SAP and the Magic of Success – Laying the Groundwork for the Inevitable Future of Business

Sometimes covering SAP and its innovations reminds me of what it’s like being the parent of school-aged children. Good parents complain endlessly – typically commensurate with the cost of tuition or property taxes – about curricula, testing, homework, and the like. While all too often forgetting that the one true test of a good school is whether the kids wake up in the morning excited about school or dreading the ordeal of the coming day, and whether the parents sleep well at night knowing that they’ve at least covered the bases when it comes to their children’s future success.

SAP’s myriad innovation strategies can be nitpicked almost endlessly as well – commensurate with the cost of upgrading older systems, deploying innovation, and building roadmaps into uncharted territory – all the while forgetting that the one true test of an innovative vendor is whether there’s something in the mix that gets the line of business users up in the morning excited to go to work, while covering the bases on technology and functionality that allow the executive leadership to sleep well at night.

I would venture that SAP managed to put forth a message at its recent SAPPHIRE user conference that finessed that dichotomy – a measure of assurance that new functionality in S/4 HANA, the HANA platform strategy, SAP’s fledgling IoT strategy, its industries and service delivery strategies, the business network initiative, and other components of the multi-layered messages thrown at the assembled audiences at SAPPHIRE contained something to help users get up in the morning and something to help executives sleep well at night.

Is the message complete? The strategy fully-formed? The path forward clear and well-understood? Not yet: SAP is, like virtually everyone one of its peers in the enterprise software market, a work in progress. Come to think of it, most of the SAP customers I talk to or work with are themselves works in progress. Just like parents looking after their school-aged children, everyone is making investments for a future that is both hard to fathom and coming up faster than anyone would like. The trick is to find the right school, the right curriculum, the right teachers, the right social context – or the right tech partner, the right innovation strategy, the right service partner, the right industry or geographically-specific functionality – and then hope that, when it’s time for the magic of success to happen, the groundwork has been laid as carefully as possible.

Meanwhile, it’s legitimate to complain about the fine points of how things are progressing – at your kid’s school or in your company’s IT and business strategy – as long as fundamentally you’re sleeping well at night and most everyone gets up in the morning eager to start the day.

I think SAP did well on both accounts: The fundamentals, as I read them from my week at SAPPHIRE, all looked pretty good. S/4 HANA turns out to have a lot more functionality than I had thought – one of the original two product names under the S/4 HANA brand, Simple Logistics, turns out to have a whole lot more than just logistics under its rubric: there’s supply chain, sales, sourcing and procurement, manufacturing, asset management, and support for sustainability, engineering/R&D, marketing and commerce, HR, service delivery, and IT. Add Simple Finance to it, and there’s a decent start on meeting the needs of many SAP customers.

This should in part help folks feel reassured, and at the time excited, about what these new capabilities mean. There was plenty of eye-candy at SAPPHIRE – cool new analytics, demos of Ariba, Concur and Fieldglass all working in sync in an asset management scenario, and HANA advancing epidemiology and treatment options in the cancer world. There were lots of examples of the Fiori user experience, and lots of insights into new capabilities in IoT, including IoT deals with Siemens and Intel, and, of course, Steve Singh talking about business networks that promise new business processes and new added-value for existing and future tech expenditures.

And there was even some sleeping pills for the IT side of the house, courtesy of Hasso Plattner. In what had to be a best case scenario, Hasso gave a breakdown about how a 54 tbyte SAP system running on what SAP now calls “any DB”, which Hasso priced at $20 million in total hardware and systems cost, would be priced if it followed SAP’s migration path from “any DB” to HANA, and then to S/4 HANA. The HANA option reduced the total database size to 9.5 tybtes, with a hardware cost of $5 million. Going all the way to S/4 HANA turned the original 54 tbytes into 3 tbytes and a hardware cost of $550,000.

Okay, not every company will see this order of magnitude savings, but there’s a lot of wiggle room here for the real world savings to be pretty huge for anyone. (With one caveat – this math assumes a clean escape out from under the respective hardware and software licenses that are being sunsetted in many real-world user scenarios. Termination clauses might drive some of those numbers in a different direction. SAP needs to help customers figure this one out too. And it doesn’t include the S/4 HANA price as well.)

Of course, assuming there’s something there for most customers, and some economic value in migrating (Hasso also didn’t include the cost of migrating in his calculations, something else that needs to be considered) three big questions quickly follow: when will all this be available, can SAP make the case for migrating towards the S/4 HANA vision, and, most succinctly, will customers agree to move in sync with SAP’s aspirations?

The first is easy: The list of functionality above is GA now, if you want to run with S/4 HANA on-premise. If you’re looking for an all-cloud S/4 HANA, the first version, with the 12 functional areas, will be available this quarter, with more functionality rolling out at the end of the year and again next year. I think it’s safe to say that if planning were to have started the day after SAPPHIRE it’s likely many companies would get to the actual software implementation phase of the project by the time SAP had a critical mass of cloud-based S/4 HANA on the street.

There’s a good reason why the application implementation side of an S/4 HANA project would be down the road a bit no matter what: There’s a lot of moving parts to making a change of this magnitude, and much of the hard work lies in carefully preparing the data cleansing and migration tasks (a potentially fraught process in any migration or upgrade), consolidating systems and business processes to reflect new functionality in S/4 HANA and the need to move to the smallest number of instances possible, retiring and replacing hardware and database licenses, and otherwise doing the things that are needed when the goal is to eventually change database, platform, and applications, and make similarly significant changes to core business processes.

