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SAP has spent several years and several billion dollars trying to formulate a strategy that propels it ahead of an unprecedented set of market forces, and this year’s TechEd helped set the stage for a 2012 that is poised to be the year SAP finally crosses the innovation Rubicon.
Of course, as students of history will tell you, crossing the Rubicon was only the beginning of the journey that made an emperor out of the general who led his army over the forbidden river. SAP faces a similar journey – the real test will be in seeing how well SAP can marshal its technology, field sales efforts, and partner ecosystem into a fighting force ready for historic conquest. By contrast, showcasing a growing palette of innovation – which SAP did in spades this week at TechEd – is the easy part.
Because more and more the battle SAP now engages is truly epic – at least in the otherwise mundane world of technology – precisely because of the massive bets the SAP board has laid on the table: as the sole standalone enterprise software giant, SAP is fighting perhaps its greatest battle against market perceptions that bundling hardware and services is the only way to reap the margins and profitability that Wall Street believes are required of successful technology companies.
Those market perceptions have seen Oracle and its hardware focus become the standard of excellence for the sector, despite massive questions about the role of innovation at Oracle. These perceptions have also lead HP to embrace software and services, and Dell to embrace services as an adjunct to their own respective innovation Rubicons.
Meanwhile, SAP has chosen to largely stick with its software-only strategy, though more and more its offering are requiring a level of services that are making the concept of out-of-the-box functionality even more mythological than ever. Importantly, SAP’s software-inter-pares focus has made it the company to watch as Oracle prepares for its OpenWorld user conference and gets ready for a quarterly results call that will put a bright spotlight on whether Oracle can make good on Safra Catz’s promise to get the company back to software-like margins now that Sun has been fully digested.
The problem for Oracle is that SAP’s software strategy is making a lot of sense as an innovative wedge into the enterprise, one that has the potential for challenging the bundling and hardware-based low TCO strategy that is at the core of the Oracle way. SAP’s challenge is to prove that the advantages of its software innovation strategy provide a better long-term value than Oracle’s dual software rollup and Exa-twins strategy.
The potential advantages to SAP’s strategy were out in force at TechEd this year, from the gamification theme to the focus on mobility to the HANA drumbeat (actually drum and bugle corps is a better description) to the continual progress on cloud-based analytics. In conversations with customers and partners, it was clear that the top level message that SAP is innovating in areas that are near and dear to the market’s heart was being heard in all the right quarters.
The mobility and HANA stories were the most impressive to me. SAP has made it clear that its reading of the enterprise tea leaves have shown that the mobile experience is the design center for the enterprise of the future. I spent the first day at TechEd asking SAP execs of all stripes about this question, and the answer was consistent: if you are a customer or partner and want to develop a new enterprise app, your design starts with the mobile user experience. That app can use HANA, pull data from the Business Suite, and be as transactional or analytical as you would like, but if it doesn’t look good on an iPad, it’s back to the drawing board time.
This is not only consistent with where other market leaders and innovators are headed, but it also shows the recognition that even the most modern SAP Business Suite user experience pales in usability when compared to the standard mobile app: Which of course makes SAP’s Sybase investment make all the more sense. That was the observation number two from TechEd: the DNA strands from Sybase are more and more tightly interwoven with the core DNA of SAP, and the evolutionary advantages are starting to show.
Meanwhile, TechEd was HANA’s own Rubicon. SAP announced that the dream of HANA as an OLTP engine for the Business Suite was now within reach, and that the company was actively working to move several thousand SAP Business Warehouse customers off their Oracle RDBMS platforms and on to HANA. While many of these customers have to run the gauntlet of Oracle’s contract lawyers in order exit their license agreements without incurring huge penalties, SAP is busily preparing a business case for BW customers that will make it cost-effective for these customers to make the shift.
The prospect that SAP could be presenting these customers with a faster, better and cheaper way to run their data warehouses as compared to Oracle should rattle a few cages over at Oracle. And with HANA-ready apps and services, HANA as a platform play in the cloud, and other parts of the SAP in-memory strategy coming to fruition, it’s no wonder that SAP is touting HANA as the fastest growing pipeline for an SAP product in the company’s history (okay, so the bar might be set a little low, it’s still an impressive claim.)
This prospect of a major HANA pipeline – and that’s before SAP taps the multi-billion dollar BW replacement market – was a major reason for SAP’s success in its last quarter, a point emphasized by Bill McDermott when I spoke to him about the quarter in July. His other main point was in evidence at TechEd – the strategy of innovating largely around what SAP likes to call a “stable” core is one that is making tremendous sense for its customers. It was clear in every customer conversation I had that the notion of adding new functionality like HANA or new mobile or analytics apps on top of the Business Suite was making huge sense for these customers. This was the dual nature of every customer’s raison-d’etre a TechEd: keep an eye on what’s going to make the core easier and more efficient to run, while looking for the cool new apps that will make the business more competitive.
