As I explained in Part One, three events last week foreshadow the renewal of enterprise software as an exciting and interesting place to be:
Salesforce.com made a definitive leap from departmental solution to enterprise platform vendor
SAP outlined coherent cloud strategy and described execution against that plan
Workday suggested possible intentions to compete more closely to SAP’s home turf than previously expected
Of course, enterprise software and the cloud are far larger than these three companies and we should not forget competitors such as NetSuite, a public company that sells an on-demand ERP system. Each of these organizations plays an important role in today's enterprise cloud ecosystem.
Part one discusses Salesforce.com, so we now turn attention to SAP and Workday.
In part three, which is coming tomorrow, I discuss the importance of competition and explain the five principles of sexy enterprise software.
SAP: THE SLEEPING GIANT ARISES
As Salesforce wowed tens of thousands at Dreamforce in San Francisco, SAP held its annual Influencer Summit in nearby Santa Clara. Due to the conflict with Dreamforce, I missed most of the Summit, but attended a special day that SAP held for bloggers.
Hearing from other analysts who attended the first day of SAP's event, I expected a boring session that rehashed old marketing messages. Blogger Jon Reed heard the same stories:
At the end of day two, a couple of sleep-deprived analysts who traveled long distances to get to Santa Clara pulled me aside and said, “This is the same message as SAPPHIRE, nothing has changed.”
Like Jon, I came away with an entirely different, and much more positive, impression. Rather than boring rehash, SAP presented a resurgent, invigorated, and engaging presentation focused strictly on the company's cloud and on-demand strategy.
The day began with SAP going on the offensive against NetSuite, even though SAP did not name the competitor explicitly. SAP accused NetSuite of misrepresenting facts in a recent anti-SAP marketing campaign related to total cost of ownership.
This exchange is significant because it may signal the start of a shift from SAP as complacent, sleeping giant to more nimble street fighter. Whether this healthy change continues remains to be seen.
Just to be clear, I have no clue which side is right or wrong in this marketing dispute. In response to pointed questioning, NetSuite's CEO, Zach Nelson, personally assured me that his company's facts are correct, while SAP defends its position with equal vigor.
We are disappointed to see this tool, which was intended to provide customers transparency into all aspects of ownership costs for on demand solutions, be used in competitive posturing. We've decided to take down this TCO comparison to on-premise software until we can ensure that unfair and inaccurate conclusions cannot be drawn.
SAP strategies. As they day progressed, SAP shared key points of its cloud strategy. Here are a few observations and interpretations:
A driving constraint on SAP is its need to balance innovation against stability on existing customer systems. The size, scope, and diversity (both technical and business variability) of SAP's customer base creates engineering and planning complexities not faced by smaller, pure cloud competitors such as Salesforce.com, NetSuite, or Workday. Cloud competitors will claim this diversity represents an SAP weakness, but it also demonstrates the richness of SAP's solutions, which no pure cloud vendor can match. Whether this richness substantially benefits small or medium business customers is an argument the vendors can debate among themselves for now.
SAP's style, language, priorities, and approach to cloud strategy now mirror the pure cloud vendors. After years of struggle and rework, SAP's team now looks and feels like a cloud organization. One quote, which SAP spoke with conviction and emphasis, resonates: "Openness and commitment to open standards whenever possible is key."
As part of a hybrid strategy, which includes both on-premise and on-demand applications, SAP has started the lengthy process of moving core applications to the cloud. I directly (almost rudely) asked Executive Board member, Vishal Sikka, whether the company currently possesses the process expertise needed to accomplish this goal, since many of the original developers in Germany have retired. Sikka immediately dismissed my question as a non-issue, so draw your own conclusions on this matter.
Former Oracle executive, John Wookey, who now runs SAP's large system on-demand program, described SAP's new approach to software design. Wookey explained he has "re-trained" developers to place the user's point of view first. Anyone experienced with traditional SAP products will recognize this as genuinely fresh thinking. In fairness, many pure cloud players have already learned this lesson but SAP is catching up to the best of them.
From a technical perspective, SAP said Business byDesign has achieved the desired state of readiness. There is no reason to dispute this assertion.
SAP showed its Streamwork collaboration product and also demonstrated its River platform, designed for developers to create "edge" applications (similar in intent to Salesforce.com's Heroku). Collaboration tools are important to SAP, but the space is more strategic to Salesforce, which has devoted substantial company resources to building out its Chatter platform. When considering this difference, bear in mind that SAP's overall product set is more diverse than Salesforce.com's.
SAP's comprehensive on-demand architecture is summarized in the following image. This diagram represents the broad scope of the company's cloud-based efforts:
Strategic analysis. SAP's confidence, strategy, and technology are coming together into a coherent vision for cloud computing. After a long period of uncertainty, hubris, and missed opportunities SAP is finally building cloud products and gaining cloud customers. Based on numbers provided by SAP, Business byDesign traction will likely increase during 2011.
Some critics will proclaim that I give SAP too much credit; those folks are welcome to their opinion but I respectfully believe they are wrong. Positive changes, products, and innovations inside this huge company now seem to be bubbling to the surface. That said, it's equally true that some of SAP's competitors pump out innovation at a blistering pace and SAP must prove execution over time.
I specifically want to praise Senior Vice Presidents, Jeff Stiles and Rainer Zinow, for their work in helping create, execute, and explain SAP's cloud vision. These men deserve kudos for exercising transparency and driving positive change inside SAP. I urge SAP's Executive Board to support and protect folks like this without reservation.
SAP faces a crossroads in which misguided, reactionary, internal forces will attempt to inhibit, and perhaps even subvert, the company's drive toward cloud innovation. SAP's success depends on its ability to innovate even while retaining stability for customers. This means even-handedly pressing forward despite the internal naysayers.
WORKDAY: FEISTY PLANS FOR THE LARGE-SCALE ENTERPRISE
Frank suggested that Workday plans to remain out of both manufacturing and distribution, core elements of SAP's traditional ERP market. In an unexpected Twitter response, Workday's co-CEO, Aneel Bhusri, retorted:
No intentions for MFG, but maybe distribution:-)
This surprising response, signaling possible clarification of Workday's ERP plans, ups the competitive ante in enterprise cloud computing. In an IDC thought leadership report about Workday (not yet published), I explain the company's plan to expand beyond its HCM base:
Over time, Workday plans to expand its on-demand suite to include the administrative (non-manufacturing) aspects of enterprise resource planning (ERP), putting the company into competition with large vendors such as SAP and Oracle.
Workday is one of the few pure cloud startups possessing the resources needed to compete directly with SAP in ERP, so the competitive threat to SAP is real.
In Part Three of this series, which is coming tomorrow, I discuss the five principles of sexy enterprise software! Part Three also explains the role of competition in making enterprise software sexy. Come back and read more -- you'll love it!
Photo of Steve Wonder and will.i.am, performing at Dreamforce, by Michael Krigsman. This performance demonstrated the feelgood mojo that enterprise software needs to delight its customers. The photo reminds us that enterprise software truly can be sexy and fun.
Disclosure: Salesforce.com and SAP split the cost of my travel to San Franscisco. SAP is a current client.