SAP: On the Knife Edge, Exactly Where They Want To Be
After two days at SAP's Sapphire user conference, I struggled with finding the big picture amidst a plethora of announcements, strategic and tactical, that have spanned the gamut from acquisition (Frictionless), to ecosystem (a new $125 milliion venture fund), to a new interface (Muse), to updated versions of their ERP, CRM, and other products. Lots of great little pieces of news, but the meta-story was still lacking.
But two sets of pronouncements by SAP top brass Henning Kagermann and Shai Agassi finally brought it home. And the fact that both execs made similar statements on the same subjects lent an esssential gravity to what otherwise might have seemed to be off-the-cuff, contextless declarations.
The first was the ubiquitous defense of the need for customers to upgrade their SAP environments, itself an old theme that SAP has been flogging for a while. SAP wants this for lots of reasons, most of which have to do with unleashing the innovation in SAP's enterprise services architecture, xApps, and other innovations -- not to mention the upsell opportunity that all that new innovation implies.
Taken by itself, the upgrade defense would be only marginally interesting if it were not for the second pronouncement that Kagermann and Agassi made, which boiled down to the following notion: ABAP, SAP's proprietary development language, is an important asset to be maintained and nurtured, and not the liability that many (including, especially, competitors) contend it to be.
What the juxtaposition of these two statements tells us is that SAP is comfortable sitting on the edge between providing highly innovative products and technology to its customers, while at the same time promising stability and support for existing investments. With one hand, SAP promises to lead the customer to the promised land, while with the other it promises support for those content to wander in the wilderness a few more years.
It's not a simple position maintain, hence the "knife-edge" metaphor. Too much emphasis on innovation, and the customers who crave stability run for the exits. Too much stability, and customers dependent on innovation start looking for another partner. It's tricky too, considering the emphasis on the "next new thing" that permeates Silicon Valley culture -- no one likes to look boring, even if boring is exactly what customers want from time to time.
But getting this dichotomy right into the future is exactly what SAP needs -- and the fact that it has essentially been doing this while posting impressive revenue and growth numbers is proof positive that this is a strategy that works well for SAP. In fact, it's increasingly obvious that SAP doesn't really want a massive influx of upgrade-hungry customers: too many all at once and SAP would have serious trouble meeting all that demand. Better a gradual pace of upgrades, while delivering the innovation that customers can choose to implement today or place on their roadmaps for three years from now
Either way, SAP wins.