In the interests of disclosure, I was writing this SAP piece as a brief part of a "Random Thoughts" post that would kind of mirror the format of my upcoming podcast - which will begin with the official launch of my website - the56group.com - in a month or two.
And then it -- as "it" often does -- spiraled out of control. Or into a long cycle of control, depending on how mad you think I am. (Mad as in crazy, not angry.) So, I split this into two parts. Random thoughts will be coming, but first: SAP's pivot, with a perspective of what it means to the industry and to SAP as a company -- not as a different version of their tech stack.
Industry News: SAP announces pivot to the front office - a formerly brief perspective
Ever since SAP announced their pivoting to CRM at SAPPHIRE a few weeks or so ago, the headlines have been rife with SAP positioning itself against Salesforce; SAP recognizing the value of the CRM market and its continued dynamic growth; and SAP's determination to dominate the currently $40 billion CRM market. Bill McDermott, SAP's long time CEO, in very dramatic terms is quoted as saying:
That was then...
All nice, dramatic and warrior like - but performance art isn't what makes this interesting nor is "we will not waver or bend" suited to anything less than assaulting a beach during World War II, not a software company announcement. Nor are these statements what was very important about what SAP did. But before I get too far into why this was the right move for SAP, let me frame this a little with history and corrections of history.
SAP was not the last to accept the status quo, it was the last of the big four to have a functional CRM suite, which it got when Bob Stutz, Jujhar Singh and company built SAP 2007, a highly competitive CRM suite in its day. That suite was the status quo, which was, at that time, what they (and the market) needed - actually a marginally more advanced version of the status quo. It did what CRM was supposed to do in 2007 - a sales, marketing, and customer service three pillars set of somewhat integrated solutions with a single data store.
What made it a bit more advanced - again for 2007 - was that it had one of the first "Google-like" user interfaces. It was what the world needed then and SAP, to their credit, were able to provide it. It made them at least a player in the CRM market, when prior to that they were an ERP company pretender in the market, providing what was mostly well known to be shelfware. That 2007 edition catapulted them into contention - a company to take seriously. Now, obviously, the stakes are higher and the needs greater. Think ecosystems and platforms.
This current pivot and the announcement associated with it has been three years in the making. It isn't new. In fact, they made this announcement on September 15, 2015 with somewhat different but not all that different wording. To wit:
"New York -- September 15, 2015: SAP SE (NYSE: SAP) today announced future integrated digital enterprise technologies that are intended to transform the relationships companies have with their customers.
SAP plans to unleash a powerful portfolio of SAP® hybris® tools that are envisioned to enable in-the-moment customer profiling, digital commerce and community development, empowering an organization's front office to stay connected with the frequently shifting needs of its customers and prospects and enabling companies to go beyond customer relationship management (CRM) into a new era of digital connectedness, customer service and support.
"Companies can no longer rely on the costly, siloed systems of yesterday to engage with their customers, who are savvy, multidevice digital natives. They want their needs understood and met -- right now and every time," said Bill McDermott, CEO of SAP SE. "Legacy cloud-based CRM technologies create business complexity because their foundations predate the rise of social media and mobility. Companies today need innovative, integrated solutions that simplify the front office, making them easy to do business with and fostering greater customer engagement."
In today's digital world, businesses need to connect the front office and back office in real time -- linking people, inventory, supply chain, pricing and customers together. This means that the new front office must go beyond the traditional marketing, sales and service automation functions and include integrated, real-time personalization, Web and mobile commerce, social customer service and more. Planned tools from SAP are envisioned to simplify the front office, helping businesses get a single, contextual view of their customers while giving each customer a consistent, personalized experience across all channels."
Nothing really came of this, in part because it was made during Dreamforce and nobody read it; in part because the SAP Hybris group was transitioning into the company still at that point and there wasn't a cohesive product suite that was ready to go to market to make this happen and in part because they were attempting to make ecommerce a fourth pillar of CRM -- which it wasn't and isn't.
To be crystal clear: CRM is the operational core of a customer engaged business; ecommerce is the transactional core of that same customer engaged business. All in all, they weren't quite ready to make the announcement that they did make - and made it again in a three-years-more-contemporary form this year - but they are ready now.
This is now....
I wasn't at SAPPHIRE this year, I will be at Barcelona if they are willing to invite me. (I would have come but I was at PegaWorld with two speaking engagements.) However, I have digested enough of what was presented thanks to SAP's good-hearted and highly capable analyst relations staff, to give you a brief first take on what I do think.