(I’ll stop and make the point that, despite the opinion of some critics who write books claiming that complexity is the sole purview of SAP, none of this is in any way unique to SAP – all enterprise software vendors, and even leading pure-play SaaS vendors, are asking their customers to make the shift to a new generation of business platform, and there’s no way to dumb down how hard it’s going to be to.)

The answer to the other two questions – will customers be ready and will SAP make a good enough case – are less straightforward. It’s clear that SAP’s customer base is by and large less ready than SAP would like, at least coming into SAPPHIRE. ASUG CEO Geoff Scott called it straight when he said that the sales pipeline might not move as fast as customers’ account execs would like. But don’t discount the solid endorsement for the overall S/4 HANA strategy that Geoff served up to his membership. That wasn’t done on a whim, nor was it done to curry favor with SAP (believe me, Geoff isn’t paid to suck up to SAP.) It was done simply because the ASUG board thinks moving over to S/4 HANA is fundamentally a good idea.

Which really leaves everything up to how SAP tells the story, and that’s not as easy as anyone – vendor, customer, partner – would like. It’s not just a product story, it’s also a story about service delivery, something SAP’s recent blending of its service and support arms into a single global entity was done in recognition of. As the tech and business worlds move towards the new models that SAP and others are defining, everything will change, including how technology is deployed, serviced, and supported. Even purchased and licensed: former SAP CMO and newly christened Chief Digital Officer Jonathan Becher showcased a new online storefront that will sell enterprise apps the way the Xbox store sells games, including in-process functional upgrades that “level up” the user the way in-game purchases level up the gamer. I’ll dig into the specifics of how SAP is articulating these stories in a follow-up post.

In the meantime, the fact remains that SAP’s customers, and every other worthy and unworthy competitor’s customers, need to make massive transitions in tech and business process in the coming years. When it comes to pretty much every highlighted announcement SAP made at SAPPHIRE, all the technological fundamentals behind the scenes of SAP’s announcements are not nice to have, but must haves. And the question is not if, but when.

New, faster database technology, cloud native applications, cloud-based integration, new user experiences, IoT, extended business processes, business networks, advanced, predictive analytics, a completely new relationship between customer, services, and support – none of these advances are optional in the long run. And every vendor is asking its customers to make these and many more shifts in platform and business strategy, and to get on with it already.

And while some patience is required, the clarion call from SAPPHIRE needs to be acted on now – these shifts take time, careful planning, and the usual blood, sweat and tears when it comes to migrations and upgrades. Meanwhile, the clock is ticking on new levels of business innovation that will define the competitive environments for SAP’s customers. The groundwork is being laid, a roadmap – the curriculum for the future of business – is now discoverable. It’s up to every company to start placing its bets, lining up its strategies, and then rolling up its sleeves and getting the work done. So far, what SAP is proposing looks like it will cover all the bases. The customers’ striving for the magic of success can now begin.

HoloLens as Metaphor: The Virtually Real Future of Microsoft

Test driving the HoloLens, Microsoft’s soon-to-be released augmented reality headset, it’s easy to forget the challenges facing Satya Nadella as his first year on the job starts to take shape. Who cares if Windows Phone is dying and the Nokia acquisition is rumored to be destined for a massive write-off? Does it really matter that Windows desktop is losing its monopoly? So what if Microsoft is betting on a massive upgrade to Windows 10 that will require millions of customers to leapfrog a Windows 8 OS that just didn’t seem to light world on fire? What does it matter that the market cap of competitors like Apple is stratospheric, while Microsoft’s cap is more sea-level-ish? Who cares about Google anyway?

Why the cavalier attitude? Simple: Microsoft has HoloLens. Everyone else can go suck an egg.

I don’t mean to imply that HoloLens solves all the above challenges, nor do I wish to imply that sucking eggs can serve as an appropriate competitive response. I don’t even like eggs. But what I do wish to imply emphatically is that HoloLens, and the augmented reality is it poised to deliver, should at least solve that market cap problem, if financial analysts can give Microsoft half the credit they give Apple for new product intros. And if not stratospheric, at least something in the upper troposphere would be fine. As the above-named Microsoft competitors have proven over and over, a strong stock price can paper over a nefarious lack of profitability (Salesforce.com), meh-category new product intros (Apple Watch, Google Glass), or excessive hype (all of the above) with room to spare.

Can HoloLens really do all that? Actually, no, at least not by itself. But, like massive innovations of the past, HoloLens has the potential to provide an anchor point for the new Microsoft – much like the iPod and then iPhone did for Apple, or search did for Google, or online CRM did for Salesforce.com – that will make the rest of its products and strategy all the more palatable to the fickle financial and consumer markets that have the foresight and forbearance of a three year-old when it comes to discerning the difference between fad and long-term value.

Before I continue my admittedly slavish, and potentially faddish, fascination with HoloLens, let me add that, above challenges notwithstanding, there was a lot happening at last week’s Microsoft Build developers conference that spoke to the long-term value potential of Microsoft. After all, Build was the conference where the Universal Applications Platform was rolled out to the assembled developers, finally fulfilling the promise of a single code base that runs across all Microsoft’s devices, as long as they are running Windows 8 or Windows 10 (which leaves Xbox out for now, as it’s not on the Windows 10 upgrade list, at least not yet. Considering the special console hardware and the Kinect motion detector that are part of Xbox, it sort of makes sense not to push developers to think about how to make a console or Kinect game portable to a phone or tablet.)

