CRM has lots of proponents these days, and lots of momentum in the market, mostly for all the right reasons. But one reason in particular, specific to the public sector, and dramatically, almost radically important in its potential impact, is now beginning to take on a new focus. If you’re wondering why Microsoft, Salesforce.com, Oracle, and others are increasingly setting their sights on the public sector CRM opportunity, read on.

And as the election year looms large, and the level of intelligent public discourse continues to be threatened by political posturing, I have a proposal that I think would appeal to all sides. How about a new moon shot for the United States: a full blown, nation-wide, public sector CRM program.

There’s a whole lot more to public sector CRM than just improving costs and streamlining services: public sector CRM represents a new way to define the interactions between democracies and their citizens, and in the process drive new models of constituent relations and civic culture. And, if you’re like many of us on all sides of the political spectrum, a little uptick in civic culture is long overdue.

This is why I see red (as in ink) when I read about well-intentioned initiatives like sf.citi, which will “leverage the collective power of the tech sector into a force for civic action in San Francisco.” One of the main goals is to incubate new technologies for resolving civic issues. However well-intentioned the group’s goals, the fact remains that we already have lots of technology, in the form of CRM, that hasn’t even begun to be deployed as well as it could be.

The rationale behind sf.citi and other like-mined groups are worthy. Improving the interactions between citizens and government has been a goal of politicians, civil servants and their constituents since the dawn of democracy, but the ability to provide efficient and cost-effective service to constituents while empowering  them to have a stake in their own government has remained elusive: Not only has the complexity of governmental service and bureaucratic process grown in the last century, the ability of citizens to feel as though they have a direct stake in the overall functioning of government at all levels has diminished as this complexity has engendered a growing disconnect between citizens and their governments.

These issues play out in the context of a global need to streamline government and render it more efficient while lowering taxpayer costs. These requirements have been historically been ignored at best, and more often than not the cost of new technology has been a punishing burden for public sector entities. The global recession has made cost-cutting no longer optional, but essential for the preservation of much needed public services.

This disconnect between citizens and government, and between technology and lowering taxpayer costs, has been under attack in recent years as a new class of constituent relationship management systems has been deployed in the service of governments and citizens across the globe. The concept of CRM for the public sector – long promoted largely as a cost-efficiency move – is emerging as a tool that can help reverse this trend towards disaffection and disempowerment, provide a bridge between government and citizens that promises a more effective civic culture, and do so in an extremely cost-effective manner.

Well-designed and well-implemented CRM for the public sector can provide two key benefits. The first is the provision of government services at a greatly improved level of efficiency and cost-effectiveness. The ability of public sector CRM to facilitate, automate, and streamline interactions among citizens, government employees, service providers, and other stakeholders can be an important element in improving the overall cost-effectiveness of government. This provides a level of value to taxpayers that reinforces good governance and fiscal accountability. 

In addition, the unique ability of CRM technology to improve interactions inside government as well as between government and its citizens can have a salutary effect on public servants and their job satisfaction and effectiveness. By improving the tools with which public servants perform their day to day tasks, public sector CRM can significantly boost public servant job satisfaction and performance, providing an important value to a class of stakeholders often neglected in the quest for better government.

One of the leading vendors in this sector, but not the only one by a long shot, is Microsoft. A look at their somewhat disjointed public sector web sites yields some great examples of how Dynamics CRM is used in public sector entities all over the world.

Besides the obvious constituent management and 311 call center management functions, which are the closest to commercial CRM, Dynamics CRM is used by public sector entities for “offender management”, a wonderful law enforcement euphemism for tracking the bad guys, asset/infrastructure inspection, repair, and compliance, event management, health and public health management – as in managing public assistance recipients and the services they use, case management, permit tracking and approvals, teacher certification and management, and lottery sales and management. It’s a long list that seems to have no bounds.

I got a little envious reading what some of these leading edge public sector agencies were doing. Imagine if your town had a central CRM database that could be accessed for all the services you need from your municipality. How about online permit submission? How about a geographic database that knows where you live so that when you report a street light outage, you’re not required to find an obscure number on the pole to submit with your report? What about automating dispatch for pothole repair? And however jealous I was as a potential user, as a taxpayer I would expect to be even happier if my city did one half the things a modern CRM system can do.  

The Goals and Challenges of Modern Democracies

There’s an almost insane amount of opportunity for public sector CRM:  In addition to helping governments cope with budget and manpower issues – now greatly exacerbated by the global recession –the adoption of commercial CRM technology in the public sector can also help local and national governments overcome constraints created by both the quality of the technology available to support public sector activities and the different government entities’ ability to consume this technology.

These constraints are becoming more and more limiting, and are themselves exacerbating another key problem: The complexity and reach of government activities and services has grown by orders of magnitude in the past two decades, and with that complexity has come a growing sense of distrust and dissatisfaction on the part of citizens towards their governments. While this citizen distrust and dissatisfaction has been well-documented, particularly in the United States, what is less well-documented is a similar level dissatisfaction on the part of many government service workers, particularly those in the front-line of constituent service who bear the brunt of citizen frustration.

An excellent example of this dynamic can be seen in the problems that local citizens in Los Alamos County, New Mexico face in identifying the correct agency to contact regarding a problem with a tree. Depending on what needs to be done – remove a tree that is interfering with power lines, inspect a tree that is infested with parasites – and which local jurisdiction “owns” responsibility for the tree – the county, the U.S. Forest Service, the Division of Public Works, among many others – there are twelve different responsible agencies under whose jurisdiction any individual tree might fall.

As cited in Customer Service and 311/CRM Technology in Local Governments: Lessons on Connecting with Citizens, published in 2008 by International City/County Management Association, any citizen calling a local government office in Los Alamos County about a tree problem is faced with running a gauntlet of jurisdictional and administrative complexity that is equally unclear to the government official trying to respond to the citizen’s request.

This example is all too common, regardless of the size or location of the government entity. The report goes on to note that the results of this service complexity and a dearth of tools can prove frustrating for all:

Even in small communities with populations less than 10,000, it is not unusual to find eight to ten departments operating within the local government. For citizens trying to determine which department or division they should call with their specific questions or requests for service, the complexity of the organization can be confusing and time-consuming to unravel. And often, local government employees are not sure themselves where to direct a particular phone call. They can end up misdirecting people and possibly leading to multiple transfers before the citizen reaches the right staff member.

This combination of public sector complexity, with overlapping roles and jurisdictions, citizens’ inability to navigate this complexity, and public servants’ lack of a means to properly assist citizens in overcoming this complexity, is at the root of a growing set of problems in modern democracies. These problems, in turn, are contributing to an erosion of trust and civic culture in local, regional, and national governments worldwide.

Citizens and Civic Culture: The Problem Set

At the core of the problems of complexity and trust is the inability of many governments to optimize the services they deliver to citizens in a way that benefits the many stakeholders in the government service process. In addition to citizens, these stakeholders include employees, such as call center and field service employees, that work directly for government agencies, as well as third party contractors that either provide services on behalf of the government or interact with governments on behalf of citizens. 

This large set of stakeholders must interact in the accomplishment of the many processes that inform civic life, and do so in an optimal way. Whether these interactions involve permit and license processing, garbage services, voter registration, parking tickets, or support for visitors and tourists, the efficient accomplishment of these processes is a key element in the defining the perception of effective government. Inefficient or wasteful processes that frustrate or burden citizens are part of a government “performance” problem that researchers like Harvard professor Pippa Norris, author of Democratic Deficits: Critical Citizens Revisited, characterizes as key to the erosion of civic culture.

The process inefficiency that is rampart in the public sector has at its origin three key factors that stem from the growing complexity of society and the intersection of citizens and their governments.

The first is the growth of information. The data required to efficiently run even a small local or regional government is growing at an extraordinary rate. Understanding how those data can be used efficiently – whether the data is about citizens or government assets or any other relevant asset or stakeholder – is a major challenge to be overcome.