So the Rubicon has been crossed, what of the battle for the empire? The question really boils down to what the SAP board is willing to do about its innovation opportunity. The problem with SAP and innovation is twofold. The first is that the company has so much innovation going on in so many quarters that it risks drowning in the river instead of crossing it. This is of course a messaging problem for newly crowned CMO Jonathan Becher, who has the unenviable task of making sure SAP is consistently on message in the 24 industries and dozen or so major markets in which it wants to wear the innovator’s crown. This means places where SAP has been traditionally weak – like CRM and HRMS, both of which now have really nice new mobile apps in the quiver – as well as places SAP has been traditionally strong, like manufacturing and supply chain. It means taking the rest of SAP into the new markets, like mobility and financial services , that Sybase brings to the table. And it means distilling one of the more comprehensive and complex innovation messages in the market into the SAP equivalent of IBM’s Smarter Planet, or Oracle’s Engineered for Innovation.
The second problem for the SAP board involves Oracle, and to a lesser extent IBM: how willing is the board, because in the end it’s their decision, to take on Oracle in aggressive fight for the growing pool of IT dollars that McDermott now sees as shifting towards innovation. That fight requires SAP to shift from its usual preference to play defense against Oracle to playing offense, and the stomach for this fight is the real question.
Take HANA and in-memory as the perfect example: It’s clear that Oracle will be making a major move against HANA at OpenWorld –they threw down the gauntlet here even before TechEd was over. If SAP plays its usual hand, and Oracle plays its usual hand, then Oracle will successfully steal the in-memory ball and start running for the goal line, red and yellow cards be damned, while SAP will put on a sincerely good chase. Rinse and repeat for mobile – it’s hard to imagine Oracle will let another OpenWorld go by without making some commitment to the mobility market. The only real question is what is SAP prepared to do about it.
SAP has the opportunity to fight Oracle on its home turf – SAP is, after all, now a database company too – as well as take the fight to new markets. This opportunity would involve blending a strong innovation message with a strong total cost of ownership message, and it would involve direct engagement with an aggressive and highly successful opponent. To do so might not guarantee success, but failing to do so would guarantee mediocrity, and further threaten SAP’s ability to make the case to its investors that the last standing enterprise software giant deserves to continue standing.
I have to close this TechEd rant with a note on gamification, which was one of the themes of TechEd and was the subject of an Innojam – a 30-hour coding quest – that resulted in a contest for the best gamified app (of which I had the honor to be one of the judges). SAP’s focus on gamification in the enterprise is another example of some fearless thinking with respect to innovation, but the results from the Innojam proved to me that any fear of gamification is completely unfounded.
First off, the 13 teams that made it into the final round were exemplified by an incredible energy and creativity – and excitement – that itself was innovative. The sparks in the room were palatable, and the different approaches to gamifying SAP were impressive. My own favorite – the “Do I Know You App” mentioned in the link above, which is an app that lets meeting attendees put names to faces and otherwise learn about the people with whom they are about to meet – didn’t win, but it exemplified a winning gamified “SAP” app in three important ways:
- The user experience was hip, mobile, entertaining, and in very sharp contrast to the traditional SAP look and feel, even the Business Suite at its most modern.
- The app was engaging and intrinsically as well as explicitly rewarding, and the explicit rewards of gamification enhanced the intrinsic reward of being able to have a more engaging meeting, even with people one has never met before.
- The app enhanced an important component of the kinds of people-centric business processes that SAP has to capture in order to reach its billion-user goal.
It’s easy to say that gamification is really way out there, and is something that SAP is doing just to look cool, even as it pulls on its suit and ties it tie and heads off to that staid and boring enterprise software world of yesteryear. The Innojam proved that if SAP wants to unleash gamification as one of its next waves of innovation, it will have yet another army to march across the Rubicon. Gamification may prove to be as strong an innovation play as SAP has ever made, and that’s saying a lot.
On-demand Market Maturity and the User Experience: Salesforce, Workday, and Microsoft Show How to Get it Right
The week before Labor Day was an on-demand trifecta, a perfect storm of theory and practice on what the brave new world of on-demand software and services can and will evolve to in the coming years. It was the week of Dreamforce and the maturation of Chatter, the week that Workday hosted a group of influencers and, among other things, showed off a pretty cool iPad app, and it was the week that I decided to test drive Microsoft’s Office 365 and learned to live in the cloud happily thereafter. Not bad for the last week of summer.
The juxtaposition of these three topics isn’t just a matter of convenience for a blogger whose blogging backlog is measured in months. What struck was what these three events said about the maturity of an on-demand market that has been until this year dominated by an excess of wishful thinking about how the new technologies, work styles, and business models endemic to the hype curve of on-demand would translate into the real world – that staid and conservative workplace that we hipsters in Sillycon Valley tend to gloss over in our excitement over our new cool toys.