Build also saw a host of new Azure capabilities basically designed to make it more flexible, elastic, easy to develop and deploy on, and otherwise prove the point that Azure is a strong potential competitor for Amazon AWS and other cloud platform offerings. Microsoft also rolled out its Data Lake strategy, a key requirement for IoT and other applications requiring the aggregation and use of massive quantities of highly disparate date. Office continued its position as the third leg of the Microsoft stool, as both a driver of Azure utilization as well as an important nexus of business functionality.

And Edge, the replacement for that scourge of Web users and developers everywhere, Internet Explorer 11, was rolled out to an expectant and much-relieved developer community. Support for non-Microsoft tech was also in evidence – iOS and Android got their share of love too, reinforcing Microsoft’s new ecumenism when it comes to the tablet and phone market, which, considering Microsoft’s position in both markets, makes a ton of sense. (More on the phone market in a minute.)

What all this means is that Microsoft did an excellent job making a case, in front of an admittedly pro-Microsoft crowd, of the relevance of Microsoft as a provider and enabler of innovation. Its pas de deux as a purveyor of devices and services was also on display: not only with HoloLens but also with its new Surface tablets, Xbox, and third party devices like the weirdly-named but wonderfully designed HP Spectre, which was jointly developed with HP and handed out to every Build attendee (including myself, and I have to admit it’s a helluva showcase for why Windows 8.1 on a touch-screen, SSD device provides an amazing computing experience.)

In particular, the concept behind the Universal Applications Platform, which I have written about here, makes for an important inflection point in the race to capture the hearts and minds of developers. UAP is about as close to a write-once, deploy anywhere platform as exists in the market today: Microsoft has taken great pains to show that apps written using UAP can target virtually any modern mobile device, as long as it is running iOS or Android (oh, and Windows Phone as well.) This is a huge boon for developers who have been writing very different apps, with very different feature sets, for desktops, phones, and tablets. While Microsoft acknowledges that form factor and other device-specific characteristics may prevent true universal portability with UAP, the ability to deploy across multiple devices sure beats the hell out of the artificial distinction between tablet, phone and desktop that iOS and Android continue to perpetuate.

While we’re talking Windows Phone, let’s get the bad news over with. Conspicuous in its absence at Build was any sort of drumbeat about writing to Windows Phone. There were some dribs and drabs, mentions here and there, some news about being able to convert objective-C apps directly to Windows Phone (Candy Crush apparently did that with its Windows Phone version, which proves something, I guess) and an emulator that allows Android phone apps to run on Windows Phone, but I couldn’t find a Windows Phone session anywhere in the conference catalogue. The phones were in the demo booths, and clearly there were more Windows Phones per capita at Build than anywhere else this side of Redmond, but it was clear that Microsoft wasn’t going to invest any significant capital at its premier North American developer conference on Windows Phone.

It was almost fitting that ComputerWorld published an article that week, based on a thoughtful analysis of a recent financial filing, which suggested Microsoft would be taking a massive multi-billion dollar write-off for the acquisition of Nokia. Microsoft still thinks there room for its phones in emerging markets, and maybe those markets will provide some way for Microsoft to have a play in the phone market, but it’s pretty clear that Windows Phone’s future isn’t.

But who needs a phone when you can have a HoloLens? Of course, Microsoft needs to get some killer apps developed quickly in order to take advantage of the HoloLens hype before Google, Facebook or Apple get in the game (and, from what I hear from my sources, Facebook’s Oculus rift isn’t in the game, and, of course, Google Glass fouled out publically a while ago.) What was nice in my demo of HoloLens was the fact that existing Microsoft apps, like Skype, could be significantly enhanced using HoloLens out of the box. And just the idea of having the world be your virtual workspace gives HoloLens some instant usability – this is, after all, a Windows 10 device fully compatible with the UAP concept. Which means you put on your HoloLens, and interact with virtual versions of Office, Edge, and the rest running on your wall, your desk, your dinner table.

Sounds silly? Trust me, working or playing in augmented reality is going to take the world by storm. If Microsoft can leverage HoloLens quickly – it’s going to debut this summer, along with Windows 10, at a price that I expect will be like that of a high-end PC (which it is – a fully untethered, WiFi and probably cell-phone connected PC) — the world of work and play, and by extension Microsoft, will never be the same.

Even without HoloLens, or, better yet, in the run-up to the pending HoloLens era, Microsoft is clearly on a roll. It’s laid a few eggs – you lay a few, you suck a few, you hatch a few, that’s what successful tech companies do. The combination of Office, Windows 10, UAP, Azure, the enterprise apps in Dynamics, support for a full line of touch-enabled devices (honestly, you haven’t experienced the epitome of desktop computing if you haven’t used a touch-screen laptop), ecumenism with respect to iOS and Android, and what by all appearances is a very solid leader in Satya Nadella means that Microsoft’s comeback is in the works.

Will Microsoft dominate like it did in the past? No way. But tech is so much bigger, and so much more pervasive, that dominance isn’t really the goal anymore. Relevance as an innovator, one that can help customers refresh their technology and processes in ways that make sense, while allowing them to prosper as much as possible with what they already have, is one goal. Spanning the divide between our business and personal lives, work and play – that’s another goal. I think Microsoft can do both, as well or better than almost any company in the market today.

There’s more to tech leadership than a slick phone, much more. And Microsoft is about to show the market that, once again, re-invention and innovation can still have a made-in-Redmond feel.

 

 

Getting to the Tech Promised Land: Selling Tomorrow’s Message to Yesterday’s Crowd

It’s a given that the marketing messages vendors are pushing today are focused on clouds and new, innovative business processes. Private, public, hybrid, vendor-specific, sovereign, and third party clouds, business networks, process innovation, IoT, and new economy business models: The messaging is pretty consistent whether it’s Microsoft Dynamics talking to its customers at its annual Convergence user conference last month, Infor talking to the analysts at its recent analyst summit, SAP talking S4/HANA pretty much 24/7, and its Ariba subsidiary talking to customers at this week’s AribaLive conference. Clouds, new business models, loads of net new, highly valuable, user-friendly business process: the future is here and is a wonder to behold.

