the apps that tie all this together? It may appear that we come from a functional gap standpoint but we don't. That's just another temporary plug in a broken, leaking dyke.

One nascent and partial answer I recently saw comes in an important addition to SAP Streamwork, its collaborative platform. Streamwork can now take HANA data/analysis and include it into Streamwork activity streams. It is early days but this is highly promising because it allows for the purposeful emergence of the right information for the right people. It goes a long way towards solving the HANA customer's problem outlined above but doesn't complete the picture. It is a different class of application from ERP and is, I suspect, an example of what Vishal Sikka, executive board member SAP meant when he said that HANA opens the door to asking new questions.

If you follow the logic, it makes perfect sense to see this in the context of Sikka's thoughts during December 2010's Influencer Summit. But in order to get there, we have to stop thinking about functions, platforms, buzzwords around which we can hang technologies like mobile etc. Instead we have to think about the business. Or, as Hasso Plattner, co-founder SAP is quoted as saying back in 2007:

"Don't you get it? It's not about a product now"

There was a hint of that in remarks Bill McDermott made regarding the last earnings announcement when he implied that SAP has started talking to the lines of business and that has, in turn, driven sales. You only do that when you solve LOB problems, not by trying to flog features. The importance of this statement cannot be under estimated.

In the past, SAP started its sales cycle in the C-suite but inevitably ended up holding most of its conversations with CIOs. In the last year, insiders at SAP tell me that 11 of its top customer CIOs have disappeared. Forever. Two have gone on to operational roles aligned to CFOs with no direct replacement. Others are simply not being replaced. Now switch gears.

Internally at SAP, Oliver Bussman, CIO, has deployed 14,000 iPads. iPhone is now on the approved list of devices that can be used on the corporate network. He is talking about building an enterprise resilient version of DropBox/iCloud. At a recent meeting I attended, all but one of the SAPpers was toting a Mac Air - the other was waiting for hers to be delivered. I've never seen that before and my last onsite with SAP was less than three months ago. What does that tell you? Slow as the SAP oil tanker might be, Bussman has done a remarkable job in getting people inside SAP to understand the world has moved on from engineering excellence as the differentiator. It is a much messier world and they have to adjust.

Michael Doane, in a revealing podcast Q&A said:

jonerp: Michael - you talk about the importance of SAP customers moving from a Center ofExpertise (technical SolMan ALM orientation) to Center of Excellence (business-driven) approach to fostering SAP competencies. Why is this distinction important and what results are you seeing in the field on the Center of Excellence front?

Michael Doane: Center of Expertise is about applications excellence but is not business centric. A Center of Excellence is about continuous business improvement and includes a business domain that the Center of Expertise does not have.

Laura Casasanto: Michael, How do project teams better communicate the value of their current SAP systems -- and in measures that business stakeholders care about?

Michael Doane: Ideally, the client will have undergone a useful Value Engineering exercise as a way of establishing a business justification at the KPI level. Thus, at the end of implementation, they can measure their tangible gains in an ROI format.

Moving forward, they continue with value engineering on a business process by business process basis using KPIs as navigation and measurement for improvement.

Bullet-point "values" such as "things are better", "we are more streamlined" or "we are faster" are not useful at all.

Nor are IT KPIs like response time or pass through time.

Doane is getting there but responding in SAPenese. I'm betting his answers will be far more nuanced in 12 months time.

Elsewhere, Sikka has talked about applications becoming much simpler:

“There is a massive simplification happening all around us. Layers are being dissolved at an unbelievable pace; people, businesses, data and machines are becoming more directly connected. This virtuous cycle of connectedness leads to disintermediation of layers, which drives end-users to become more empowered and demand better user-experience — challenging us to create more connectedness,”

When you think about the millions of lines of code, the endlessly flexible toolkit that SAP represents and the amount of customisation that inevitably hobbles innovation then Sikka's message makes a lot of product sense. If it can be delivered upon. That has to be assumed given the speed at which HANA-isation is occurring with SAP ERP. That's not enough.

As SAP takes HANA forward, as it thinks about re-engineering its application suites, it has to think about how its 2 million plus engineering community actively participates in developing the thousands of new applications SAP will need in order to meet business need. This is not about shifting customisations out (although that would be a welcome by-product), it's about making the power of HANA to redefine applications universally available to all SAP customers. And there's the rub.

