In the last post on SAP I wrote, I remarked that I wasn't a Kremlin watcher but had a fascination about how CEOs and changes in CEOs affect companies. Its been about 2 months since I wrote that and by now, as I wrap up my experience (and I am carefully choosing that word) at Sapphire, I have to say, that the effect on SAP of the co-CEOdom of Bill McDermott and J.H.Snabe seems to be truly dramatic. Without hesitation, I would say that I have never, in all my years of experience with high tech companies, or companies of any kind, seen such a fundamental transformation in the outlook, direction, and tenets of company life from any company than the one I've seen at SAP. What makes it particularly spectacular is that this isn't just the words of a company that is attempting to spin - but is reflected strongly in the look, feel and actions of SAP and its employees and staff. It extends from the way that SAP is involved with their customers and partners to the way that Sapphire even looks - something more akin to the 22nd century (so to speak, those of you who read things literally) than even the 21st.
Do I think this is a product of the McDermott-Snabe duet? Not entirely, but I think that they are opening the company up so that what has been there for awhile is now exploding into the open.
That said, I'm not all starry-eyed and awestruck either. There are a couple of non-trivial concerns I have - given the SAP strategy that's been outlined at SAPPHIRE 2010. However, what I have seen is dazzling - at least when it comes to the cultural transformation.
SAP understood this and began involving their largest customers and partners in the innovation and iteration process. They jointly developed products or improved products that SAP would then produce. Each of them - the vendor and the customer - had skin in the game. This originated, I'm happy to say, in the CRM 2007 product development - the first dramatically different and successful in its difference SAP product. Prior to its development, SAP's CRM product was a joke at best and a non-existent throwaway at worst. After SAP CRM 2007, it was a contender on the CRM enterprise stage without question.
But of course, the integration of customers into the product development process, changed how SAP saw itself doing business and how they were organized for that. For example, here is what Michael de la Cruz, who was SVP of Mobility at the time (now SVP Public Sector) said about 2007:
While executive support from Shai Agassi, Hennings Kagermann, and Bob Stutz may have triggered and driven the changes at SAP in our culture, our most dramatic changes occurred by us deciding to focus on our customers in every way possible—changing our strategic direction, our processes, and our rates of interactions with our customers as we made the changes and beyond. We spoke to our customers every single day.
Change at SAP started out by having the team interview our customers about their pain points with us and our products. We started prior to the SAP CRM 2007 release and during that time, we found that a lot of our customers weren’t in front of their computers. They were out there conducting their businesses. The customers told us that the product, not just the user interface, was too difficult to use. It was painful to hear brutal feedback on where our functionality fell short. But it was also refreshing for customers and SAP to talk openly and honestly about the good, the bad, and the ugly. As we discovered more things like this, we began to base our strategy on customer feedback. But even more than strategy, those interviews reinforced the need for a broad mindset change by those who created, produced, and released the products. Customers had been telling us this for many years but they were more emphatic now. They had been influenced by the consumer web and consumer thinking that had crept into the enterprise, and the pressure increased.
This was by no means company wide but it was a start toward a "new SAP" that I think simply blossomed when McDermott-Snabe became the ruling duo. They unleashed something that was already there.
Its always easy to be skeptical of large companies and their ability or inability to change. Small companies are nimble, innovative, creative, blah, blah, blah. And for many small companies that is entirely true. Many. Not all. But conversely, large companies can change too. What tells you if they really did or not? Look to the cliche - actions speak louder than words.
That's exactly why I think SAP's changes are dazzling. They acted on them and you can see that they're institutionalizing those actions across the company so that the culture change is both permanent and repeatable - and flexible enough to change again when needed.
That's reflected in a number of ways - ranging from the strategic reorganization of the company to the individual desire and actual listening to the customers, analysts, partners that SAP is doing - and their creation of institutions to support that transformation.
Its also reflected in the look and feel of the company now - even how they handled SAPPHIRE 2010 - which was outright.....cool.
**When you walked into the Exhibition Hall, you were faced with a wall that had a ton of SAP product information on it. See the video here. This wall was a giant touchscreen that allowed you, with your fingers and entire hands to move data around, visualize and re-visualize it, turn it on its side, change its position, integrate it with other pieces of information that you might need - all via touch.**
**I was on a panel with CEM expert Lior Arussy and Gartner Markets whiz Sharon Mertz on CRM strategies, and I happened to look to my right and saw this giant projection wall with 8 huge HD screens that was carrying all the open theater speeches, panels, demos that were going on throughout the massive, colorful exhibition hall.
See?**
**Perhaps the most dramatic for me was the way that they handled the analysts, press, bloggers etc. Typically at these vendor conferences and in SAPPHIRES past, vendors would have an area of rooms that were for press only - a room that you had power and internet connectivity, a room for interviews and a room for a press conference of sorts. This time it was totally different.
