John Schwarz, SAP board member, former head of Business Objects, and one of the leaders of a flying wedge of change that is permeating SAP, knows what he’s talking about when he characterizes the “new” SAP that is emerging from year one of the Léo Apotheker era.
So when he offered that the SAP he was presenting to the analyst and blogger community (among others – academics and other influencers were there too) was “not your grandmother’s SAP,” it was more than just a cute turn of phrase. There are a remarkable number of changes cooking at SAP, more than most realize, and much more than meets the eye, even after almost two days of listening to SAP executives articulate the components of the change that they have chosen to make public (and a few still being delivered under NDA).
That difference between what is said and what isn’t is an important distinction to make when judging SAP in the enterprise software market. Certainly, most companies are circumspect, if not cagey, when it comes to revealing what they’ve been cooking up with their R&D budgets. SAP is something altogether: a company that constantly struggles with conflicting cultural and historical imperatives about what it can and cannot say about the future.
The cultural conflict comes from the tension between German and Silicon Valley mentalities about marketing the buzz alongside reality. It’s a classic SAP problem that has been fueled by the growing influence of SAP Palo Alto’s more freewheeling culture, and while many would see it as a positive dynamic tension, it’s safe to say that sometimes a little too much dynamism is, well, a little too much.
The historical problem comes from the scars that SAP has carried for over-promising and under-delivering. Most recently this occurred with Business ByDesign (which is about to have its redemptive moment sometime in 2010), but there are other examples as well: Master data management, Duet, adoption of the full NetWeaver stack – SAP, like every enterprise software company, can be rightfully accused of pushing a few products and concepts way out in front of the market’s ability (or interest) in consuming them and/or SAP’s ability to deliver them. It’s the oldest story in high-tech: Sic transit gloria.
What still makes SAP a German software company and not a Silicon Valley company (and by that latter term I’m including the Redmond extension of Silicon Valley) is the company’s genuine chagrin at over-promising and under-delivering. If SAP were really a member of the brotherhood of American software companies, that remorse would be either non-existent or largely ignored in the perpetual dogfight for mindshare and market share. Indeed, one of both Oracle’s (and even Microsoft’s) amazing characteristics is the ability of these companies to never let failure get in the way of the next hyperbole. Both companies have launched more failures than SAP can shake a stick at, and both have a resolute culture of never looking back. (Or if they are tempted to, they borrow Satchel Paige’s maxim and assume that all they will see is someone gaining on them). And both companies, in case you hadn’t noticed, continue to be fabulously successful, despite the jackals nipping at their heals.
With that in mind, it’s important to look at the recent SAP Influencer’s Summit as a technology iceberg moving through the marketing sea, showing its tip but hiding much of its most impressive girth out of sight. This is particularly important in looking at the criticisms of CEO Léo Apotheker’s allegedly lackluster first year, which has apparently disappointed a number of observers and lead to all sorts of speculation, among which that Léo will be replaced by Hasso Plattner and that the company will be sold to IBM (both of which reveal a lack of understanding about legal and regulatory reality, or most other forms of reality as well.)
Indeed, it’s an ironic truth that the last year has been probably the most dynamic in SAP’s history. You can see that in the eyes and hear it in the voices of almost every SAP executive you meet. Some of that look is battle fatigue, but a lot of it comes from participating in a hyperactive year in which more formerly sacred assumptions were put to test than anyone at SAP would have ever thought possible. This is one of those assertions, by the way, that I cannot back up with fact as much as I would like (violating that many NDAs would be more than career limiting). So you’ll have to trust me when I say that this has been a year like no other at SAP, and one that will begin yielding results in 2010 that will make good on Schwarz’s promise that the omis of the world (or grossmutters, if we must be more formal) wouldn’t recognize the SAP of today and tomorrow.
Part of the new SAP comes from some of the cool technology and products that won’t be under-delivered in the market – in-memory databases and Explorer, the resurgent ByDesign, new GRC applications, enhancement packs, and new sustainability apps, to name a few. Also making SAP more of a force to be reckoned with is a growing understanding of its role in cloud computing (even though there was less said about this at the Summit than many inside and outside SAP would have liked – there’s that old cultural conflict again), performance management, social networking and in lowering the total cost of ownership for its customers.
This latter subject was touched on in a number of ways during the Summit, both in the keynotes as well as in breakout sessions. The omnibus version is the following, minus the background info that is controlled by an NDA: SAP has made lowering TCO a priority as a first step towards turning it into a competitive advantage – and thereby turning a year’s bad publicity about raising maintenance costs on its head.
The growing arsenal of products and services that can effectively lower TCO is growing significantly, and more is on the way. What SAP did emphasize in public is the ability to engineer relatively painless upgrades through its enhancement packs, drive more efficiency in implementation and upgrade by the broader use of SAP’s own services, and improve education and lower the total time it takes to implement an SAP system.