While Sikka is keen on uplifting the developer community, SAP has yet to take that essential step of bringing the developer community in close proximity with the business in a purposeful way. I see pockets of folk here and there that understand the dynamics involved in making communications work between end users, customer problems and technologists. It's not quite enough. I believe SAP needs a new type of SI. Not one that is implementing some humungous FICO/SD project. Those are done or being remediated through upgrade the next couple of years via the handful of SIs left who can execute against these projects.

The new SI has to be capable of fast tracking business solutions that may start out as a specific customer need but end up as another app in SAP's own application store for sale to any of its 176,000 customers. It is one where business owners are an integral part of the development process. Maybe I'm not looking hard enough but to date I've only stumbled across one example which has yet to go public. Or maybe it is too early.

I am aware that in building this case, I am overly simplifying the issues SAP faces and subsuming the technology will not be to everyone's taste. But I firmly believe it is the correct way to focus attention on where SAP is going and what it means for business generally.

So...if you consider I am onto something can I ask that in assessing SAP going forward, we stop trying to make them wear The Wrong Trousers? Can we please stop worrying about databases, speeds, feeds, platforms and other stuff. Sure, it is important for those who have to develop and implement but that's not really the journey this company is taking. Neither is it the direction that businesses of the kind Vinnie and Phil are hunting down are going. Think about what's happening to those CIOs on SAP's customer roster. Think about what will make a demonstrable difference to business performance. Think about industry by industry challenges.

Like the rest of us, SAP is looking through the future glass somewhat darkly but the vision - when you piece it all together - is clear. It's about the business coming together with the right developers. That's what we should be assessing. All the rest is theater. Who knows, even the understandably jaundiced Vinnie might be interested?

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Topic: SAP

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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14 comments
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  • RE: SAP: avoid wearing The Wrong Trousers

    "The new SI has to be capable of fast tracking business solutions that may start out as a specific customer need but end up as another app in SAP???s own application store for sale to any of its 176,000 customers. It is one where business owners are an integral part of the development process.....It???s about the business coming together with the right developers."

    Spot on Dennis. If I can translate that, it means:

    - The clunky Blueprinting process must die
    - Agile and iterative approach is necessary
    - Outsourcing business critical projects won't work. Being physically with the business is necessary.

    The Procurement and Compliance department ain't gonna like that.
    mbesto
    • RE: SAP: avoid wearing The Wrong Trousers

      @mbesto - There seems to be a natural paradox when you talk to customers about "specific customer needs" because:
      - they want the system to follow their business process
      - they want the functionality to exist in standard product, not customization
      - but they don't want any potential competitors to have access to it.

      So the idea of it ending up in SAP's "own application store" is not always palatable, especially when customer #1 bears the full cost of creating it.
      terry flores
    • Smartphones and enterprises are different things

      @mbesto <br><br>I thought I had better point that out for the less observant among you. <br><br>I cannot see how the "appstore" approach could possibly work for enterprise software - some concrete examples please of how it could.<br><br>
      jorwell
      • RE: SAP: avoid wearing The Wrong Trousers

        @jorwell, <br><br>The appstore does not work perfectly for enterprise, but it does still work. Having a library of pre-built solutions, adds tremendous cost savings and speed to market for the enterprise. IBM's Collaboration group has been delivering the enterprise 'appstore' for years and it is quite a mature offering at this point. Check out the "solutions catalog" at greenhouse.lotus.com. You'll find business applications from IBM, IBM SI partners and other enterprise software vendors. You'll need to register to see it but registration is free.<br><br>Catalog Solutions: 1,584<br>Downloads: 70,480
        waynejoneser
  • In the future the RDBMS will be at the centre of everything

    HANA, after all, is an RDBMS - so SAP know where they are going.<br><br>At the moment we are crippled by complexity. <br><br>The relational model based, as it is, directly on logic offers the opportunity to reduce enterprise software down to exactly two components* - logic and presentation. The RDBMS takes care of all the logic and can (should, must!) drive all the logic in the UI too. For those of you who are wondering about data; in an RDBMS the data is logic too - if you take the trouble to understand the basis of the relational model this becomes very clear.<br><br>At present we have barely scratched the surface of the potential of the relational model. <br><br>It does matter to businesses because businesses want consistent data that they can access flexibly - and only an RDBMS can do this. <br><br>However you don't need to present this to businesses as an RDBMS, logic is just language made more formal and structured natural language approaches can make the technical aspects invisible to business people - very important!<br><br><br>Of all the technologies around today I am very certain that the only one which will be of any relevance in 20 years time is the RDBMS.