The second major problem is the accessibility of that information. Not only is there a massive amount of data in these processes, many public sector information systems are ill-equipped to render these data usable by the different stakeholders. Existing information systems are often antiquated, siloed, and suffer from a lack of funding and expertise. Meanwhile, the vast majority of research and development in software and information technology is targeted at commercial, not public sector systems, and as such the resulting applications and tools are often ill-designed for public sector use. This results in much of the technological lag in the public sector that President Obama referred to an address to the OMB Forum in March, 2010:

Public servants, President Obama noted, are more than willing and able to participate in improving the interactions between government and citizens. “But all too often,” President Obama said, “their best efforts are thwarted because the technological revolution that has transformed our society over the past two decades has yet to reach many parts of our government.”

The third major problem is the historic inability of governments to keep up with the need for new processes to effectively manage the growth in information and the need to better manage citizen/government interactions. This problem is both a public policy issue and an information technology issue: governments need to mandate change, and then work closely to ensure that the change is implemented in the most effective manner using the best technological tools available.

Importantly, the impact of using technology to improve government effectiveness need not be a matter of spending more to do more. Indeed, in many cases, these approaches can be extremely cost-effective. According to a report by CALPIRG, the California-based public interest research and lobbying group, the payback for undertaking the initiatives that bring citizens and government closer together can be significant.

A recent CALPIRG report,California Budget Transparency 2.0, highlights the example of the state’s Reporting Transparency in Government website. The site, which cost $21,000 to develop and $40,000 annually to maintain, provides access to state budget and other data for citizens to download and analyze. In one example cited by CALPIRG, citizens using the site were able to look at usage data for the state’s automobile fleet and direct administrators to information that suggested that the fleet was larger than needed. This resulted in the reduction of the fleet by 15 percent and a savings of $24.1 million.

What the CALPIRG report, and others like it show, is that many of the technologies used by the private sector to engage customers and partners with businesses can be applied to the issue of engaging citizens and other stakeholders with their governments. This is very much the case with CRM software and related technologies.

The success of a number of vendors’ public sector CRM offerings shows that there is a way to help improve the functioning of government and help reverse some of the corrosive effects of government complexity and citizen disaffection and distrust. The fact that modern public sector CRM systems are increasingly inexpensive to implement and equally as inexpensive to modify helps satisfy the need for governments to be accountable to taxpayers when it comes to spending on technology. This accountability is itself a key element in civic culture and trust, and being able to build highly effective citizen interaction systems based on a cost-effective CRM package brings an additional value to public sector entities.

That accountability is extended by the analysis that can be undertaken once key public sector processes are mediated by a modern CRM system. The analysis that a CRM-based municipal service and support system can perform regarding problems with malfunctioning parking meters, or the citizen satisfaction rates that a  city can analyze based on data from its CRM system, support a metrics-based society that in turn can actively optimize its citizen-support processes based on real data, something that has been largely impossible for most public entities to accomplish.

Finally, the notion that modern CRM systems can improve the effectiveness, and therefore the job satisfaction, of government employees and other stakeholders provides a new lens with which to view the role of technology in public sector entities. Ensuring that the growing number of interactions between citizens and public sector employees take place under optimal conditions of effectiveness and efficiency provides a environment for improved public service that benefits all.

So, before we launch public/private initiatives a la sf.citi, we should start with something we already have and know well. CRM in the public sector is an idea that has so many applications, so many examples from the private sector on which to draw from,  and so many good products to deploy, that it’s almost criminal to consider running a democracy without a full-blow public sector CRM system. I’d love to see this become part of the dialogue in the coming election cycle, instead of some of the nonsense we’re seeing in the public discourse. With CRM’s proven ROI in the private sector, it should be easy to cost-justify a serious national investment in modernizing citizen/government interactions. Who needs to colonize the moon when there’s so much more we can do to make life better here on earth, for so much less?

Nothing succeeds like success, the old saw goes, but there’s a dark side to the kind of success that SAP has been enjoying for the past year. Success of SAP’s magnitude is hard to achieve, but, more importantly, it’s even harder to maintain. And as I look at SAP’s recent financials, and its growing market clout – not to mention the strategic stumbling of arch-rival Oracle – it’s become obvious that co-CEOs Jim Snabe and Bill McDermott now have an even more daunting task at hand: keeping the luster bright on the shiny new penny called SAP.

The essential nature of this task can’t be emphasized enough. The problem with success is that people get used to it, and then require ever greater measures of success, or else: it never takes long for the congratulatory glad-handing and back-thumping to be replaced by a series of “what have you done for me lately” questions, that, absent the right answers, lead inexorably to a reversal of fortune and an ignominious exit for the same leadership that seemed to be infallible only moments before.

The best metaphor for what is currently happening to SAP comes from mountaineering: experienced mountaineers know that having enough energy and supplies to get you to the summit is only half the battle, and sometimes it’s the easiest half. To be a successful mountaineer also means knowing how to save enough energy and resources to get back safely to base camp, with the emphasis on safety: for lots of reasons – fatigue being only one of them – getting down off the mountain can be much more treacherous than going up.

And, getting back to base camp is what it’s all about, because if you’re a real mountain climber you’re not going to be satisfied with conquering just one peak, you need to get down off the summit you’re on in order to get ready to climb the next one.

SAP is facing its own mountaineering trial, and the going promises to be as much a challenge as anything else the company has faced. This climbing-down-the-mountain-to-climb-back-up problem is totally, and willfully, self-inflicted:  the problem, simply put, stems from the fact that SAP is  standing on the summit today. Pretty much any way you measure success, SAP has it. Great revenues, growing customer count, some amazing innovations, two recent, very strategic big acquisitions, good people, and, if you subscribe to the zero sum theory of enterprise success, a ton of affirmation in the apparent flaws in Oracle’s business and technology model.

Part of what SAP needs to do is just get off this particular mountain successfully, the other thing it has to do is get started on identifying and climbing the next peaks. Here’s my take on these two imperatives:

Getting back to base camp

SAP’s biggest challenge is in consolidating a long list of initiatives, products, technologies – not to mention acquisitions – into a coherent whole.  Or as coherent as possible. It’s not only that the company has too many individual products in more than a few categories – five HRMS systems, three CRM systems, four databases, a wide-ranging collection of mobile apps, and an even wider range of development environments – it’s that SAP has to find a single voice and a single message to surround this ever-growing portfolio, however broad and overlapping it might be. This is essential not just for the immediate go-to-market effect of having internal and external consistency, it’s a main requirement for scaling the next set of big peaks SAP needs to focus on.

With that coherency of message must come coherency of leadership. The dynamic tension that exists in a company with two boards and two CEOs can be a major source of strength: I’m convinced that this large and complex structure has served as the forge for the market leadership and success SAP enjoys today. So, while I don’t think for minute that SAP should move to a more centralized and autocratic model (which it couldn’t if it wanted to), but I do think that as SAP climbs down the mountain it needs to be seen inside and out as working from the same playbook. And that involves not just ensuring that messaging and positioning are synchronized, but also that SAP’s famous consensus culture be valued as an asset and not used as an excuse for disharmony.

This is essential as SAP tries to harmonize its products and messages under a single banner. It’s clear that there are a hundred battle lines that could be drawn in the fight to build a more singular vision and product set: the worst thing SAP could do is actually let those lines be drawn in the first place. Being able to get the company ready to scale the next peak also involves making sure that SAP functions more as a team and less as a set of competing factions. For better or worse, SAP is competing in a market where the autocratic model predominates, which gives SAP’s rivals a maneuverability that an SAP at war with itself will eventually lose to.