First, please, understand, I have been and continue to be a fan of SAP. They have been a company I have covered and one that I have been an engaged adviser to for more than a decade. I admire many of their senior staff, their innovation (you should see what's coming out of the Palo Alto Labs - and I can say that anytime and be completely blown away by the innovation I see). I admire their thinking about community and their actual community in practice- SCN - one of the world's largest and best run tech communities. I love their willingness (and their success) in co-creating with their customers. I admire their acquisitions. I think their M&A strategy over the years - at least when it comes to their major acquisitions has been minimally on point and borderline brilliant. I think it isn't a coincidence they are one of the world's most successful companies at least in the back office.
If you saw their interactions with their customers on a regular basis, which I do, you'd be surprised and, given their public image, amazed. They are among the most continually underestimated companies in the world - and, while I won't cover it in this post except indirectly - there is a reason for that - and its on them.
Pivot = Pirouette?
When SAP announced this move, within literally minutes there were headlines about "analysts sour on SAP announcement." One tweet, from MGI Research, a company I never heard of and know nothing about, had that comment and linked it to an article in Reuters quoting Gartner analyst, Ed Thompson, one of the best in the world. There wasn't a single word in the article that was indicative of analysts souring. Here's a screencap of the tweet. Then read the article.
In fact, if you look at the analyst community, it's somewhat split on the move - though leans to positive with concerns.
Here are some who lean favorable but not wholly that.
One or two lean negative but not wholly that:
- Esteban Kolsky (but this is a fair article, because it has what he likes too.)
Finally, one or two are mixed:
Headlines like MGI Research's tweet are misleading and are showing animosity from the headline provider not those quoted in the post. Not sure what their beef is, but I didn't like what they wrote. Our job as analysts isn't to twist reality. Our job isn't to "show the vendors their baby is ugly." Our job is to say "if you raise baby's right face cheek up this much and lower the left one this much, they will be more beautiful." Point out the flaws when necessary and the strengths for two reasons - one so that those we should be serving, the public, have a clear picture of what they are looking at and possibly for. And two, so that we help the companies be better - if our opinion means anything to anyone at all that is.
The venom that gets spit at vendors from some of the folks in my world is ridiculous. It often seems more personal (e.g. they won't talk to me so therefore...). Companies, especially large enterprises like SAP, are complex and complicated. There isn't all good or all bad about any of them. SAP, Oracle, Salesforce, Microsoft etc. all have strengths and weaknesses and while they compete and thus have a lot in common - if they didn't they wouldn't be in competition - each of them carries enough differences - ranging from their tech stack, to their culture, to their partners, to their customer success programs etc. to their R&D investments, to their relationship as a trusted advisor, ad infinitum, to give potential customers a choice in deciding what they want.
If I might pontificate for a moment, as analysts we have a responsibility not only to report but to opine -- and to do that fairly with an understanding that none of these companies fall into the black or white part of the universe. What works, what doesn't work, what might the company do to fix what doesn't -- and doing that without rancor but with regard for those who read what we write and listen to what we say is what analysts who are being fair should be doing. Its fine to be critical, just not fine to be venomous and misleading and let some personal slight be the determinant of the attitude one takes to the company.
Where I stand...
Let me be firm on where I come in here. I am squarely in the camp that this was the right move for SAP and -- all drama aside -- is what can propel SAP forward provided they are willing to address the market directly rather than address it through the lens of Salesforce - and providing they can produce what they need to make this the real deal.
This is the time to do it. It's not just a matter of taking advantage of the opportunity available in the now largest business software segment - CRM - which Gartner said hit $40 billion in 2017 (and will hit $66 billion by 2021). It is also because, to effect digital transformation which as Esteban Kolsky so often rightly points out isn't really "digital" transformation but business transformation - companies need to become more customer engaged than they currently are. The technology needed is the technology that operationalizes the customer facing efforts that the company has to make. That allows the company to design the strategies and implement the programs that both create and sustain the customer's commitments to that company. But to be that, one way or the other, involves the entirety of a company, not just the technology, not just the design and execution of the strategy and programs, not just the culture, not just the actual interactions between the company and the customer - but ALL OF IT.