Looking at Chatter as part and parcel of a real business processes, Workday using the visual metaphor of the iPad to make on-demand workforce management an intuitive, interactive experience, and using Office 365 to greatly facilitate my multi-device, multi-location, almost-always-on work world made it clear that on-demand’s greatest contribution to our lives isn’t the simplistic notion of the “end of software” or that everything IT suddenly switches from from capex to opex , or even that IT resources can now be allocated in a completely elastic, transparent matter.
The real revolution of on-demand will be a combination of two factors: the first, which I’ve written about extensively in the past, will entail the development of new applications and services that simply could never be developed in the pre-on-demand world for love nor money.
The second, which my last week of summer experiences really brought home, is that on-demand – aided by tablets and other mobile devices, and benefiting from more than a decade of practical and impractical use – is revolutionizing the technology-based experiences of users and in the process vastly expanding the user base of technology. And it’s doing so by blending the old and the new, the stuff we’ve always done and the stuff we’ve dreamed – when we knew how – of doing one day.
These new user experiences are both dramatic and subtle, depending on the use case and the degree of revolutionary or evolutionary change – intended or unintended – that the on-demand software is now bringing to the table. Take Chatter/Workday: being able to approve a workflow-driven HR request inside a Chatter stream looks like such an obviously essential function that if you didn’t know that this was new and cool you would have just assumed that had always been possible.
Or, more to the point – in an ideal world you wouldn’t have bothered with a tool like Chatter unless it had this functionality: the notion that activity streams auto-magically enhance real business processes was a key part of the above-mentioned wishful thinking that characterized the hype phase of social, on-demand software. And Chatter-as-workflow-enhancer fits both of my criteria for being part of the revolution of on-demand: net new functionality you couldn’t deliver for love nor money in the old on-prem world, with a revolutionary user experience to boot. And hidden inside the value of this net-new cool stuff is solid grounding in the past: those old tried and true business processes that need to get done regardless of the newness or coolness of the toys we have to do our jobs with.
I had a similar epiphany playing with Workday’s new iPad app: you almost have to ask why anyone would bother to rethink HRMS and human capital management without building such an app and deploying it on a platform like the iPad. Of course, this is a management-level app, meaning that much of the hairy, hard work of managing a workforce isn’t intended to be in this app (no more than the hairy, hard work of the enterprise is intended to be done in Chatter, BTW). But when you think back to Larry Ellison’s famous epiphany in 1997 that his company’s HRMS system was unable to answer the simple question of how many people actually worked at Oracle, it’s clear that if Larry asked the question today there’d be an app for that, and it would look like the one I tested from Workday. Again – cool new functionality in service of a better way to do our day-to-day jobs.
While Salesforce and Workday are using on-demand to change the look and feel of the user experience, Office 365 is using on-demand to maintain a familiar desktop user experience while fundamentally altering the usability of that experience. It wasn’t easy for me to reach this stage at first – O365 suffers from a lack of concise documentation on how to migrate from an existing desktop Office experience to the O365 version. It’s the classic backwards compatibility problem that has dogged Microsoft since the dawn of time: if you want to move your desktop Office environment to O365, you have to not only run a confusing gauntlet of miss-matched documentation, but you’re largely left on your own to discover what the brave new world of O365 means to your workday once you throw the switch.
To be fair, the backwards compatibility problem of O365 exists precisely because it is replicating an existing work model in the cloud, unlike Chatter, which is creating a net-new user experience from the ground up, or Workday, which is deliberately trying to create a new HR metaphor. But Microsoft could, and should do better at showing how the net-new blends with the old to create a pretty impressive on-demand experience.
That experience is primarily defined by the use of an on-demand Exchange Server to synchronize Outlook’s email, calendar and contact list with any online device that can talk to an Exchange server. The synchronization works so well and with so many devices that the result is a degree of usability that, again, seems to be exactly what all the hype about on-demand has always been about: access from any device, seamless synchronization between devices, and largely seamless synchronization between the day to day of the work world and the hope and promise of the on-demand world. The result is a degree of connectivity between devices and those key elements of Office that has revolutionized how this road warrior wages war. It’s not about a net-new metaphor, nor about completely altering how I do my day to day: it’s about using the cloud to make what I do better. Much much better.
It would be unfair to the rest of the on-demand market to say that Salesforce, Workday, and Microsoft O365 are the archetypes of the phenomena of net-new functionality and new user experiences that enhance existing business processes. Clearly the phenomena have been in the market for some time, and both have many progenitors. But the fact that the on-demand market pioneer (Salesforce), the on-demand market fast-follower (Workday), and an old-line on-premise laggard whom many have wrongly written off (Microsoft) can all make an impressive showcase for what is not just to come in on-demand but what is here and now makes the end of summer 2011 a watershed for the market. With the promise of much much more to come.