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.
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.
The Cultural Transformation
While the visible signs of the cultural transformation have been eye-popping, don't assume that this started this year, or was something that just happened. It has been at least 3 years in the making. In fact, in the 4th edition of CRM at the Speed of Light, (there is a free chapter on culture change available here), you'll see a section entitled, "Case Study: SAP Goes for the Gold Standard" which outlines at least one of the pockets of cultural transformation that have been around a few years - if this wasn't the first one. What was noticeable was that SAP at that time, recognized that their traditional way of doing business was no longer going to be appropriate for a new world which at one level demanded increased customer engagement and at another level involved considerable input from customers on what they actually wanted from the companies that they were dealing with or what they would like to see. It was no longer a "build it and they will come" enterprise software world - or world in general for that matter. Customers wanted to play and were playing a more pre-eminent role in how they ran their own businesses - or in the case of B2C - their own lives, rather then have their vendors determine it as they had been doing to some degree.
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.
SAPPHIRE 2010 in the 22nd Century
The overwhelming feeling that you got going to SAPPHIRE 2010 in Orlando, especially at the Exhibition Hall was that somehow you had just entered the early part of the 22nd century. This was the most technologically advanced - and complex - setup I've ever seen but was also the most well thought out exhibition hall when it came to producing what you'd have to call an open environment. A few vignettes:
**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.
**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."
Again, this is NOT just a cultural transformation in name. It is one in deed too. They've reorganized the company with considerable corporate restructuring. A lot of senior executives left the fold with the removal of Leo Aptheker - some left voluntarily, some not so much. I usually am sorry about that simply because of the human cost involved but in this particular case, SAP's moves have been the right ones - mostly - and good for the company. I can't say I feel sorry for the execs who left or who "got left" because they are well heeled already I have to presume and thus, my populist instincts say, that they'll land elsewhere.
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.
CVN and IdeaPlace
SAP has had a unique relationship with their customers for many years - one unlike any other company that I know - through their Customer Value Network (CVN) run by the remarkable - truly amazing - Jim Goldfinger. What made this network unique is that it is about 100 plus SAP customers who are so fully engaged in the company that they are almost seen as internal resources - though, of course, it's not a blind eye view so to speak. Jim Goldfinger has crafted a network of customer advocates by knowing them deeply and personally and bringing them in to not just discussing SAP fait accomplis but also to discuss direction prior to the decisions being made on which way to go.
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.
The Message Remains On Track
In the last 12 months, SAP has been trying to rediscover itself and done itself some actual damage in the process. If you look at their messaging at the varying conferences, its been all over the map and has ranged from smart (sustainability, enterprise mobility) to surprising (innovation, in-memory computing) to stupid ("eliminating 3 letter acronyms, selling end-to-end processes). They seem to have finally righted their ship here and in the last several months have not just expressed but expanded upon the notions of real time, unwired and sustainable which supported their March 2010 Business Influencers Conference themes of in-memory computing, enterprise mobility and sustainability. This is important to reestablish as Ray Wang puts it in his piece on SAPPHIRE 2010 a sense of normalcy, which SAP and its customers - and future prospects - desperately needed.
Okay, all this is well and good, but SAP has to provide products, services and solutions to their customers. To that end, when SAP provides the right themes, they also have to provide the products and services that are appropriate to the themes or the discontinuity shows.
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.
Sybase in Context
One of the cornerstones of the SAP enterprise mobility technology has been the Sybase iAnywhere platform, which is a genuinely solid piece of work. Its a mobile platform that can deliver content from an application on the fly in any format for any mobile system that you want. So if you have Blackberry, iPhone, Windows 7 Mobile and Android, let's say (since I suspect, sorry Palm, that those four will be it soon enough), content can be pushed out to the phone in the format needed as the data is accessed.
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.
Business by Design
Even the hypercool demo of Business by design on an iPad using in memory by Hasso Plattner during his keynote, doesn't get BBD off the hook as far as I'm concerned. I did a test drive of the product and saw a demo of some of the CRM functionality of the product that I didn't get to see in the test drives. I found the product functionally substantial if the market SAP is aiming at is the same as the NetSuite market - the upper end of the midmarket - although BBD plays across the whole midmarket, really. This is NOT a small business product - far too functionally complex for that.
However, I have several problems, some small, some concerning me greatly, with BBD:
I think the UI design has issues. For example, the "Close" button in the Order Management section of the test drive was the second button from the left of the row of buttons. Natural human inclination is to look for a "Close" button on the far right. Things like that are puzzling small but significant decisions on UI design. The UI is generally not all that attractive nor particularly user friendly. But that would be even niggling if it weren't for the fact that there are significant competitors in the market with deeply functional products and nicer UIs.
Functionality sometimes puzzled me. For example, there is a function called Document Flow that when opened shows a series of boxes that are connected in a sort of simple flow that say things like "sales order" to "sales order" to "customer invoice." Two thoughts - What happens when the order gets complex and there are 20 boxes - it would be remarkably cluttered. But more importantly, why even include a function like this? Who would want it?
Most importantly, it is being released VERY late in the game and is just not a superior product yet. I'd say SAP BBD is three years (though that's a metaphorical statement) behind the curve and the other on demand vendors aren't waiting around for them to catch up. They are directly competitive with NetSuite and as of now, NetSuite is a better product.
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.
I need to say something briefly about CRM 7.0. Though, this product didn't get a lot of keynote love, it is seen by SAP as a flagship product - a strategy driver for the newly transformed company. It was well represented in a wide variety of sessions and at the kiosks on the show floor. CRM functionality beyond CRM 7.0 was also widely discussed such as the BBD sales, marketing and customer service functionality and the Sales 2.0 On Demand product mentioned above.
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.
While some of this seems a bit disjointed I'm sure, there is one thread that runs continuously throughout SAP's new business-stream. SAP has transformed their company from what has been seen as a highly traditional, conservative, closed company, to an open innovative accessible organization who can play on the international enterprise stage as it progresses through the 21st century. There are still holes and problems and needless to say, we have to see how much of this survives 2010 and becomes part of a permanent new landscape. I suspect it will, but its up to SAP, not me, to continue this.