As a technology company, what SAP brings to the table, is that they offer enterprises, and even much of the mid-market an end-to-end technology matrix and are, for the most part - though with a major flaw (PRIMITIVE PLATFORM) (more later) - organized to provide it that way. Arguably, Oracle has that too, but their current way of organizing their technology offerings doesn't support the idea of an end to end matrix or ecosystem. This can be a market advantage for SAP but there is a lot to do to make this happen.
So, let me start with what I like about the SAP move - and then what I don't or am concerned about.
The name of the game is I like it like that...
- I like the pivot of the company itself. This is an area that SAP has been preparing to focus on for three years - and, especially given my worldview when it comes to CRM, customer engagement, and customer experience - can be an area that they potentially can excel in. The commitment to the customer facing market is genuine and the resources are going to be made available throughout the company to make sure that what has to be done is done. I have no doubt about that commitment.
- I like their global positioning around the Intelligent Enterprise - a lot. Its one that they can arguably make the case for - and can be a true differentiator for them - and that they can show to be more than marketing hype by their offerings in the front office, the back office and the supply chain including their very advanced customer-facing work in digital supply chain (done by the amazing Hala Zeine). This is SO much better than the rightfully maligned "SAP Runs Simple" messaging of the last few years since it decidedly does not. Intelligent Enterprise is one that while they are not uniquely suited for - Infor can make the claim, Oracle, stretching it could, but regardless, for SAP, it just works.
- I like Alex Atzberger as the leader of SAP Customer Experience Cloud (more later on the name itself). He is universally well regarded, likeable, intelligent and respected throughout SAP and for those who know him outside of SAP, all that outside of SAP, too. His story, which I won't repeat here, is well worth hearing. A great choice to run the this now most important effort at SAP. He is also making himself readily available which is something that was NOT at all an SAP Hybris leadership hallmark. He is a fast learner. Big thumbs up here.
- I like that SAP Hybris is no longer SAP Hybris and that Hybris itself is now the Commerce Cloud. Absorbing the Hybris brand into SAP, regardless of all the very positive changes due to Hybris' impact (there were many) is the right move. It's been overdue. SAP acquired Hybris, not the other way around.
- The SAP acquisition strategy led to two of the best acquisitions I've seen in many years - Gigya and Callidus Cloud. Both of these companies -- which I had much more than a passing acquaintance with -- were brilliant acquisitions. Gigya, the leader in customer identity management, not only provides SAP with 1.2 billion verified customer identities (almost 17% of the planet, people), but SAP has already used it to generate three GPDR-compliant products with proactive GDPR-readiness tools, SAP Identity, SAP Consent, SAP Profile. Callidus Cloud, a company that I advised for four years right up to the acquisition, provides SAP with the sales (and some marketing) enhancements for SAP's more traditionally focused Sales and Marketing capabilities. For example, the Callidus Cloud sales onboarding application, built on the Callidus Cloud Litmos Learning Management System (LMS) is arguably the best I've ever seen and, from what I understand, not only will be sold by the SAP Customer Experience Cloud teams, but will become SAP's internal sales onboarding system. Callidus Cloud is a perfect fit for SAP (or honestly, would have been for literally all the major vendors) and their unique blend of services and solutions will go a long way to differentiating C/4 HANA from the pack. Its arguably the linchpin for SAP's customer experience cloud offerings.
- SAP placing a bet on microservices is something I like - a lot. They have a microservices platform YaaS. While I can't tell you how great it is or how bad it since I haven't seen it in any depth other than a few demos, I can tell you that SAP has a strong commitment to making it a core piece of their current customer-facing thrust. I am a firm believer that microservices are one of the pillars of the future when it comes to engaging customers and when it comes to crafting customer experiences. I think Esteban Kolsky, in a white paper he wrote, sponsored by SAP Hybris in 2017, lays out the case really well. Here is an excerpt: "Microservices will dramatically redefine the future of customer interactions, evolving service from large, complex applications to multiple independent function. Enter microservices: the Swiss army knife of the cloud computing age. This cloud-plus-apps approach lets you rewrite the rules by letting customers create the experience they need, in a time and place that works for them." I couldn't say it any more clearly. An example of its great success is WeChat, the ubiquitous-in-China mobile platform. Their "appstore" is actually a microservices store where there are millions of "apps" that actually allow you to craft a series of services such as making airline, hotel, or whatever reservations, transferring money, etc. that can be done via shortcode and mobile messaging. SAP's commitment is notable and important, and provided that YaaS is a) a true platform, and b) more than a series of demos, can give them a market leading position.