Finally, SAP has to take a greater position on the world stage as a global player. The fact that no one from SAP was at the table when U.S. President Obama came to Silicon Valley last year is emblematic of the issue. While Obama detractors saw this event as just another fund-raiser, the real issue is that, fund raiser or not, it wasn’t even expected that SAP would be there.

As part of getting ready for the next set of peaks, it should be a given that SAP plays on this stage. SAP co-CEO Jim Snabe meets with German Chancellor Merkel frequently, and SAP should be taking a seat at the President’s table here in the US frequently and visibly. This isn’t about politics as much as it is about perception, especially in the consumerization of IT mountain that SAP want to climb.

Obama’s dinner companions included a number of aspirants to this opportunity: Yahoo, Google, Apple, Twitter were all there, at least in part because they are identified across the consumer and business domains and therefore made for a good Valley photo op for Obama. And they were all there because they’re seen as leading edge companies driving innovation and growth, not to mention jobs. Et tu, SAP?

And, to top it off, Oracle’s Larry Ellison was sitting at the table too. Bottom line, SAP needs to be counted as a member of this club. What good is having an American co-CEO if he can’t get a dinner with the President?

Climbing New Peaks

If SAP can climb down the mountain with an understanding that products have to rationalized, internal harmonization needs to be more harmonious, and SAP needs to play more on the global stage, then I believe the company will be ready to scale three new peaks that will help Bill and Jim keep that shine alive.

The first is the growth of a developer community worthy of the new harmonized platform and product strategy that SAP needs to create. It’s clear that everything about SAP’s aspirations as a cloud company, an analytics company, a database company, and mobile company will depend on having a solid, unified, and highly focused developer community that can make SAP the App Store of the enterprise.  That developer community will only show up if there’s a clean, easy commercial environment – a la the Apple App Store – where the developers can sell their wares. This is a huge mountain to climb, and an expensive one. But everything on the enterprise side of SAP’s future success, and on the consumer side as well, rests on the creation of this community and a place to sell its wares. And without the harmonization of product and direction, this community won’t even know where to start, much less where SAP will be able to take them.

The second is harnessing the sensor revolution, also known as the internet of things. There are literally billions of sensors being sold in the next few years, every one of them capable of enough intelligence to act as a data source, if not a data consumption device. These include the sensors in our phones, tablets, and smart appliances as well as in cars, factories, refineries, libraries, utility meters, and medical devices, just to name a few.

These devices present two extraordinary opportunities for SAP. The first is on the data analysis side: if ever there were an incredibly rich source of data for HANA to analyze, these sensors are it. The petabytes of data generated will need analysis, and HANA would be an ideal place to start. The second opportunity is on the business process side: the data streams that are analyzed from these sensors will present decision makers with opportunities to much more intelligent decisions across the enterprise and in their customer interactions, and the richness of those data and those decisions will create new ways to improve on existing business processes and create new ones. That will be particularly true when these sensor-based data are married to internal ERP, supply chain, CRM, or HRMS data: if SAP can broker that marriage, than the gains of the last two quarters will look modest indeed.

The final mountain to climb with be the convergence of the consumer world and the IT/business process world. This will be huge, and hard, for SAP to do credibly: there are very few that can actually do both – Microsoft and HP can, but that’s mostly a back-end convergence, not a go-to-market convergence built on leveraging internal synergies. And despite the iPad’s success in the enterprise – as SAP has proven so well – Apple still has to prove that it can change its DNA and get into the enterprise space via the front door, instead of coming in the backdoor as it has with the iPad.

All this means that SAP will need to get its ducks in a row to be able to graft a real consumerization play on top of its enterprise play.  It won’t be easy, but not making the consumerization play is not an option: this is where technology is going, and it’s where SAP needs to go too.

Notice how I haven’t mentioned mobility, in-memory, or on-demand once. That wasn’t a mistake: while I think the on-going focus on the big three initiatives at SAP has provided a much-needed coherence over the last two years, I think these concepts have worn out their welcome. The reason is simple: all three represent enabling technologies, not business-ready or consumer-class solutions. Bill, Jim, CTO Vishal Sikka, and pretty much everyone at SAP has done their level best to make sure everyone knows that SAP can deliver on these three technologies.

But now is the time to talk about what SAP is going to do to synchronize these technologies with demonstrable business, and eventually consumer, value. HANA as a replacement technology for Oracle DBMS in the SAP Business Warehouse is an excellent example, and from a sales pipeline standpoint it’s a big win. But SAP needs more examples like this one, not just for HANA but for mobility and on-demand, and this solutions dialogue is the one that it needs to have with the market, much more than the pure technology conversation it’s been having of late.

Keeping the shine on SAP won’t be easy, so don’t be surprised if there’s a new sense of urgency now that SAP is on top of its game. The old battles – Walldorf vs. Palo Alto, marketing vs. development, my new thing vs. your new thing – need to abandoned so that room can be made to engage the new ones. And that’s not just because SAP needs to get ready to scale a few more peaks, but because its never-ending list of rivals – Oracle, IBM, Salesforce, Microsoft, Workday, Infor – will be trying to either climb the same mountains or find others from which they can challenge SAP.

Every one of the above rivals, and many others, will be dead-set on putting a little tarnish on Bill and Jim’s shiny new SAP as they climb down the mountain and get ready for the next peak. Nothing succeeds like success, but success also helps increase the size of the target. This year marks the 40^th anniversary of the founding of SAP. With the benefit of 40 years of hindsight, it’s safe to say that things have never been better for SAP. And they’ve never been as precarious either.

SAP is doing something significant in the acquisition of Datango, the question is whether the market will react accordingly. The move is significant in that Datango offers a new paradigm for enterprise software training, but that significance is tempered by the sorry state of training content and the unfortunately legitimate attitude of many a CIO that spending big on training is wasted.

The attitude is legit largely because of how poorly the market has approached the development and delivery of enterprise software training.  Basically, enterprise training is broken, and most companies ignore it entirely or pay lip service to training their end users. This is because most training content doesn’t match implementation reality, training only happens at the initial time of implementation, and training is usually dumped into user’s heads during mind-numbing day-long classes, which means that it is forgotten the moment the class is over. Not to mention the fact that few companies refresh their end-user training during the enterprise software lifecycle, nor do they bother to train new hires.

The problem with this picture is that good training could make a huge difference in many areas: process mastery and overall software ROI is only the start. End users who are well-training tend to like their jobs more, customers who interact with well-trained employees tend to like their vendors better, and companies in regulated industries that train their employees well tend to stay out of regulatory purgatory more. There’s no end to the potential ROI of good training.

Despite the theoretical value that good training provides, training in the enterprise software world has been a colossal failure. It should come as no surprise that training budgets – as well-evidenced in SAP Education’s declining revenues – have been falling over the years as the awfulness of most training content has met the real problem of cost-justifying this awfulness. (For a look at what happens to SAP customers who skimp on training, Michael Doane’s work on SAP end-user maturity is essential.)

Datango’s ability to do advanced simulation provides an excellent platform for providing this desperately needed transformation of training as a dumping ground for talent and aspirations into training as a strategically necessary arrow in any enterprise software user’s quiver. I spent some time looking at Datango several years ago as part of a major review of enterprise software engagement models, and it was clear that Datango could add a lot to the development and delivery of next generation training.

The main problem for  SAP and Datango will be in convincing CIOs and business process owners to make the investment in technology and people in order to elevate training’s strategy value. Oracle bought UPK in 2008 with the similar goal of driving advances in training into its customer base, and thereby building a solid training revenue base. Those goals have largely been dashed in the ensuing three years, not because UPK isn’t a good product — it most fundamentally is, and enjoys a significant penetration in the SAP customer base as well as the Oracle customer base. The problem is that the value of training has never been elevated to meet the technological advances that UPK and now Datango can offer. The result has been missed opportunities for both vendor and customer.