There was a wide open area in the front of the Exhibition Hall - yes, in the Exhibition Hall - with hundreds of chairs and long tables with power strips and internet connectivity (wired). There were couches and those kind of bar tables - elevated with a couple of elevated chairs. There was an information desk and an access desk - it was a cordoned off area called Global Communications. There were meeting rooms. Again, all in the Exhibition Hall, all in an open area, and thus it pulsed with the excitement of the Exhibition Hall itself. Not only that, but senior execs at SAP were dropping by to say hello all the time. No longer a "set up an appointment with my secretary/executive assistant" but instead a "hey, 'sup" informality that I've seen nowhere else. A brilliant move if you want analysts and journalists to think well of you. Perhaps the only puzzling thing was the isolation of the bloggers who had their own section away from the press and analysts. That comes because SAP oddly distinguishes bloggers from all other business influencers. That wouldn't work ordinarily, but they have an amazing guy running the bloggers program - Mike Prosceno, so it works but more on the sheer strength of his personality as opposed to it being an exceptional idea. I cross into both groups - my badge usually says chameleon and changes with available budget lines - I actually had a Business Influencer and Speaker set of badges - and could have had analyst, press, or blogger too. Nonetheless, this aside, the openness of the Global Communications was extraordinary.**
The conference set up was brilliant in its openness - and a reflection - I'm sure a conscious one - of the changed culture that SAP wanted to exhibit at SAPPHIRE 2010
While SAPPHIRE was a reflection of the changes, though, SAPPHIRE ended too. The real question was, is, when it comes to the change in SAP culture, how well situated is SAP for the future of its business? The long term is what matters with culture change, not the show floor.
To that end, there is a corporate reorganization that might work within this new cultural framework. Note however, the phrase "might."
But the corporate reorganization is a severely transformed structure. It moves from horizontal buckets like CRM, SCM, etc. to a vertical company that has two long totems - lines of business and products (such as in product development). So for example, where they had a CRM "bucket", now there is a CRM LOB and a CRM product development team that works within the portfolio of each totem. For example, where great guy and SAP senior exec Rich Campione used to be responsible for the enterprise business apps solutions such as CRM and ERP, he's now responsibility for the product development side of the whole portfolio.
This may work, though it remains to be seen. The imperatives of business tend to genuinely drive product development (at least in theory) in most businesses though realistically, how product development actually occurs is often at odds with the demands of business development. We'll see how this works at SAP with product development and lines of business separated out. The nature of the transformation will allow, it seems, products to be developed at a faster pace and with more resources than in the past. The LOB component is what remains in question. But this is a risk that SAP is taking and even the willingness to make this sorta dramatic shift is something different than in the past - when SAP operated in a very conservative mode.
But part of the restructuring is not just how they responded to each other internally but how they actually are engaging their customers in the SAP value chain.
The limitation of this extraordinary group of advocates is that it has been largely built on a personal set of relationships that take place as often face to face as they do via cyberspace. Additionally, Jim Goldfinger's devotion to the customers is legendary - and unique. However, the CVN works - I know because I know about 1/3 of the customers in it - and they are committed to not only implementing SAP but to participation in the SAP ecosystem and evangelizing on its behalf.
Couple that with the engagement of the large companies in the co-creation effort that led to the new CRM product for example and you have the foundation for an extensive SAP ecosystem that is driven via its internal and external advocates. But with the culture changes, come a lot more.
SAP launched a new Jive-based community at Sapphire 2010 called Idea Place, which is perceived by SAP as an "Innovation Campus" and often called out in the rest of the world - an "ideation community." It fulfills the missing piece of the innovation and engagement puzzle by providing a forum for customer, partner, individual feedback on current SAP products, new ideas for products or even something as small as a feature or minor improvement. It is what "crowd-sourcing" is typically defined as. Here's a video on it that will explain what it does from SAP's mouth to your ears.
What makes this important is that not only will SAP have a channel for the "general population" to reach into SAP with their ideas, SAP remains committed to responding and acting on the feedback that it generates. So between the CVN, the co-creation company to company that Michael De La Cruz speaks of, and Idea Place, SAP is actually practicing what we could define as a B2B version of Social CRM, though let's not go overboard. In fact, Idea Place reminds me a great deal of Procter and Gamble's Connect and Develop program.
This resembles what' I've styled the "collaborative value chain" - the enterprise value chain with the incorporation of bidirectional customer channels which allow the customer to participate in the actual evolution of the company. They're not for everyone, but they are available to everyone who cares to participate - though the onus of participation is on the customer actually. The customer can choose to involve himself/herself/his company/group etc. Or not. SAP has taken a first step in that direction.