    An application is just a piece of software to get in the way between a business and its data, yes?

    <br><br>* I know this doesn't look very good in PowerPoint presentations because you only have two boxes instead of the 30 or more favored by enterprise architects but wouldn't we all be better off without these people?
    jorwell
    • RE: SAP: avoid wearing The Wrong Trousers

      @jorwell relax the cap theorem and architect relational systems without the traditional DMS (Chatter). An application is just a piece of software ... user experience design? (Apple)
      clibou
  • RE: SAP: avoid wearing The Wrong Trousers

    Yo, Dennis, thanks for the citation. To your point about "responding in Sapanese" that was the language of the initial question posed to me. In fact, over the past 16 months, more than half the work that I have done around Centers of Excellence has been in non-SAP environments as the "flavor" of enterprise applications in a Center of Excellence environment is of no interest at all.
    Michael Doane
    • RE: SAP: avoid wearing The Wrong Trousers

      @Michael Doane - working towards a SAPenese free conversation? ;)
      dahowlett
  • RE: SAP: avoid wearing The Wrong Trousers

    Hi Dennis,

    I don't know much about SAP, but as you referenced the business I work for (Recruitment Genius) I wanted to add to your great article.

    Firstly I believe that with AWS and Windows Azure everyone already has 'enterprise' grade software. But we never thought like that. We never thought our business would grow so quickly that the potential power we could harness would help service our customers. We simply thought it was cheap, lean and agile.

    'Lean' and 'agile' are two very overused buzzwords that surround cloud computing. I walked around Cloud Expo Europe last week to also see "third generation" and "next generation" being banded about. As a purchaser none of it 'spoke to me'. I want to hear about 'secure', 'robust' and importantly 'proven'. I may have simple requirements but then cloud computing is essentially simple and everyone wants to complicate it so it seems less of a commodity.

    Finally I agree with your point that customers don't really care what systems we use. Currently we process a new resume approximately every 0.4 second and backup 13gb of data a day for several thousand clients. Not a single client to my knowledge has ever asked how we do it. They don't even ask what our uptime is. This isn't because their inexperienced, but conversely because their experienced purchasers. Everyone expects it to work and don't need to know how it works. Very much how most of us don't know how our cars function, we just trust they do, turn the key and bingo.
    gnewman14
  • Applications much more likely to die than RDBMSs

    What is an application by the way? I bet you can't define it clearly. Try the same for service while you're at it.<br><br>To be honest the model you appear to be offering seems like a rehash of the mess that has already been foisted on us by MicroSoft and Sun where programmers spend most of their time trying to understand and battle with class behaviour rather than getting any useful work done. <br><br>It's bad enough in systems programming but I don't see why businesses should be forced to suffer it.
    jorwell
  • Some management techniques that might be appropriate

    So what you are proposing is Tahositaahti*, a variation of the time honoured, tried, tested, untrusted and unproven Miuayga* technique.<br><br>Or perhaps a quick game of ad-hockey; like real hockey but you make up the rules as you go along and the punch ups are much, much more violent.<br><br><br>*Tahositaahti - throw a heap of services in the air and hope they integrate<br>*Miuayga - make it up as you go along
    jorwell
    • RE: SAP: avoid wearing The Wrong Trousers

      @jorwell ....uh - no. Not like that at all.
      dahowlett
  • "purposeful emergence of the right information for the right people."

    Define a relation between person, query and refresh frequency - finished. <br><br>Now why do I need all this exotic new technology again?
    jorwell
  • RE: SAP: avoid wearing The Wrong Trousers

    On the notion of wearing the wrong trousers and kicking established vendors in the nuts. Relaxing the CAP theorem, wearing baggy trousers, and folding real time relationships into business process likely the new architecture, case in point: <a href="http://www.tumblr.com/tagged/littlebigpaas" target="_blank" rel="nofollow">http://www.tumblr.com/tagged/littlebigpaas</a>
    clibou