So, good for SAP that it now has Datango under its belt (and, by the way, when they get around to adding Right Hemisphere’s visualization technology to enterprise training, SAP will have an truly impressive-looking training platform). The trick will be to convince a weary and jaded enterprise training market that it’s time to take another look at this neglected corner of the budget and prioritize training and process mastery once again. My guess is the investment in changing the industry’s collective mind about the value of training will make whatever SAP paid for Datango look small in comparison.

I’ve been working in the interactive gaming and gamification industry for over four years now, first as the founder of a now-defunct start-up focused on developing interactive training games, and most recently as a hands-on catalyst for enterprise gamification. It’s been gratifying to see this idea crop up as a topic of considerable interest – and research – in 2012.

And while the majority of what has been done with enterprise gamification to date has really been about marketing and customer engagement, I believe that we’re poised for an enterprise gamification revolution inside the enterprise that will take the largely unrealized concepts of social collaboration and create the engagement metaphor that will, finally, help companies realize these lofty social/collaborative goals. And their lofty investments in what has been a less-than-stellar reality for many, users and vendors alike.

The bottom line concept for why enterprise gamification will enable real social engagement and collaboration is this: our existing enterprise business culture and its processes and technology have ill-equipped us for supporting the kind of ad hoc collaboration that we need in order to take business efficiency and effectiveness to the next level. Nor are we able to use new social media and collaboration tools to force fit this requirement into the enterprise. Why? Because, fundamentally, we don’t know how to collaborate in this wild world of unstructured, ad hoc, highly interactive, always-on and highly virtual people-to-people-to-enterprise connectivity.

We need not just new technology but new kinds of processes in order to meet these requirements: Enterprise gamification will show us the way.

In the old world of ERP-based transactions, business processes were largely proscribed – either by regulation, law, or practice. This made it relatively easy to design and build a process for, say, invoice reconciliation, that, while perhaps boring and inflexible, was proscriptive precisely because there was a process that had to be followed to reach a desired outcome. This ability to define processes led to the growth of the enterprise software market that we know today: proscriptive, repeatable processes codified in packaged software. That’s been the state of the market for over 20 years.

In the new, post-ERP, post-transaction world, we have discovered that trying to harness the potential for human interaction and collaboration can’t be based on neatly proscribed processes, because real human collaboration simply doesn’t work that way. Indeed, we often cannot begin to fathom what the process would actually be to, say, collaborate on building and maintaining an enterprise knowledge base, mostly because to command that it should happen, the way we command that invoices be processed according to GAAP rules, is neither possible nor desirable. You simply can’t order your way to a truly collaborative process.

Rather, when looking at the post-ERP requirements of the 21^st century social/collaborative enterprise, instead of proscribed processes, we have desired outcomes. This notion of outcome becomes the focal point of a collaborative process the way transactions were the focal point of classic business processes. Thus, an outcome might be something as basic as “better customer service” or “better cross-business unit collaboration”, but in either case outcomes start with two basic characteristics: that lack of proscriptive process I just mentioned, and a conviction that an outcome can benefit from collaboration between different stakeholders, if only there were a collaborative process in place to make that happen.

The notion of outcomes has two more essential characteristics that need to be understood: they have a genuine value to the enterprise, and that value can be turned into a KPI that hopefully can be measured in some fashion or another. Gamification, it turns out, is ideal for analyzing and reporting on these values.

Finally, there’s the final rock-solid foundational component for enterprise gamification, which I alluded to above: despite the desirability of the outcome, the stakeholders need to be shown how to collaborate in order to reach these goals. This is the dirty little secret of the social/collaborative world in which we are trying to live today. We’re not a very collaborative society – this is, after all, the nation of the rugged individualist, the Jeffersonian pioneer conquering the wilderness. Enlightened and capable, naturalement. But collaborative? Not us.

This is where enterprise gamification becomes a powerful tool for the 21^st century enterprise. The key benefits of enterprise gamification are seen in providing a system of incentives and disincentives that direct individuals and groups towards a specific set of behaviors that in turn positively influence a desired outcome. A well-designed enterprise gamification environment becomes an engagement mechanism for collaborative behavior that can overcome the natural inability of people and enterprises to collaborate effectively towards a common goal.

Thus, the classic gamification elements such as points, badges, contests, leaderboards, ratings – not to mention fun – are put to use incenting people to collaborate and cooperate towards the desired outcome. On the way people get tangible rewards, peer and supervisor recognition, a sense of purpose and collective action, and other psycho-social rewards that can help the individual and the enterprise reach the apex of Maslow’s hierarchy. And have some fun doing so.

But that’s not all. Because all the stakeholder interactions are taking place inside a gamified technology platform – even those interactions that require use of some enterprise or desktop software system – there is an unprecedented ability to measure how well individuals and groups are collaborating. This analytical capability isn’t just limited to people: the same environment can also show as how well the technology components – the gamified elements and the enterprise or desktop software systems – are working towards serving the desired outcome. This ability to measure how people and processes interact – and offer guidelines for improvements –  will provide an unprecedented window into the enterprise’s overall effectiveness.

Meanwhile, something subversive is happening inside the newly gamified enterprise: people are more engaged, more able to understand and support the outcomes that matter to the enterprise, and they are being recognized and rewarded for these actions. This ability to acknowledge the contribution of individuals in a collaborative endeavor isn’t unique to gamification. But only in a gamified environment can everyone – employees, their peers and their supervisors – see the value of those contributions to the individual, the work group, and to the company as a whole.

In conclusion, I have to confess to an essential problem that continues to bedevil enterprise gamification: a real ROI. The problem with the above is that it’s very theoretical, there simply is no data to prove that enterprise gamification works, yet. That’s the real goal for 2012: start taking the theory into the field and show how it works, and do it well. That’s one of my person goals as a gamification catalyst, and one that I will be writing about further as the year unfolds.

Luckily for all of us in enterprise gamification, there’s lots of solid data on how well traditional multi-user, online gaming works in terms of issues like user engagement and knowledge transfer: multi-user game researchers like Nick Yee and game-based training researchers like David Williamson Shaffer, to name two of hundreds of researchers in these fields,  have amassed considerable data that supports the notion that gamification could have a powerful impact on the enterprise. This body of research is vast, comprehensive, and provides, in my opinion, an effective starting point for cost justifying enterprise gamification. But more is needed, nonetheless.

So, hold tight, it’s going to be a fun year, and a year when fun enters the enterprise in the most subversive guise possible: as a means to make good on social collaboration and the potential for greater efficiency in the performance of ad hoc processes. It’s a worthy goal, and enterprise gamification is a worthy platform. Onward!

This is a story of a credit card fraud that happened to my wife and I just before the holidays. It’s an amazing one that apparently involves insiders working at Chase.com and UPS, but the fraud is only half the story. The other half is about incompetence, poor call center training, broken security processes, and how once again the weakest link in any business process is the person trying – or not trying – to do their job.

So if you’re counting on Chase to protect your identity or work proactively to solve a serious identity theft against you, read on. You may want to reconsider placing your precious identity in the hands of this clown car masquerading as the largest U.S. bank.

This is also a story about how, once the rogue human element is inserted into the picture, automated call centers and logistics systems make it too easy to steal – in this case by intercepting newly ordered Chase credit cards from a UPS distribution center, using a pilfered security code to activate the cards, and then going on a heckuva holiday spending spree. And it’s the story of  how hard it is for one of the biggest banks in the world to fathom that it’s just been stung by a not –very-sophistacted inside job. Chase would rather blame the victim than heal itself.

The story begins one morning three weeks ago with the receipt of an email from Chase, the issuer of my Southwest airlines credit card, that alerted me to the pending arrival of a “the new card that I ordered.” It also cautioned me to contact Chase if I hadn’t ordered it, and as I hadn’t ordered it I immediately called the call center.