But that’s the marketing story, and as I find myself saying more and more, all the great ideas in marketing go to the field to die. In truth, what vendors are pitching and what customers want and are willing to pay for has never been more divergent.

The examples are everywhere: the Ariba customer who looked over at me during a presentation on the networked economy and said “we’re mostly just printing checks” with Ariba. Or the reality of Infor’s customer base, of which less than 3,000 out of 70,000 have moved to the cloud despite a well-articulated strategy and a decent ROI case for doing so. Or the Microsoft Dynamics partner who told me that his company still can’t figure out how to sell “One Microsoft”, despite the well-articulated strategy delivered by CEO Satya Nadella and Dynamics boss Kirill Tatarinov at their first “business focused” Convergence. Or the incessant questions from SAP customers about how to cost-justify the move to S4/HANA in the face of a relatively sparse set of applications.

In every case there is no shortage of great product and great strategy – sometimes, admittedly, more aspirational than actual – that together articulate a brilliant future for all these vendors’ customers, and, frankly, the global economy as whole. I’m really not kidding when I say that each of these vendors has pretty much nailed their version of the right strategy, and is on the way to putting the right products in place. All are positioned to make a profound impact on customers’ day to day operations, as well as their strategic futures.

If only the customers were ready.

Leading one’s flock to the promised land has always been a complicated task, and the temptation of flocks to regress and worship the idols of the past has been a metaphor that has long since transcended its origins in the story of the Exodus from Egypt. (Moses, you will recall, was saddled with a “stiff-necked people” he had to drag through the desert long enough for the generation that knew slavery to die off and be replaced by a new generation unburdened by the past. More than a few CEOs and CIOs I know can relate to that.)

This stiff-necked idol-worship is exactly what these on-premise vendors are facing as they bring to market an impressive set of new offerings. Whether it’s Infor’s new Cloudsuite and Upgrade X initiatives, Microsoft’s forthcoming Dynamics AX 7 and its pioneering Azure-based Lifecycle Services offering, SAP’s S/4HANA and HANA Cloud Platform, and Ariba’s networked economy, and everyone’s vision for IoT – cajoling customers to make the shift isn’t either as obvious nor as simple as the marketing messages would have everyone believe.

It’s important to note that this isn’t a failure of any vendors’ marketing efforts vis-à-vis its customers or influencers – any thoughts of shooting the messenger will just result in needless bloodshed. The messages and messengers are largely doing a great job: getting out in front of the flow and taking a few hits on the way is one of the prices to pay for leadership . Previous massive market shifts – GUI-based desktop computing, client/server computing, the relational database, modern ERP systems, the Internet economy – all had their teething problems, and every one of the pioneers who eventually prospered got a few arrows in their ass in the process. Those that couldn’t take the heat and stayed out of the kitchen paid the ultimate price for their lack of pioneering spirit.

So, in a way, hit and miss is the only way to progress, and it’s inevitable that you’re going to miss more than you hit in the beginning. The vendor conferences I’ve attended recently are perhaps the most stark examples of how hard it is for these messages to reach the right audience. If you’re a typical Dynamics customer, you’ve gone to Convergence for years looking for the latest features for your particular brand – NAV, GP, and AX. So when Satya and Kirill start talking about how to use everything from the Surface to Office 365, SQL Server, CRM, and AX, all the way up to Azure – chances are it’s a little hard for many in the audience to swallow.

Similarly, Ariba’s conference this week was full of procurement professionals, for whom the nuanced and complex stories of customers like insurance giant AIG and Cirque de Soleil were both fascinating and foreign. We learned in the keynote that AIG has placed accounts payable and procurement under the same executive, Jim Gillespie. Jim made an eloquent case for why it’s a good idea, but when he asked the audience how many organizations also did so, it was hard from where I sat to see a single hand in the air. So much for a critical mass of companies moving from siloed processes to complex integrated processes.

I saw a similar disconnect at a SucessFactors conference last year: selling an integrated HRMS and SAP backoffice story to a conference full of HR professionals with neither the authority, nor for the most part the vision, to act on the integrated business process message that is SuccessFactor’s best bet at beating Workday. Meanwhile, Infor’s renewal numbers speak for themselves: a 90 percent maintenance renewal rate for some of the most legacy on-premise software still in use highlights the premium most Infor customers place on next generation innovation —  not enough. (Infor’s value engineering group makes a nice case for why it’s a cost-effective move – and still not enough customers are biting.) Even the net new customers Infor is pulling in – 3100 in the previous three quarters –are by and large eschewing their vendor’s innovative ION middleware and the cloud.

The problem in many cases boils down to who is in the room when the sales pitch is actually taking place. As I ‘ve said before, every one of these vendors’ vision of the future runs into two unfortunate realities in the field: there’s no single decision-maker who can make the buy decision – these new offerings cross too many boundaries in the enterprise for any single decision-maker, even in many cases the CEO, to make the call. And reality number two is that, on the vendor side, it’s hard to find someone who can articulate the vision in its entirely, unless their name is Bill, Charles, and Satya, or one of their direct reports. The average, and even above average, field sales exec isn’t really equipped to sell a vision this complex at the level it requires.

