Where to next for ERP et al? (part 1, SAP)
With a Gartner probability of 0.9, I guarantee that what follows is not how things will turn out. At least not exactly. Paul Greenberg's post casting the enterprise CRM runes for 2009 provides the perfect springboard for something I've been thinking about since the middle of the year. Where the heck are SAP, Oracle and Microsoft going with their enterprise businesses and what does 2009 hold for them? More important, what do they need to do?
Paul is another Irregular and what he doesn't know about CRM could be written on the back of Marc Benioff's (Salesforce.com, CEO) hand. I spoke with Paul last week to get his unspoken bead on what the future holds and to bounce thoughts. This is important because regardless of the way anyone slices and dices the market, managing the customer relationship is going to take on a whole new meaning in 2009. We're already seeing it with Oracle touting Social CRM, Microsoft focusing on its own CRM offerings and SAP reporting success in that area. But what more?
If you look at the numbers as Larry Dignan, Brian Sommer and I do each quarter you might easily conclude that the market running order in 2009 would be the same for 2009 as it has been for 2008: SAP, Oracle and Microsoft. I doubt that will change significantly but what matters in software marketing is mindshare. In that sense everything is up for grabs. That is assuming the market doesn't collapse altogether, a prospect that isn't out of the realms of possibility either.
In talking to Dale Vile from Freeform Dynamics, he confirmed much of what I am seeing in the market: no real panic among CXOs but a firm expectation of a significant slowdown. There are regional variations with most of the gloom in the US/UK. Both Dale and I would go much further. We believe that the market - and vendors - are in for a very nasty surprise, possibly as early as Q1 of 2009.
I believe that IT departments could find themselves in crisis as boards demand value from IT combined with more cost cutting. It is hard to see how this will pan out because unlike the last downturn, CIO/CTO's have adjusted to shelfware problems and have little of the fat they needed to shed at the turn of the century. Their biggest problem remains the difficulty they have in communicating with the business. Many put this at the CIO's door. The last six months have taught me the reverse. It is the business that needs to pay attention to IT. Technical people I speak with know far more about what needs to be done than their business counterparts give them credit for but are rarely given the floor with which to speak with conviction. That has to change.
If business recognizes the contribution IT can make, then the IT landscape changes and introduces a new dynamic into the sales process. I sense there is a likelihood of that happening, especially given the question marks we are seeing being placed in the value of licenses and their attendant maintenance and support costs. Mind you, if it was that simple then things might have changed a long time ago. The often toxic relationships I witness are a legacy of the past. Now is the time for the whole business to come together.
On the buy side front, Vinnie Mirchandani, Ray Wang, Frank Scavo, Brian Sommer, Mike Krigsman and myself (to name but six) are not going away anytime soon. We will continue to fight the customer corner in our own styles against an increasingly frustrated market. We're only a few more data points in the buying decision cycle but the question remains: how much longer will buyers continue to hand over three times the license fee over a 10 year period and continue to smile while watching project continuing to fail?
Let's start with the gorilla in the marketplace: SAP
SAP - a watershed to overcome
2009 will see the biggest shake up in SAP's recent history since Henning Kagermann took over the sole CEO role in 2003 but who retires in May, 2009. Claus Heinrich is, for all intents and purposes retired and Peter Zencke is pretty much done. There are rumors that CFO Werner Brandt may also go but I have no confirmation other than the rumor mill doing its thing. That leaves current co-CEO Leo Apotheker with a near clean slate from which to build a fresh board with fresh thinking. The question is whether he will have the time or vision to do that.
Right now, Apotheker is inheriting the most difficult conditions the company has ever seen. That won't matter if he cannot deliver in 2009 which means he's got maybe a year in which to show his worth or find himself in earlier than planned retirement. Apotheker is a formidable operator who kills what he eats. He's cut from the same competitive cloth as Benioff and Larry Ellison (Oracle CEO) but it is questionable whether SAP is ready for him. SAP's ethos the last 35 years has been centered around the notion of 'German engineering.' Think BMW, Mercedes Banz, Porsche but without the styling. Apotheker brings an emphasis on sales. Not a bad thing because he really doesn't care what he sells as long as there is food on the table. This is not where SAP has traditionally positioned itself. Apotheker's biggest problem lays in what he does about a company that represents as a house divided.
On the one hand you have the old school engineers at Walldorf HQ. They've gotten fat, happy and lazy as they've seen SAP dominate the accounts of the Global 2,000. In Palo Alto, you'll find the go getting innovators, best represented by Doug Merritt who has a penchant for controversy but who knows exactly what he's doing. It's a two-speed company in tension but where ultimately getting stuff done is tortuously slow. Rumor has it there are up to 100 projects floating around in Palo Alto labs, many of which may never see the light of day but which individually could deliver value back to customers.
Apotheker has problems left and right. The company's insistence on driving through its ill thought out maintenance price hike is distracting it from getting any other coherent messages into the market. Business ByDesign is beleagured and the lack of product imagination on the CRM front beggars belief. It's BPM offering is behind the market curve and while flexibility and operational agility is on the minds of CXO's, SAP hardly draws credit in that department. It desperately needs to get away from its 'not made here' attitude and become more open or it will devour itself. Some tentative steps have been taken in that direction with its EcoHub and commitment to the SAP Mentor program but they are baby steps.
The real vipers in the SAP ecosystem are the SI's who see SAP as little more than a well paid gravy train. If they start to feel the pain of recession hard enough, then SAP has a shot of bringing them under control. If it fails to do that in 2009 then it will find it harder than ever to say it bats with its customers. In that sense SAP could well store up resentment for the future that sees customers drifting away or being tempted by maturing on-demand offerings. After all, Salesforce.com didn't build a $1 billion business out of thin air and is increasingly looking like the innovator you want to pay attention towards. It is equally becoming clear that the myth of not dismantling SAP is not as solid as it once was.
The recent appointment of John Wookey to head up SAP's on-demand business is interesting. Wookey has a formidable reputation but is coming to a company that doesn't have much idea what to do about the on-demand world. It is way too early to take a bead on his likely influence but of one thing you can be sure. If his work doesn't contribute to sales in the near term, we'll hear precious little. In the meantime, Josh Greenbaum puts a few stakes in the ground with which I am not going to disagree.
2009 will be a watershed year for SAP. Apotheker has a lot to do and much will depend on his ability to blow past the collegiate style of the company and get things done on his terms. His sales driven focus will serve the company well in the short term but will only turn into long term stability and fuel real growth if he gets rid of the old guard and recognizes that for all its rhetoric, SAP just isn't innovating in a way that customers recognize.
Results could easily be very lumpy given that the company has ditched all pretence at a forward forecast. They are in a precarious position with much to lose and desperately need to be seen as the partner of choice and not just another money grubbing software vendor that ultimately doesn't care. My wish is that they reach January 1st, wake up to customer sentiment and delight us all by announcing a moratorium on the price hike. If they do that, then 2009 will be much easier to navigate. If not, then the only thing that will see them through as a truly independent company will be their own arrogance.
Next up: Oracle