And thus began a comedy of errors that has run now for three solid weeks. First I was told not to worry, that this must be some kind of routine re-order. I persisted, and was then told that indeed my wife had ordered the new cards the night before. I told them she hadn’t, and I was asked, I swear, if I was sure that she hadn’t. Yes, I was sure.  I was even asked if I had actually asked her if she had ordered the card. This conversation was going south quickly.

Having filled my idiot quotient already, I forced the call center agent to put her supervisor on, and he and I determined that some sort of fraud was happening, though with a curious twist: the new card was being sent to our home address. Nonetheless, we cancelled the card, retired the account number, and ordered new cards to be sent to us. And we put a new security password on the account so that all future activity would be required to “go through” the new password. For the record, the new password was written down on a piece of paper and my wife and I then entered it into our respective computer systems using a relatively elaborate code.

That afternoon, armed with the tracking number for the fraudulent card (but not the new ones, Chase didn’t give that tracking number to me) I began to track the package on the UPS site. At 3 pm a notation showed that the packaged was being diverted from home delivery to a pickup at a UPS facilty, on the request of the receiver – not me, but obviously the woman who had pretended to by my wife. This made some sense, as it wasn’t obvious how the thief planned to get ahold of the card once it had been delivered to my house. It would be soon, however: I  hadn’t counted on the UPS side of this scam.

At 6 pm a new notation showed up in the UPS record, indicating that the thief had changed her mind and was now requesting it to be delivered to the house. Which meant that we were going to get three cards the next morning (a Friday): the two new cards and the original fraudulently ordered card.

Friday morning comes and around 11 am I get a call from Chase, checking on some recent activity with my new card. New card? Yes, one of the cards I ordered the previous day – and secured with a new password known only to Chase and me  – was being used at the Apple store in San Mateo, CA (above 45 minutes south from here) to great effect, ,while the other one was shopping its little heart out at SunGlass Hut in Napa, this time 45 minutes to the north. Merry Xmas.

Having never seen these cards, or even having an inkling of the new account number, I was dumbfounded. I immediately asked to speak to a supervisor, and was told that the cards were signed for at my house that morning at 9:50 am. I told them that was impossible, as I was home all morning and saw no no sign of UPS.

Maybe, it was suggested, with the utmost seriousness, UPS had showed up and someone waiting outside my house signed for them. Also not possible – Amber the wonder dog goes into serious intruder alert mode at the site of a UPS truck, and would have been barking up a storm at the site of a truck and some stranger in front of my house receiving some packages. In other words, the package had not only not been delivered, it hadn’t even made it to a delivery truck but had been stolen from the UPS distribution center in San Pablo, CA sometime after its arrival scan. (I checked with a UPS driver on this: had the thief diverted it from a delivery truck, the package would have been located in the electronic manifest of the truck and the driver would have become suspect  #1 in about two seconds. UPS drivers, unlike the seasonal help UPS hires in the DC during the holidays, are pretty unlikely to risk their jobs and pensions for a relatively minor fraud like this one.)

Then, I asked the Chase supervisor the two questions that have bedeviled Chase since that day:  1) how can you activate a new card that is password protected without the password, and 2) how can someone intercept a package from UPS without a tracking number? Bear in mind, I had encrypted the new password on our computers and I had never received the tracking number.

Absent a reasonable explanation that has escaped me for these two weeks, I have to conclude that it was an inside job: Someone at Chase stole my wife’s identity, ordered the first card, and then, noticing that it had been cancelled, stole the new password and tracking info, passing the latter on to his or her partner at UPS and using the former to activate the card. The fact that this theory seems possible is reinforced by Chase’s inability to actively investigate this fraud: Their investigative incompetence has left a security hole a mile wide in their credit card operations, and anyone who knows what I know about how Chase deals with fraud would have easily been able to pull  this off with some reasonable assurance that Chase would be unable to figure it out.

Indeed, this is where  the farcical elements of the story begin to pile up. Chase has now spent the last three weeks attempting, and failing, to figure out how this fraud could have taken place without the involvement of someone inside Chase: it’s clear that their investigation is centered on a desperate attempt to show that no inside job took place.

Instead, some pretty silly alternative scenarios have been suggested. The best was the theory that someone in my house listened in on the phone call and obtained the new password. I have interrogated my wife, my two young children, and Amber, and none of them apparently stole the data. (Amber broke and confessed to sleeping in the bed while we were out of the house, but that was it on our end.) Chase has also continued to assert that no identity fraud has taken place from inside Chase, and that, rest assured, Chase is working to resolve the matter.  (I have learned that “rest assured” is Chase’s little call center mantra, it’s probably on a poster hanging up next to a picture of Chairman James Dimon. Trust me, it’s one of the great oxymorons of modern business.)

And, just to be clear, without revealing too much, if this fraud was accomplished by listening in on my phone calls, the scam could have been much more comprehensive. Nuff said on that.

There is one other scenario that has degree of possibility with respect to authorizing the pilfered credit cards: judging from weeks of dealing with Chase’s call centers, including people who claim to be two and three levels above the level one responders, it is possible that some gross incompetence in the Chase call center allowed the person who diverted the cards from UPS to activate them without the password (using my mother’s maiden name), though I was assured by Chase that a call center rep can’t even enter the activation screen without the password. This still doesn’t solve the question of how someone can pull a packaged out of a UPS distribution center without a tracking number, unless another poorly trained Chase call center rep gave out the UPS tracking number to a caller without correctly verifying their identification.

I leave open this possibility because it turns out that poor training and gross incompetence is Chase’s forte when it comes to call center operations. One of many examples: After the replacement cards were intercepted from UPS, we had them cancelled and two new cards ordered, with yet another new password set up for the account. The new password, I found out five days later, hadn’t actually been entered into the system, or it had been entered and erased by someone. It was a heady moment when I first called in and tried to access the account with the new password, only to find that I had to use a previous password to check on a fraud notification alert (see below on how they mucked this one up  too).

Chase, in a rare moment of humility, acknowledged this failure to record the new password was an error.  The fact that a call center managers (this was a manager) is unable to press ‘enter’ when placing a new password on an account, means almost anything is possible inside Chase, much more probable than my wife hiding the fact that she’s ordered new credit cards or that someone is lurking in the basement listening to my phone calls.

One more in the list of noteworthy failures inside Chase: when I got the new cards on Saturday, I notified the Chase fraud desk that I would be traveling to Boston that Mon. (which is why I was still even working with this company: I needed a credit card for my trip and my only other one was Amex.) The following Wed. I received a travel notification alert from Chase that indicated that someone had placed a notification of pending travel on the account. I called (and was rejected from the account because I was using a new password that had actually never been entered. Luckily I still remembered the old password), I found out that the travel alert was the one I had placed on the account five days earlier. Five days! The people who went on the shopping spree has spent thousands of dollars in the space of an hour, imagine what someone could do for the five days it takes for the fraud alert to show up. So much for a proactive fraud alerting system.

The story unfortunately has yet to be resolved. Chase has basically been trying to end its investigation of the fraud for the last three weeks, calling me periodically to say that their Center of Excellence has determined that no fraud occurred. I have asked three different supervisors to provide answers to my two questions  regarding the password and tracking number, and after a week there has been no answer. They did admit the other day that there had been a pattern of credit card diversions from UPS in Northern California, but that of course has nothing to do with Chase.

At this point the only reason I am hanging on to the cards is to see how this will all pan out and to see what Chase is going to do for me once they finally admit that the fraud occurred inside Chase.  I’m thinking a three-year subscription to a credit card alert service for starters. Just starters.

So, the moral of this long-winded story is simple: It’s possible to be the largest bank in the United States and be ill-equipped to deal with credit card fraud to a shocking degree. Despite however many millions Chase must spend on protecting its credit card holder, it’s clear that they don’t train their people well, they don’t have strong, bullet proof security processes, their investigation processes are pitiful, and they’re overall default mode is to blame the victim and ignore the obvious.