This is very different from what the cloud-only, Silicon Valley cloud keirsetsu has to deal with. Salesforce.com, Workday, Netsuite, and other keiretsu members, as well as their fellow travelers, the financial analysts who think forward P/E ratios that aren’t stratospheric aren’t worth a hill of beans, all live in world which, until recently, was devoid of these kinds of challenges. When you’re selling CRM, or HRMS, you need to talk to a single buyer, a vp of sales or HR, who is largely looking for a way to do what he or she is already doing, only faster, better, and cheaper. The exec in the room knows the problem, can grok the solution, and is largely able to sign the contract as well. Your average rep doesn’t need to articulate a vision about new economic realities, complex, integrated business processes, or net new platforms. Just sign on the dotted line.

It puts the on-premise vendors, except for Infor, in an unfortunate position. The financial markets think SAP and Microsoft should be more like Salesforce.com and Workday, as in dumbing down their go-to-market strategies to make them as virally easy-to-sell as an all-cloud point solution, while giving Salesforce.com and Workday a pass on being more like SAP and Microsoft, as in profitable. I find that reasoning short-sighted, but that’s what the big money funding the cloud keiretsu is known for. (Infor, as a private equity play, doesn’t have to face the public market’s quarterly wrath. I’m not saying private equity is necessarily easier to deal with, but there’s an implicit long-term view that these investors take that is fundamentally different than the quarterly cadence of the public markets.)

In the end, it may take the equivalent of 40 tech years of wandering in the desert before the on-prem vendors’ customers cross over to the promised land. The trick is to keep trying and realize that sometimes market education simply takes time. The market may try to move in condensed, highly compressed tech years, but CEO, CIOs, and business execs are only human, and we humans are sometimes harder to change than everyone from vendors to G-d Almighty would like. After all, we have been a stiff-necked people for a very long time.

 

Implementing Enterprise SaaS: If it’s Easy, it’s Because You’re Not Trying

Back in the early stages of the SaaS market, so many months ago, it seemed obvious that the SaaS market would one day undergo a major transformation as the easy wins based on taking on-premise capabilities and flipping them to the cloud – pretty much the business model of Salesforce.com in the early days– gave way to an era of greater complexity and value. At one time it was the value-added cloud capabilities of business networks and the like that were supposed to lead the SaaS world to the promised land by using the cloud to conduct business in ways that simply hadn’t been possible in the on-premise world.

Wrong. So far, anyway.

But while we wait for the business network opportunity to reveal itself at scale – a bet that SAP in particular has made in the last few years with acquisitions like Ariba, Concur, SuccessFactors, hybris, Fieldglass, and other cloud properties – a new SaaS complexity is emerging, and its advent has begun to reconfigure how SaaS is implemented in the enterprise. And with that reconfiguration has come the demise of one of the most sacred tenets of the SaaS world: simplicity.

What has become obvious is that enterprise-class SaaS as a strategic implementation option is more and more dependent on the ability of the vendor and implementer to integrate SaaS services with the on-premise world. That integration isn’t just a nice-to-have afterthought, it’s becoming the core of the business case for implementing enterprise SaaS, and that business case is making SaaS a much more complex undertaking than it was in the glory days at the turn of the century.

The easiest way to tell that the game is afoot is to track how the global SI crowd, the ones that made cost and complexity the watchwords of on-premise implementations, are now showing up at the SaaS feeding trough, talking about business transformation, value-added services, and pretty much anything else that will replace the easy body-shop dollars that SaaS is definitively killing off.

Not that this is necessarily a bad sign – there are many competent practitioners of the implementation arts who possess the mental fortitude to do well by the new SaaS implementation imperative. But for the most part the global SI crowd comes to the SaaS table with their on-premise methodologies – pitched like the devil in order to get the business, and then honored mostly in the breach when it comes to the actual project – and are finding that their methodologies more of an anchor than a sail.

The smarter SaaS vendor execs are sanguine about how well these on-prem SIs will do: I was told in no uncertain terms at a recent SuccessFactors analyst event that savvy customers are turning more and more to the boutique SIs, who, as one exec told me, “are unencumbered by their on-premise methodologies.” (For those who haven’t tracked the relationship between methodologies and long-term project value, on-prem methodologies are like teaching to the test – you might actually end up with a smart kid when you’re done, but your odds may be even better that you’ll end up with high-scoring fool.)

The other way you can tell that complexity and SaaS are now synonymous is the growing quantity of deals gone bad. SuccessFactors has spent a tidy seven-figure sum of late remediating troubled implementations, and to be fair, the offending SIs have run the gamut from boutiques to the global SIs.

SuccessFactors is hardly alone in this regard, as evidenced by the increasingly universal requirement for vendor audits of SaaS implementations done by third parties, even the biggest and baddest of the global SIs. While SuccessFactors is relatively new to this, Workday has required these audits for some time.

The mandatory vendor audit is a significant departure from the status quo ante of the on-premise world, where vendors, like a couple of shocked parents at their first hearing in front a juvenile court judge, would one day rudely awaken in mid-project to find out that they are the first to be blamed and the last to know. The revelation that what should have been a poster child implementation had become a den of iniquity that had been hiding in plain sight all this time has strained the mental fortitude of enterprise software vendors since the dawn of time. The fact that it took the combined incompetence of the SI, the customer, and, often the overselling vendor sales rep, to create another major or minor catastrophe offers scant comfort.

Been there, lived with that. What’s different about on-premise vs cloud catastrophes is that, in the former, the vendor’s profit margin on the license sale remains largely intact. There may be a hit on the services side – post-hoc remediation services are expensive – and the brand takes a beating, and the customer is pissed, but that sacred license margin is still there to boast about when the quarter is done.