- I like that they have revamped the offering and kind of categorized it into industry standard names e.g. Sales Cloud, Marketing Cloud, Service Cloud, and Commerce Cloud. I can't say I like the rebranding of Gigya around the Customer Data Cloud. Customer data sits "horizontally" in an offering, Clouds are solutions or applications i.e. vertical. Nothing horizontal is a cloud. This isn't just endemic to SAP - all their competitors do the same thing. A layer is named a cloud. Not wise. That said, the other four - might as well make them Sales, Service, Marketing, and Commerce Clouds. There are usually two options - a highly creative name that reflects what the products or platform layers do (e.g. PROS Monet, Salesforce Einstein), or, if not that, then the name that can be googled and you will come out in the search (as will your competitors). So the four clouds that SAP Customer Experience provides - are the same exact names as everyone else's and that's just fine. That puts them in the mix when research for a solution is going on.
What I don't like....
- Positioning their move as one to "take over" the CRM market from Salesforce is unwise and not only one that they won't win but one that doesn't do them, their customers, future customers or anyone else any good because it has no value in highlighting what SAP has to offer. It only does what does what all the other players in the industry do, which is to position Salesforce as the alpha - which helps Salesforce, not SAP (or Oracle, or Microsoft or any competitor of Salesforce for that matter.) They would be much wiser to work with their strengths.
- Calling their overall CRM related or what they call their customer experience suite C/4 HANA First, it's time to stop putting in HANA as part of an overarching product name. HANA, which for those of you who don't know is SAP's in memory data processing and management engine. It's a vital part of what they do but by putting it in the name of their back-office suite S/4 HANA and now their "front office" suite, C/4 HANA they limit their world view and they make it seem that the suite itself is limited to working with HANA. I know they are in part trying to stop encroachment on their customer base by Salesforce et al but this name doesn't help them stop it. C/4HANA is a very poor name because:
- It is limiting with its inclusion of HANA in the name and implies no way to integrate with something outside SAP which in this day and age is deadly.
- It is a colorless name and tells you very little except that you probably can assume that C means customer. Big deal.
- Apparently the "4" means 4th generation of CRM, not "for" though of course, in the infinite cleverness of vendor naming conventions it means that too since I imagine in S/4HANA, the 4 isn't for the 4th generation of "S" - whatever that is. Just doesn't work for me.
- I have no idea what the 4th generation of CRM is. I read a piece on it by SAP and still have no idea. That name means they'd better be ready to explain that - now.
- C4 is a plastic explosive. Not something you want to be associated with - ever.
- Talking about how we are undergoing a customer revolution as if this is a new revelation. It is not, it is over 10 years old and it is a fact of life at this point. Transformation of the customer's needs, wants, demands, and control occurred due to the communications revolution that began more than 15 years ago. It is continuous as the technology evolves, the customers mature and the world changes, but its not a new revelation, it's something that we all have been not just writing about but have been living for the last decade plus. Calling this customer revolution something new is like saying that mobile is a "trend." They are how we live.
- This is a company that can provide end-to-end (and back to front) technology. While on the front end I've seen them rename their offerings, I haven't seen any indication of how they intend to knit the offering into a unified matrix that provides enterprise customers - theirs or otherwise - with the ecosystem they require from SAP. Meaning they haven't proven to me or anyone that their products can do what they are claiming they can. Because they aren't showing the products, just the messages. They need to move on this fast. Or their efforts will come to bupkis (literally beans in Yiddish. Colloquially meaning "nothing of value").