But most important is how vulnerable Chase is to relatively clever gang of credit card thieves working inside Chase and its logistics partner, UPS.  This is the Wikileaks effect in the consumer credit world: you can build the best security system in the world, and yet a single individual with inside access can circumvent it with little effort. The trick is to not only be able to prevent such an occurrence – some of which can be done by better hiring practices, particularly during seasonal hiring rushes – but also to be able to consider the impossible – an inside job – and investigate it thoroughly and passionately. Chase has been mailing this investigation in from the get-go. They need to clean it up before they kill off whatever reputation they think they still deserve.

I was finally able to listen to the Oracle Q2 call, and the picture looks pretty bad for Oracle, while looking much better for the rest of the enterprise software market, which is completely undeserving of the collateral damage that Wall Street visited on their share prices following the Oracle debacle.

The key takeaways were pretty damning. Applications license revenue fell, while technology revenue grew relatively anemically. Importantly, license revenues from vertical industry sales were clearly suffering, and the company clearly missed its own targets for selling Exadata and Exalogic by significant margin.

Most importantly, the damage from the Sun acquisition continued to be felt in the company’s overall margin performance: Safra Catz again made a vague promise about an eventual return to pre-Sun margins, but it was clear that a lot would have to improve over last quarter, as well as every quarter since the Sun acquisition, before those margins come back to lead the industry again. If they ever do.

Also important was the almost off-hand comment from Catz – “the quarter was not dependent on any large deals” – that indicated there was no single large wound that resulted in the bad quarter as much as a thousand  small cuts. Triaging the big wounds is easy, staunching the losses from many smaller ones is much much harder.

Other details of interest. CRM grew close to 20 percent, ERP “did very well”. But verticals “need better management.” Considering the two largest volume components of the Oracle enterprise portfolio – CRM and ERP, which I assume mostly consists of EBS – did well or very well, the laggards – verticals – must have done really poorly if the overall apps license revenue was negative. Sucked wind may be a polite way to look at it.

I attribute this in part to the complexity of deploying these products – all of which were acquired and all of which require serious hardwiring in order actually integrate them to the rest of the suite. This is the essential fallacy of the company’s “engineered for investors” strategy: buying all these pieces makes it hard on customers who actually have to pay the price of integrating them to their ERP systems of record – regardless of whether that ERP system is from Oracle or some other vendor. The increased approval times Catz cited as a reason for why many deals didn’t close in the quarter may have really been a sign of better due diligence on the part of prospective customers as to the real total cost of ownership of deploying Oracle’s un-integrated vertical applications.

Other noteworthy issues can be found in what wasn’t said. Not a word about Fusion Applications, which means that they were neither material to Q2 nor a strategically important component of how the company plans to dig itself out of this revenue hole. In fact, Larry didn’t mention any applications products as being part of the hoped-for recovery in the next quarter – every forward looking statement he made was about hardware, particularly Exadata and Exalogics.

This is Larry being consistent with his hardware obsession, but it really begs the issue of what will happen to what was once a market-leading enterprise software company that has now been diverted by its CEO’s hardware obsession.

It was perhaps telling that the miss for the quarter was most evident in applications but the company’s focus in the earnings call was mostly on how it would grow its way out of the problem with hardware sales. I can see no way for Oracle to fix its applications business by selling more hardware, and the more the company focuses on hardware the more it seems that applications are becoming an afterthought. This, in my mind, is what happened in Q2, and will continue to happen until Oracle figures out what business it really wants to be in. Clearly, based on the last few quarters, the hardware business isn’t working out quite as well as the company had hoped.

As an industry analyst, I’m used to be being slotted, even though my goal has always been to cover as broad a swath of the enterprise software market as possible, based on the assumption that customers and users need help understanding the full context behind their enterprise software decisions, and not just listen to a vendor pitch, write a check, and be done with it.

This goal is often anathema to how vendors organize their analyst relations functions, having historically followed the big analyst firms down the path of splitting the market into discrete analytical areas, mostly for the purpose of selling discrete analyst services. Thus, a general practitioner such as myself often must contend with multiple AR teams, often out of communication with one another, in the pursuit of full coverage for any vendor with a complex product portfolio.

Lately, this problem has grown in spades as vendors like Oracle have branched into hardware, vendors like Microsoft have started successfully blending its non-enterprise assets into enterprise product lines, and hardware stalwarts like HP have become erstwhile enterprise software vendors. With my holistic market view as the goal, as vendors evolve to provide a broader and broader portfolio of products for the customer, analysts who want to follow the customer’s perspective need to follow a broader swath of the vendors’ product portfolio as well.

Which, in most cases, turns out to be largely impossible, to the detriment of vendor and customer alike (and it ain’t so good for us general practitioners either.)

If I were (even) more cynical than I pretend to be, I would think the inability of most vendor AR teams to understand the need to cross-pollinate the analyst community with the full scope of the vendor’s product lines – or at least offer up the opportunity for analysts to try to understand the big picture – was deliberate, sort of a divide and conquer strategy intended to keep out any dangerous , holistic analysis that might reveal key dis-synergies in the strategy.

And if I were immodest I would claim that this total vendor coverage is easy and fits well with the capabilities and interests of most industry analysts and AR departments. As someone who tries to do this, I can assure you it’s hard, and at times damn near impossible.

But not completely impossible, and, in many ways, very possible indeed.  And very much needed, now more than ever.

The reasons are simple: if a customer wants to buy the very best software at the very best price and with the very best performance possible, how that software interacts with the rest of the IT stack is critical (this has been the rationale for my analyst coverage for years, and the basis of my strategy advisory practice as well.) And as more and more vendors are not only providing more and more of the stack, but are actually optimizing their enterprise software for their own stacks, advising the customer requires an understanding of how all the pieces fit together. Merely commenting on the capabilities of discrete pieces of enterprise software without understanding the rest of picture just doesn’t cut it anymore.

The other pieces – hardware, middleware, database, deployment options, development tools, advanced UI tools, etc. – aren’t just important, they are often key points of differentiation between vendors and provide key selection criteria for customers. Customers almost never implement in a greenfield manner, rather, their selections for new software are intertwined with their existing infrastructures and applications portfolios. Which means that just buying the very best ERP system won’t cut it if that system doesn’t interoperate with the customer’s existing software and hardware infrastructure. And, in more and more cases, whether its Oracle touting the synergies of its enterprise software running on its Exalogics systems, or Microsoft showcasing how its Kinect gaming interface can be used on the shop floor, understanding these interactions and how all these pieces interoperate are must-haves for any well-qualified decision-making process.

Which leaves us with a dilemma: how to make the analyst and the analyst relations role a better fit for the analytical requirements of the enterprise software market? The answer isn’t simple:  vendors with complex portfolios need to cultivate analysts who can understand that complexity, and provide them with a level of access intended to make sure the synergistic, holistic view is articulated and understood. This requires in many cases both a revamping of how AR thinks and acts as well as a similar reconsideration of how analysts look at individual companies.

These shifts are not always easy, for functional as well as political/cultural reasons: AR teams often reflect their respective product and solution marketing teams, which in turn means that changing the status quo means changing the structure of how products go to market, and even how products are developed (or acquired, depending on the vendor’s particular innovation strategy.) That makes this concept of total or holistic vendor coverage holy hell for anyone trying to make it happen, inside or outside a particular vendor.

But I’m convinced more and more that this is a necessary evil that must be confronted, assuming the goal of educating and informing customers so that they make the right choices is the goal of the vendors’ market communications. Unless that misplaced cynicism noted above is actually justified…

Over the ten years in which Microsoft has struggled to find a place for its Dynamics enterprise software products inside the company, the question of whether Microsoft should jettison the business  unit altogether has surfaced more than once. And on the face of it, it’s hard not to ask the question. Despite the annoying secrecy that Microsoft maintains about the revenues of its Dynamics products, it’s pretty obvious that the original goal of “10 years and $10 billion” in revenues is off by something resembling an order of magnitude.