Bad implementations in the cloud have a very different impact on the vendor’s margins. A bad implementation, no matter who is to blame, still has to be run in the vendor’s data center, and supported by the vendor’s support staff. Meeting the data center’s service level agreements for a poorly implemented SaaS app means more effort and support costs. These brittle implementations are more likely to break at upgrade time, and in general letting them into the data center threatens to kill off the recurring revenue margin that the whole SaaS industry is built on.

This problem becomes even more acute when the cloud implementation has significant integrations, which as I stated above, is more and more the case. Hence SaaS vendors like SuccessFactors and Workday are not only requiring that their own teams audit the implementation, but they’re also requiring the customer to pay for the audit.

This is definitely a move in the right direction – customers have a degree of culpability and responsibility that has been traditionally papered over in the rush to judge the vendor and let the SI get off scot-free (unless the failure ends up in court, and then the lawyers labor hard to ensure that the allegations of blame are fairly and equitably distributed among all three parties, and the devil take the hindmost.)

What’s the final evidence of complexity from the world of SaaS implementations? Salesforce.com’s rather convoluted usage limits for API calls. What’s easy to understand is that high-end customers running Enterprise Edition or Professional Edition (“with API access enabled”), have a limit of 1 million API calls in a 24-hour period. That’s a boatload of integration and complexity.

What’s also easy to understand is that Salesforce.com is working hard to make sure customers don’t use more API calls than they pay for, as in this little note in the fine print from Salesforce.com’s API usage limit guide: When an organization exceeds a limit, all users in the organization may be temporarily blocked from making additional calls. Calls will be blocked until usage for the preceding 24 hours drops below the limit.

Take that, API user deadbeats.

What this new cloud complexity means is that cost savings in SaaS, like the famous peace dividend that was promised following the end of the cold war, may turn out to be more mythological than real. The requirement for integration and the maintenance of those integrations will very likely keep services revenues for SaaS chugging away for quite some time.

And don’t think that going all SaaS will solve the problem – silos of SaaS functionality can be even more complex to integrate, and keep integrated, than an on-prem/SaaS hybrid environment. SaaS vendors treat frequent upgrades as a virtue (which always sounds so good on paper, until something changes that you didn’t want changed). So imagine, like one relatively small company I know, having a cloud backoffice consisting of 80 cloud apps. Each one upgrades on its own schedule, with little or no awareness of what the other 79 are up to. The company in question was actually considering getting a DNA graft and moving a ton of functionality to a single on-premise ERP system. That is until a severed horse’s head appeared under the sheets in the CIO’s bed one morning. (Metaphorically speaking, of course.)

It’s clear now that we’re waking up from a cloud cost-savings binge that was a little too good to be true. True, lots of the grunt work that went into implementations is gone, and good riddance too. But expecting that the end of the low-hanging fruit of the implementation business would mean that less money would be spent on services overall is a bit of a pipedream. Implementing enterprise SaaS is hard – even if you’re doing payroll in the cloud, by the time you “configure” your SaaS payroll to take into account the many countries and currencies you do business in, the different pay structures and pay grades in your company, union work rules, the deductions, and on and on, you’re not really configuring, you’re implementing.

SAP knows, they did this themselves, using SuccessFactors to replace a sprawling, global HR mess with 100s of redundant processes and disparate, unintegrated systems spread all over the world with a single, unified SaaS system. You don’t just configure a system that size and then flip a switch.

And if you want to tie that into your finance system, your HR and talent management system, throw in some succession planning, add your contingent labor to the equation, tie talent management into maintenance and service scheduling  – well, you just did a big fat, complex implementation. With all the attendant costs and risk.

So if you’re doing enterprise SaaS because you want your IT life to be more simple, think again. The game is rigged against simplicity, and always has been, for the simple reason that business is complex, and always has been. To paraphrase President Eisenhower’s famous admonition to the nation as he left Washington politics for good: when  it comes to enterprise SaaS, beware the implementation complexity complex.

….

For good measure, Ike also said “If you want a friend in Washington, get a dog.” I’ll work that aphorism into my next post. Promise.

 

S/4HANA: It’s not R/3, and it’s not 1992 either (part II)

(Bloggers note: I was informed yesterday that the proper spelling for SAP’s new suite is S/4HANA. I was also told that a large tech manufacturer with a propensity for suing over IP issues owns a trademark for S4. I just checked my budget for protracted lawsuits and decided to go with S/4. Don’t tell Edward Snowden, he’ll drop me from his Xmas list like a hot potato.)

 

So, smooth sailing for S/4HANA?– Not likely, certainly nothing like the good old days when R/3 was the biggest and the baddest modern, client/server, enterprise software product on the market, marauding through the global economy like a rum-soaked buccaneer.

But if SAP has to create its own tailwind, there’s a few things it can do to fill its sails a bit. Some of this should have been mentioned at the launch, other aspects need to be developed quickly – but all are in the realm of the possible, as well as, IMO, the extremely necessary.

The S/4 HANA Sandbox: SAP chose to forget to mention, not that they weren’t told to, that SAP can load a copy of a customer’s ECC 6.0 production system into the S/4HANA cloud and let the customer run their existing system on S/4HANA in a “try before you buy” mode. This is the best way to overcome the pointless marketing hype about S/4HANA speeds and feeds, not to mention promises of how Fiori changes everything, and just let the software do the talking. I think every customer thinking about S/4HANA should demand this, and should demand it at no charge.