To that end, several products were front and center at the show and several product directions were clarified. Most important? The in memory computing, enterprise mobility, and CRM 7.0 with the first two tied together by the Sybase acquisition. Incorporate the on demand strategy and the inevitable move by SAP into the cloud to this and we get the release of Business by Design. Take into account the UI of CRM 7.0 and the almost intuitive use of Business Objects Explorer on the iPad and we're looking at a new generation of genuinely usable, cool and useful SAP apps.
But, I thought as did others, why would you want to spend $5.8 billion on a mobile platform - even one this good -when you had a partnership that seemed to make everyone perfectly happy? Plus the estimated value of the mobility business around the iAnywhere platform is around $400 million. Substantial but not enough to pay $5.8 billion though, is it?
I had my nose tweaked back into joint with a series of conversations as I found out more of the thinking - and now - I understand. I can't speak to the valuation. Not my domain expertise or even my bag, but I can speak to the wisdom of the thinking.
The mobile platform was one of three key reasons that the Sybase acquisition occurred. The second, and what may be the most important, goes to the heart of the upcoming SAP architectural redesign around in-memory computing. For those of you who want to hear more about in-memory computing, here's a video posted by SAP about it back toward the end of 2009 (thanks to Zoli Erdos for this one). Sybase's database designs are tailored to support in memory computing. That would be their Adaptive Server Enterprise and SQL Anywhere products. If not end of story, big part of story here. Makes SAP's evangelical task of bringing in-memory computing to the enterprise masses that much "easier."
There is one more thing, which was pointed out to me by several SAP executives. SAP doesn't have much penetration into the financial services markets (I can corroborate that one) and apparently Sybase does (I'll have to take their word on that one). This gives SAP a deeper entry into a market they've been historically deficient.
All in all, thus, $5.8 billion for the $400,000,000 mobility business isn't the story as some have speculated. In fact, it might only be the second most important part of the story. Just the coolest looking one.
Okay, this Sybase thing aside, we have to get back to the products at hand - especially the one that they presented so frequently, even looking somewhat cool and rather powerful on an iPad, that you would think it was the savior of SAP. That would be Business by Design and, take my word for it, this isn't the savior of SAP.
However, I have several problems, some small, some concerning me greatly, with BBD:
All in all, while functionally strong for complex and growing midmarket companies, I am distinctly underwhelmed by this product. Is it a bad product? No. Is it a good product? Not particularly. Is it competitive - yes - but holding up the rear.
All that said, with the spectacular cultural transformation of SAP, BBD could be improved rapidly should SAP decide they want to do that. But they have other options too.
They could acquire the functionality elsewhere.
They could build separate on demand products that handle the same requirements but are not saddled by the UI or the history. For example, one product that they are building right now is Sales 2.0 On Demand (I presume a working name only). This product is based on the collaborative vision of SAP EVP John Wookey, who nailed the future of sales on the head when he defined how salespeople will have to internally interact in the future. He understood that not only will sales people have to treat customers as peers and not objects of a sale, but that there is a way to tap the vast internal knowledge of large sales organizations to extract the knowledge that resides in the heads, not on the laptops and desktops of other sales reps, marketing people and other employees which improves the chances of sales people to succeed in their jobs.
Rather than substituting this for traditional SFA, they are doing the "propah ting" and extending collaborative capabilities to traditional SFA functionality. Smart move. They are doing this as separate from BBD product.
To be fair to SAP, there are a couple of things that need to be said that are positive. First, the standout in the BBD standalone product - their analytics - shows a lot of promise and of course, are geared toward being delivered in-memory. Even as they are now, they are strong and pretty much provide what any company could possibly require in the midmarket at least.
Second, if BBD is placed in a larger context as part of an overall strategy that integrates on premise, on demand and the cloud - with mobile. then it doesn't need to be a great standalone product - though I'm sure SAP wants it to be. The context for it is how it played on the iPad in the demo given at Sapphire. There it kind of worked. But that's not the way that most customers will use it as a standalone.
All in all, they need to step it up with BBD. While they at least now have something, they simply have to get a lot better at it.
My primary complaint about CRM 7.0 when I first reviewed it several months ago was that the territory management was poorly conceived. The only way to manage territories at the time I saw it was via manual entry. However, SAP has fixed that and, as a result, developed an application that is truly competitive - and has a brilliantly easy interface to deal with. Take a look at the web version of the UI:
Pretty slick and a far cry from the ugly interface of the past. Thing is, SAP has a winner here and will be competitive at the enterprise level for a long time. I'll be doing a much more complete review of this product later on this year. I just want to make sure that that CRM 7.0 is understood as a strategic part of the SAP portfolio.