And yet, the two-day analyst summit hosted by Microsoft just before Thanksgiving week made it abundantly clear that Dynamics isn’t a so-so success for Microsoft: the company’s enterprise software portfolio, in particular AX and CRM, has become the lodestar for virtually every important piece of technology produced across Microsoft’s vast technology empire.

More importantly, Dynamics is increasingly the place where the cross-company synergies that have eluded this famously siloed company are now becoming reality. And those emerging synergies bring with them the potential to dramatically alter Microsoft’s overall competitive profile in the enterprise and that critical point of convergence between the enterprise and the consumer that very few companies, Microsoft being perhaps the most advanced, are in a position to truly take advantage of.

The idea of the Dynamics lodestar came to me about one hour into the analyst briefings, when Dynamics exec Michael Park, in an off-hand remark, referred to some forthcoming capability in Windows 8 that would significantly improve Microsoft’s mobile enterprise offerings, as though we Dynamics followers already knew all about it (which many of us we didn’t, highlighting the fact that covering enterprise software, whether it’s from Microsoft, Oracle, Salesforce, IBM, HP, or SAP, is more and more an exercise in covering everything that Microsoft does.)

Kirill Tartarinov, the head of the Dynamics group, had already mentioned Windows 8, as well as Kinect as a user interface device for the enterprise, in his opening remarks, and we were soon to hear one of the first mentions of Skype in a Microsoft briefing since the deal was finalized, also in the context of enterprise functionality.  As the morning wore on the list of Microsoft products that were being woven into the company’s enterprise software strategy grew to become nothing less than a what’s what of virtually the entire Microsoft top-tier  technology palette.

Here’s a list I compiled during the day of the different pieces of the Microsoft product set that are finding some of their most important use cases alongside Microsoft Dynamics:

• Azure and the cloud, including Office 365
• SQL Server
• Visual Studio and .NET
• Windows 8, especially mobile
• Kinect
• Lync and Skype
• Business Intelligence
• Sharepoint
• Bing

I’m not even sure that covers all the possible products and synergies, but it’s a good start. When you weave these different offerings into AX and Dynamics CRM in particular, the result is an impressive array of new and innovative functionality that gives Microsoft a strong standing in the enterprise. In a separate post I’ll highlight some of the synergies between Dynamics and the rest of the Microsoft portfolio, suffice to say for now that combining these assets and making them core parts of the overall Microsoft enterprise offering makes for an impressive portfolio.

What’s also impressive is how these capabilities sync up with the Dynamics’ plans to harness a direct sales force and consulting team in order to take on the large enterprise market. This is, of course, absolutely essential for tackling the large enterprise market. Without having some degree of direct responsibility for project success – either as a prime, or more likely, as a sub-contractor – Microsoft can’t hope to compete in this space against SAP and Oracle.

With this direct sales-plus-services team now ramping up, Microsoft will have some great assets to bring to the large enterprise table:  A portfolio of well-integrated products that support traditional ERP and DBMS functionality, as well as on-demand/SaaS CRM, mobility, cloud-computing, new user experiences like full-motion gesture control (Kinect), integrated communications, collaboration, analytics, search and mapping, office productivity, and applications development . As many of these products are already market leaders in their respective domains, the new Dynamics direct sales and services team is starting from a definite position of strengths.

The result is that Microsoft will soon become a factor in the large enterprise market in ways that could seriously realign the market in coming years. And that’s before we get to the consumer/enterprise bridge that Microsoft can now form.

This consumer/enterprise opportunity is one that Microsoft has a distinct advantage in realizing. Only Hewlett-Packard has an equally impressive position in both sides of this opportunity, now that it has chosen to keep the PC group in-house. Apple is coming in quickly on the heels of the iPad and iPhone, and Google, if it could ever figure out how to deal with security and enterprise-class service, may one day break out of its consumerist focus and make a real play for the enterprise. But all the other erstwhile Microsoft competitors – IBM, Oracle, SAP, Salesforce.com, and many others – have no legitimate presence in the consumer side of the market.

This leaves Microsoft with a pretty big runway for dominating this convergence. Assuming it can keep up with a consumer tech market that is looking for Facebook like social connectivity and Amazon-like simplicity, in an iPad-like user experience – and that’s not a small assumption, though Bing, Kinect, and Windows 8 should help in that regard – Microsoft could emerge as the essential marriage broker between the enterprise and the consumer in a way that will be the envy of the market.

For now, this  position is aspirational, and it may take at least two years before we can judge how well the Dynamics direct sales effort is working and how well the synergies between the larger Microsoft portfolio are productized and brought  to market. But in terms of potential energy, Microsoft Dynamics is an up and coming market leader.

They may have missed the goal of $10 billion in the first ten years, but I would expect that it won’t take them anywhere near ten years to reach that goal now.  And that’s not including what Dynamics should be able to do to boost the revenues of the rest of Microsoft’s business units.  Playing the role of proving ground for new technology, particularly in the high-margin enterprise space, isn’t just good for Dynamics, it’s good for Microsoft too.

As the enterprise software market parses the news that SuccessFactors will become SuccessFactors, an SAP company, the question of how well SAP manages its M&A strategy is coming to the fore.

SAP has been buying small and large companies for a while, and though nowhere near as avaricious as Oracle or IBM, there are now three big buys – BusinessObjects, Sybase, and SuccessFactors – and countless smaller ones – most recently Right Hemisphere and Crossgate – to look at in judging how well SAP is doing in the M&A business.

The short answer of how well is easy: not well enough. That’s not to say that SAP is screwing up (though the early days of the BusinessObjects acquisition were hardly smooth sailing), but it does say that SAP needs to have a better-oiled M&A strategy to match the well-oiled technology and go-to-market strategy it is trying to build with these acquisitions.

The current case in point is mobile: The acquisition of Sybase was announced over 18 months ago, eons ago in the tech world, and SAP’s mobile strategy is still fragmented. There are some great gems amidst the fragments, and the SAP Mobile Apps store is a good starting point for understanding (not using, the apps aren’t available yet) where SAP is going. But it seems that every time I turn around there’s another mobile app from another group at SAP that is not necessarily connected to a pan-SAP strategy.

While this fragmentation is hardly a disaster, it does speak to the larger question of what happens when SAP buys a big technology company. One can argue whether Sybase was good buy, and whether Sybase Unwired Platform and Afaria are the be-all and end-all of mobile enterprise platforms, but it should go without saying that spending upwards of $6 billion on Sybase, not to mention the extraordinary executive time and effort that had to go into that deal, should put an end to internal fragmentation. Instead, it’s clear that a unified, singular mobility strategy is still pending.

We saw a similar effect with the BusinessObjects acquisition: fragmentation, competing product lines, and internal struggles over product and technology strategy. It’s easy to forgive SAP the chaos of the early years of that acquisition, considering its indisputable strength in BI and analytics today, but it was a pretty messy process that took, in my opinion, too long to sort out.

Part of what’s going on is the bi-polarity of the world of SAP. There’s more than continents and oceans that divide SAP’s Waldorf and SAP’s Palo Alto offices. The cultural gap between the two poles, however smoothed over by moving personnel back and forth and having both the CMO and CTO sitting in Palo Alto, is still vast and complex. This bipolarity pits different design, development, and business culture factors against one another in a global battle that is won as much by attrition as it is by the pure merit of one or another choice.

Into this complexity SAP overlays a consensus management process, with an executive board, a supervisory board, and teams of executives all over the world  weighing in on key decisions. At times this works extremely well, but all too often it yields a surplus of cooks and a potentially spoiled broth: Without the command and control structure of, say an Apple or an IBM, SAP sometimes has trouble matching the dictatorship of the markets with the dictates SAP needs to thrive.