SAP’s risk is pretty much nothing, and everything, with the Sandbox. If reality meets or, dare they hope, exceeds the hype, the deal is done. When and how much still needs to be negotiated, but the why S/4HANA question will be settled. It’s also a great way for SAP to highlight the value-add of its cloud-services capabilities: platform-based cloud services are going to be one of the ways in which all the platform/enterprise software vendors compete, and SAP is going to have to fight it out with Microsoft and the services it’s bundling in Azure, as well as what native-cloud vendors are already doing by default. And if the Sandbox doesn’t make a customer desperate for some S/4HANA, then, well, SAP is toast. (Hey, don’t just take my word for it, Chairman Plattner thinks so too.)

Take care of the DB Migration ROI problem: Okay, maybe not take care of it. But one of the big mistakes SAP can make is to wait until customers reach a contract end-of-life situation, particularly with their DBMS and associated hardware and data center services, before SAP tries to influence the customer’s decision to switch to S/4HANA. Maybe SAP could get a couple thousand new customers a year by just waiting, but that’s assuming that all the other platform/enterprise software competitors will just let these customers roll over to SAP. They won’t, and SAP should assume that by the time the contracts are up for renewal it’s too late.

Instead, SAP should be hard at work making the case for why it’s worthwhile to consider switching now: are there hard and soft cost savings to consider even if it means walking away from a strategic database contract and paying the penalty? Even if there are no real cost-savings, and I’m not expecting there would be in every case, putting some numbers on the table about the value of switching now versus waiting for an Oracle or IBM contract to expire allows SAP to play offense, instead of playing defense. It may be that many companies will be willing to eat some of the cost of running the clock down on their existing contracts if SAP can show them how much better life and business will be with S/4HANA – and that means real numbers, not just platitudes like “100 times” improvements in this, and “250% improvement” in that.

Show the way: The other thing I wish SAP would have done last week is talk explicitly about how customers can get there from here. A roadmap would have been nice, and based on what they were talking about at TechEd Berlin last year, there’s something to say about when the S/4HANA follow-ons to Simple Finance, like Procurement, Manufacturing, Supply Chain, HRMS, etc., will be available.

But more importantly, SAP needs to tell the story about how a customer running ECC 6.0 becomes a customer running S/4HANA. They should approach it like a recipe – take one enhancement pack 7 update, add a database migration service, sprinkle in some Fiori upgrades to ECC 6.0, do a HANA RDS implementation, switch to Simple Finance, bake until well-done. Then start on the second course – be it manufacturing, HR, whatever. And along the way answer some tough questions: What’s the process? What’s the complexity? What tools and services will SAP provide? How long will it take? What’s the cost? What’s the value? If SAP wants to get S/4HANA on the strategic planning agenda, it needs to give strategic planners something to go on.

Of course, all of this advice will really just allow SAP to begin to put its best foot forward in a complex and highly competitive market. It really isn’t 1992 anymore, nor is it 1999 (Y2K time) either. SAP has some great assets, like a helluva fast DBMS and the tools and services to make it easy to use. SAP is also the most successful purveyor of software that embodies business processes in the market today, and that position can only be good for S/4HANA.

But as so much of what S/4HANA can do isn’t available in packaged software, not from SAP or anyone else, SAP has to create an amazing, partner-lead innovation wave, based on S/4HANA, that will close the manifold last-mile gaps that are widening all over the business world. That means SAP has to partner with ISVs and VARs in a way it never has before (hint: partnering should be for the benefit of the partner and the customer, not just the vendor). It has to take ownership of the success of the customer, not just act as though the job is done once the license deal is signed (a situation One Service is intended to address). And SAP has to stop talking about how cool HANA is and start talking about how cool businesses that run S/4HANA are.

Because perhaps the biggest difference between 2015 and 1992 is that the buyer is orders of magnitude more savvy, more jaded, and more desperate than ever before. Customers need the kind of change that S/4HANA is proposing – real time functionality with blazingly fast support for existing and new business processes, all running in whatever cloud configuration the customer wants. But customers aren’t going to just write a check to SAP because they say so. SAP has to show why it it’s the biggest and baddest, and then go out and prove it.

Because if SAP can’t get the customers to ultimately lead the charge – not the SIs, not market forces, not the pain of legacy systems – it’s not clear who, if anyone, will be around in 2035 to write the next chapter.

S4 HANA: It’s not R/3, and it’s not 1992 either (part I)

There’s a lot to unpack from SAP’s S4 HANA announcement of last week, but if I could only highlight the essence of what the announcement means for SAP and its customers, it’s this: SAP needs to make sure every customer understands how the versions of SAP they are running today will lead them to S4 HANA, in what time frame and at what cost. And SAP has to make sure every new customer understands what it means to run existing processes at significantly greater speed, as well as run net new processes they never were able to run before, before they’re asked to sign on.

If it wasn’t for these very customer-centric issues – in other words, if the exigencies of the real world didn’t exist – then I would say unequivocally that S4 HANA is at least as monumental a moment in the evolution of enterprise software as R/3 was back when it was released in 1992, and that’s saying a lot.

But much has changed in the ensuing 22 years, and things will have to be very different before it would be safe to give S4 HANA the kind of odds of raging success that R/3 had in its day. The old days of moribund mainframe systems and antediluvian mainframe software, a pending Y2K hoax, the lure of client/server computing, a desperate need for CIO’s to recapture control before the distributed data center obviates their power and budgets, and a consulting/SI channel equally desperate for something real to sell alongside the business process re-engineering hype of the early 1990s – none of these are around to give S4 HANA the kind of tail winds that R/3 enjoyed.