What I'd like to see more of or more about
- Moving from SAP Hybris to SAP Customer Experience is something that requires a lot more than just a name change. As I outlined in part one of my post on Adobe a few weeks ago, customer experience means a lot of things to a lot of people and a lot of things to just me too. Here are some of the differences in the use of customer experience where I distinguish between the overarching (my favorite word these days) customer experience, consumable experiences and brand experience - all of which are used in the service of customer experience by a lot more than just me. I need to see how SAP is thinking about this. They have gone from SAP CRM to SAP Customer Engagement to SAP Hybris Customer Engagement and Commerce to now, SAP Customer Experience. I thought when SAP went to Customer Engagement (not CEC) that they had nailed the market and aligned with it where it was as CRM morphed from its purer form to the operational core of a larger engagement protoplasm. I'm not as thrilled as I was then but I'm willing to listen. But SAP has to explain it. (More below on this too)
- SAP is without a doubt a master of vertical markets. I've seen their industry process maps and their templates and their knowledgebase by industry and they are by far the best of any vendor's I've seen. By far. They are dominant in the back office of many markets for many years, oil and gas being one of the paradigmatic examples of a 30 year (give or take) cycle of dominant market position. But they have given little indication of their vertical strategy re: the pivot. The implications of going at verticals in the front office are gigantic (I don't use huge anymore. Guess why). First, Oracle CX is well positioned in many verticals, including public sector - a big SAP focus. Second, Salesforce partners are taking up the cudgel for that and you have companies like Veeva and Vlocity moving fast and doing a great job in encroaching on vertical territories. Microsoft has an enormous reach in verticals ranging from sports (though it is declining there) to healthcare and government also - even construction. But SAP still has the trust of many of those specific markets, so they have a leg up on a lot of the vendors. But I wouldn't waste any time developing a vertical strategy and specific vertical market targets if I were SAP. So far, there is no indication they have done that.
- Ecosystems and Platforms are the future and the present. All of SAP's competitors have been moving in this direction. Oracle still has a way to go in both ecosystems planning and platform development - or at least the public announcement of that. Microsoft, with the release of PowerApps has the tool that all the other companies should envy and that with Azure et al cements them as a possible leader in platforms if they are smart enough to follow through. As far as ecosystems go, Microsoft's partnership with Adobe is an indication of their understanding of ecosystems as a strategic GTM (go to market) effort, not a partner-in-a-marketplace tactical effort.t Salesforce has been focused on building the Customer Success Platform and its previous incarnations since 2002 and is learning quickly how to harness their organic ecosystem - the largest one I've ever seen in a business - strategically, rather than let is roil, roll and dissipate into slots in the AppExchange. So SAP needs to get on the ball now with that. SAP has always imperfectly but still better than most, understood ecosystems. While they seem to have the pieces for a platform (YaaS etc) I don't see any indication that they are thinking that directly about it. If I were them, I'd publicize the platform and I'd run through an ecosystem building exercise to see what the end to end intelligent enterprise actually requires. But that's just me.
- Thought leadership is going to need a revamp. That said, I want to be clear that its not due to deficiencies in that area either in the back office or the front office. In the front office, their thought leadership site The Future of Customer Engagement & Commerce, aside from a ponderous name that I presume will be rebranded anyway, was the best in the industry. But they are pivoting the entire company around the Intelligent Enterprise and Customer Experience and that has decidedly NOT been their thought leadership focus for the last several years so they are going to have to build a substantial refresh of the content. Both internally and with the support of external specialists. There isn't much there to support their new initiative. Plus, even though The Future of Customer Engagement and Commerce is clearly the site focused on the customer-facing efforts of the company, it can't ignore the Intelligent Enterprise in all its thinking. Now that the company has decided to go after the emotional market that CRM and CX and CE represent, they are going to have to change a lot of things about the way they do their business - thought leadership, again, respecting the quality of their past material, needs a serious upgrade.
- Follow through is the last one and the one that I'm most concerned about. I don't doubt the seriousness of SAP's commitment to take on this new direction. But, I've been waiting to see this more than three years now. Its now been announced. Been announced though isn't the same as execution or transformation. The company has a lot of changing to do and actions to take which I am hopeful they will.
Let me kind of sum this up. Honestly, I could have written a lot more about the company, having been their adviser for more than a decade and having covered them even longer than that - and having been someone, who both marvels at their innovation and scope and marvels at their historic inability to tell that story.
At the highest level, I like this move by SAP - its one I thought was long overdue. But I'm not complaining. They made the move and for that they should be applauded. I think that this benefits them, the industry, the market, and their current and future customers - if they actually stay consistent and execute well against their pronouncement. However, I am concerned for all the reasons stated above, but optimistic because of the positives that are already there and their new leadership. Its good to see this happen. I've been in the CRM industry for the last 25 years or so and have a pretty damned good knowledge of what it was, is, and will be - and what customer engagement and experience were, are, and will be. SAP is hitting many of the right buttons, because a. they are market aware and b. they smell the money when it comes to the CRM market. And I say, good for them. I hope it works but I am waiting to see and they still have a lot to do. But I am hopeful they can and all will benefit if they do.
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