Into this complexity SAP is now buying SuccessFactors. And sorting out the fragmentation in SAP’s HRMS strategy makes sorting out a mobility strategy look easy. As ably pointed out by the grande dame of HRMS, Naomi Bloom. SAP is sitting on a virtual hairball of HRMS code bases and products. Adding SuccessFactors to the tune of $3.4 billion should put the onus on SAP to figure out this mess and drive a unified strategy into the market. Will it be able to do so?

My concern doesn’t come with the SuccessFactors acquisition itself – this is a great choice for SAP, one that is desperately needed both in terms of what it means for SAP’s HRMS strategy as much as for its on-demand strategy. My concern comes with the suffix “an SAP company.” This works extremely well from a personnel standpoint, and is consistent with SAP’s culture, but, with the teething problems of BusinessObjects, and to a lesser extent Sybase, in mind, will keeping SuccessFactors independent be the right way to go? I’m not advocating the slash and burn strategies pioneered by Computer Associates and continued by Oracle, but I am a little wary of friendly acquisitions when the result is too much friendliness and not enough acquisition.

Why does SAP need this kind of unification so badly? After all, as I just said, BusinessObjects has helped make SAP a top BI and analytics company. The answer is simple: Oracle. SAP is fighting Oracle’s “engineered for investors” strategy by putting forth a more cohesive, better integrated, and therefore more cost-effective platform+applications strategy. One of the key value-adds that SAP can offer is a more integrated stack, better rationalized across the different pieces of its portfolio, that lies in sharp contrast to the dis-integrated, heterogeneous offerings and big integration price tag in the  Oracle applications strategy.

The point is simple: The more SAP makes these big acquisitions, the more it must ensure that this key point of differentiation is protected. This is less imperative in mobility, which is by definition new and different enough that any expectation of deep, built-in code-base integration is low. But HRMS is a very different, and if SAP is going to use SuccessFactors to beat Workday, Oracle Fusion, and Oracle PeopleSoft in the SAP core customer base, it’s going to have to build that integrated strategy quickly and convincingly.

Can SAP do this? I wish I was more confident that it could. I trust that the different market imperative for HRMS – and the enormous opportunity that SuccessFactors presents – can sharpen the company’s resolution and help quiet the internal politics, but it won’t necessarily be easy. Time is of the essence here – Workday is definitely on a role, and the PeopleSoft market is full of customers for whom an upgrade will in reality require a full re-implementation, and for whom non-Oracle SaaS opportunities are making the shortlist – and SAP has the chance to truly be in the right place at the right time with SuccessFactors.

But only if SAP can get this acquisition right, and get it right the first time…

I spent an extremely entertaining and informative day with Kinaxis at their user conference last month, and it struck me how much supply chain management seems to be stuck in the past, even as it increasingly occupies one of the hottest of hot seats in the corporate world, and even as companies like Kinaxis strive to bring the supply chain into the future.

And if you don’t think supply chain management is in the hot seat, ask the world’s disk drive makers about what’s happening in Thailand, or the Japanese automotive manufacturers about what happened with this year’s earthquake and tsunami. Or Boeing and their many delays and problems getting the Dreamliner out the door. In the globally interconnected economy, it’s the supply chain that rules.

Not that Kinaxis is guilty of living in the past – though it’s been decades since I heard a vendor talk about the virtues of a hierarchical database. Au contraire. It’s the rest of the supply chain market that seems to be relying on older business and technology models, to the detriment of the big enterprise software companies and to the benefit of best of breed vendors like Kinaxis.

This living in the past problem was evident at multiple points during the day, most obviously when it came time for Kinaxis’ customers to stand up and tell their stories. As is common at a best of breed vendor show, the customer stories were replete with references to the SAP and Oracle software that these customers still use, even though the core strategic supply chain functionality they were touting that day belonged to Kinaxis.

What every user story boiled down to was the following formula: my company still uses [insert big enterprise suite], but for this core function [insert S&OP,  demand-driven planning, outsourced supplier management, advanced supply chain analytics], we’re going with Kinaxis.

And every justification for going with Kinaxis contained a similar formula.  While [insert big enterprise suite] is still my system of record, it’s too [slow, ignorant of how to manage outsourced supplier, not good enough for S&OP] and we couldn’t wait around for them to [add the functionality I need, make it cost effective, make their user experience more user-friendly, put the resources into my company to make sure my needs are being met].  And so Kinaxis’ supply chain best of breed story goes.

What’s amazing about these stories to me is that I heard a similar set of stories – including some of the same customers and suite vendors – when I attended an E2open conference three years ago. And when I toured Silicon Valley’s top manufacturers in 2005 as part of a supply chain research project, stories such as these were the order of the day at every company I visited. In a recent visit to E2open, one of its executives reminisced about discussing these issues when he was Oracle in 2000.

What’s up with that?

Part of the problem is clearly the rapidity with which business models are changing.  And the breadth of what constitutes supply chain management keeps shifting as more stakeholders become involved and more data becomes available to do more complex analysis and build more comprehensive supply chain plans.

Even new product introductions are changing: One of Kinaxis’ customers is Barnes and Noble, which introduced its Nook reader in 2009 to great fanfare. There were two problems with this NPI for Barnes and Noble: the first was that the company is a novice at manufacturing supply chains, being a book distributor doesn’t really prepare a company to be a consumer product manufacturer. The second, most importantly, was that the Nook is part of an entirely new wave of tablets tied to a retail distribution company, not a traditional consumer electronics company: how could Barnes and Noble do supply chain planning the old, rear-view-mirror way when there is little or no comparable product on which to base a demand plan for the Nook?

So Barnes and Noble signed up for a new point-of-sale-based, demand-driven supply chain run by  Kinaxis software. Turns out this is a bit of a gamble, as Kinaxis has never tried to wire up over 10,000 POS systems, and Kinaxis’ pricing structure for its software wasn’t designed for this volume of end points either (let’s just say at list price, 10,000 POS systems would have made this one of the most expensive supply chain management implementations ever – safe to say Kinaxis and Barnes and Noble managed to come to an agreement on a more reasonable price.)

The other reason the supply chain management status quo seems stuck in the past is that really transformative supply chain management is as much a business process journey as it is a software journey. That’s hard, very hard, and even harder in companies that don’t understand how strategic their supply chain needs to be. In my wanderings about the supply chain world I have often been amazed at how good enough keeps being good enough, despite the fact that at a corporate competition level good enough is usually the domain of losers and also rans. This fact alone often relegates true supply chain transformation to those renegades and rogues that dare think out of the box. And lucky for them, there’s products like Kinaxis RapidResponse that allows these transformers to do their thing and still keep the big ERP suite advocates in their jobs too.

The good enough syndrome turns out to be a major conundrum for any big enterprise software vendor. Becoming an entrenched interest at a customer site often leads to – or is a leading indicator of – a good enough mentality that helps maintain incumbency at the cost of innovation. This makes it hard for the SAPs and Oracles of the world to be identified as the innovators among their core, entrenched user communities, and it makes it easy for a Kinaxis to appeal to those who don’t mind upsetting the good enough, entrenched thinkers and driving a little innovation into the enterprise.

One more comment about Kinaxis that bears mentioning: their user conference was downright fun, and they managed more than once to make supply chain leadership funny. Yes, as in LOL funny. Hats off to Bill Dubois in particular for playing the role of talk show host and stand up (really sit-down) comic so well that I had to wonder why he ever left Broadway or whatever the Canadian equivalent would be to become the Pied Piper of supply chain geekdom. Okay, maybe I’m impressed for the wrong reasons, but a company that is comfortable enough with its products and customers to make it fun and funny has a lot going for it. That was a best of breed show if I ever saw one.