There are still some potential gotchas in the overall prospects of SAP, or at least places where SAP must be sure not to under-deliver. Orchestration is the big elephant in the room: in order for the SAP vision of a process-driven, hybrid on-demand/on-premise, SAP product and partner-led enterprise of the future to be realized, a robust and extremely well-architected orchestration layer has to be added to the portfolio. This will not only make sure that SAP can deliver what its customers need with regard to business processes, it will also keep a certain Big Blue wolf from blowing down the door with a similar offering that promises to relegate SAP applications to the commodity garbage heap. And for now, SAP orchestration is slideware, at least as far as a deliverable product is concerned. (Which puts SAP only slightly behind Oracle, which has deliverable product – AIA – but hardly a critical mass of users and not enough market momentum to propel this part of its strategy forward.)
Another big gotcha really revolves around timing and political will: What also isn’t said out loud in Walldorf or Palo Alto is how hard it will be to make the sweeping changes that are needed to keep SAP on an even keel in any short order. The will is definitely there: Léo, Jim Snabe, John Schwarz, and Bill McDermott, to mention a few of the board members – are definitely interested in making grandmothers throughout the world baffled when they hear of the new SAP, but that’s not enough.
SAP cannot and will not make the big, bold, dramatic revisioning that an American company might try to do: it’s just not in the DNA of the company. What SAP can and will do is make incremental change, slowly enough that it might be imperceptible, with the goal of accumulating enough change to really make a difference over time. This frustrates many in the punditsphere, and no small number of people inside SAP as well, but it’s really the only way big change will actually happen: through small, incremental steps.
So, here’s a few of those steps that augur much bigger changes (in no particular order):
A fundamental focus on the line of business: This is pretty much one of the most fundamental changes underway at SAP, and it effects everything from how products are designed to how services are delivered to how customers are engaged. Along with this focus is an understanding that the user base of SAP needs to expand exponentially in order for the company to survive and prosper. The number of initiatives and efforts underway at SAP to tackle this problem is impressive, and many of them will be unveiled during the course of 2010 and 2011. But putting out new products and services isn’t the only way this LOB focus can succeed, it needs a change in the sales organization as well.
A shift towards changing how and what the sales organization sells: One of many examples of this can be seen in the fact that Bill McDermott recently stole Sanjay Poonen from the product and marketing side to spearhead SAP sale’s continuing focus on enterprise performance management and related products. This isn’t the first time McDermott has crossed the sales/marketing dividing line for some top talent: Doug Merritt went over from the product side a little over a year ago to help out on sales too. Poonen had been helping the product and marketing side be more competitive against Oracle, particularly its Hyperion product, and was instrumental in getting SAP’s OutlookSoft acquisition into the limelight. Now he’ll be doing this on the sales side as well.
McDermott has also hired a top talent from Cisco to build an internal training program for sales, and has helped push an effort to change how customers discover the value in their SAP systems by creating an “academy” to transfer best practices into the partner and customer base.
The sum of these changes on the sales side the architecting of a new sales force that is more strategically focused on delivering value, not fulfilling quotas, and reaching the line of business user. This can’t be a slam-dunk, overnight success kind of effort. But over time, it could make a huge difference.
A shift in the partnering model in favor of Microsoft: The announcement at the Analyst Summit that Silverlight, aka the Adobe Flash-killer, will be the user interface technology for ByDesign follows quickly on a deal with Microsoft to make OutlookSoft, now called BusinessObjects Planning and Consolidation, the preferred EPM tool for the Microsoft stack. Meanwhile, the old Duet product name was actually mentioned at the Summit, a further sign that these two partners are getting closer than ever before. Azure, Microsoft’s cloud platform, may be the next stop in this growing partnership, though it’s not clear that Azure can satisfy all of SAP’s cloud ambitions. It’s not hard to speculate that there could be further aspects to this partnership, particularly with respect to significantly increasing the traditional dotted-line relationship between the NetWeaver stack and .NET.
I could go on, but this is turning into a dissertation, and not a blog post (Not to mention a tweet). Suffice to say that the reports of SAP’s stagnation are greatly exaggerated, and, indeed, what is really happening is an unprecedented renewal across multiple parts of the company. The question then becomes one of timing and ability to execute, which brings us back to where we started: SAP’s fear of following inevitable failure (as per the industry norm) with buzz and hyperbole may make it hard to see where the success has been until its impact has become almost mundane. At which point there is a genuine concern that customers, at least US customers, who are used to feasting on a diet rich in hyperbole, may become disenchanted by the reluctance of SAP to engage their taste for the next new thing.
My sense is that 2010 may be the year in which SAP whets the market’s appetite for buzz as it emerges from its info-cocoon and starts to boast a little more about what it was up to in 2009. It won’t be easy to pull all this change into a simple, easy to tweet, set of concepts that don’t take an hour (or the case of this post, more than 2000 words). But if SAP can go public with a coherent message around change, it could have an enormous impact on proving Schwarz’s contention. And, regardless of what everyone’s omi thinks, changing SAP as dramatically as Apotheker, Schwarz, and others would like will be a good thing for everyone. Even Oracle and IBM. But that’s another post altogether.