Which means that SAP is in charge of the tailwind, as well as the sail, the rigging, and everything else required to get S4 HANA the attention, and uptake, that it, at least on paper, deserves.

Of course, SAP is a vastly different company than it was 22 years ago: bigger, more complex, more embedded in the global economy, more of pretty much everything. Which augurs as well for S4 HANA as SAP could hope with such a monumental new offering. But there are still a fair number of issues that will conspire to make S4 HANA as challenging as it is promising for SAP.

Software then and now: Back in the R/3 days, SAP’s competition, to be blunt, sucked. Old, tired, unintegrated, mainframe-dependent, the enterprise software of the 1990s was a field ripe for disruption. And while R/3 had its share of issues, the bar was set pretty low for a successor to the likes of D&B Software and Cullinet.

Today, S4 HANA has to compete against a wide range of worthy opponents – Salesforce.com, Workday, Microsoft AX, Infor 10X, Oracle – that are setting the bar pretty high for success. These companies also enjoy significant incumbency benefits in their installed bases, which SAP has to attack vigorously at the same time that SAP has to defend its installed base from the enemy. The implicit ROI of incumbency means that proving that S4 HANA is a better choice than any of these companies’ offering makes SAP’s job all the more difficult.

Platforms then and now: There were really two platforms available at the time of the R/3 launch – the dominant mainframe platform of IBM, and the up and coming platform defined by Unix and client/server computing. The latter had a particular characteristic that almost made it the un-platform: open standards for hardware and software, implemented as an explicit challenge to the lock-in of IBM’s mainframe systems, made the platform switching costs between the upstarts systems relatively low, at least in theory. Vendor lock-in, so the smoke and mirrors of the time went, was IBM’s bailiwick. The openness and standards of Unix and client/server were the domains of the new guys in town.

Today, platform vendors, and every one of SAP’s erstwhile competitors is selling a platform strategy, are paying lip-service to openness, but no one is fooled as they were in the 1990s. A platform is the key to the IT budget for many years to come, as well as a way to not-so-surreptitiously guide and influence customer behavior. C-level execs are a lot more savvy about this issue than they were in the days of R/3, and that means SAP has to make the case that S4 HANA is both the very best long-term choice for a platform shift, as well as the most open choice for continuing to leverage other platform investments that can’t be just summarily decommissioned.

Databases then and now: Along with the Unix and client/server openness myth came the myth of database choice. Again, decoupling the database from the mainframe and its operating system, and thereby decoupling enterprise software from writing directly to either of these two systems, was a virtue that propelled IT budgets across the industry. SAP embraced database openness by effectively making all databases equal – and thereby marginalizing performance equally – in a way that the market embraced willingly. If a company was a DB2, Oracle, or SQL Server shop – and the keepers of these database standards in the enterprise were a powerful lot – nothing had to change in order to embrace R/3. And there was much rejoicing in IT land.

The end of that embrace is perhaps the biggest change in S4 HANA. By writing directly to the database, not a least-common-denominator layer, S4 HANA gets even more functionality out of one of the fastest transactional/analytical systems on the market today. This is great for the business user, whose applications can now do things applications could never do before. And this is good for the conscientious CIO who sees an opportunity to limit the oversized influence that the relational database keepers continue to wield. But doing so, ironically, means that SAP must both tout the superiority of HANA at the same time that it says that the database layer is no longer relevant, precisely because it is no longer a separate “layer”, but part and parcel of the applications that impart the true value of S4 HANA to the enterprise.

If that sounds a little confusing, you get the point. The End of the Database may be a little too much for SAP’s next slogan, and The database is dead, long live HANA is a bit of a stretch as well. But it’s going to take a lot of market education to overcome a few decades of open database thinking and RDBMS hegemony before the HANA part of S4 HANA reaches its apogee.

SIs then and now: R/3 rode in on a wave of SI hype called BPR, for business process re-engineering, which I at one point re-christened “bad practice repair”, which was what was really going on in a lot of companies. The SIs loved BPR because it gave them an entrée into the CEO’s office to talk strategy and CIO’s office to implement new software. SAP was all about both kinds of BPR, and it was the start of a beautiful friendship.

Today, the SIs are scrambling to understand what S4 HANA, particularly its implementation-light, cloud-base functionality, means for the implementation side of the SI business. No SI in the SAP partner world is laboring under the misapprehension that S4 HANA is anything but bad for the implementation side of the equation. While they all pay homage to the conceit that their real value lies in strategic services, they’re secretly waging a Sisyphean battle against the erosion of a core revenue stream for them. Which means, quite simply, that the SIs won’t carry SAP’s water the way they did in the 1990s. All the more so because there’s no great Y2K hoax to galvanize ignorant execs into doing a lot of new implementations in order to make sure the world doesn’t come to an end. (Though, have you read the news lately? I’m beginning to wonder….)

What can SAP do about this? I’ll publish my suggestion in my next post on Wednesday.

Enough Consumer Coolness: It’s Time to Make a Case for Windows 10 in the Enterprise

I’ll start by saying that I came home after having watched the Windows 10 launch (on video, not live, more on that later) all excited to show my kids the demos of HoloLens, particularly as I was sure I saw a little Minecraft in there, a serious favorite of the underage crowd in my house. Too late. My son, in perusing YouTube for the latest in Minecraft music videos, announced as I walked in that he had already seen the HoloLens demo, and wondered when he was going to be able to play 3D holographic Minecraft.

If ever anyone was wondering why Microsoft bought Mojang, the maker of Minecraft, just search “Minecraft video” on YouTube: The results (37 million hits) infinitely outstrip searching “Windows enterprise” (232,000 hits) by more than 100 to 1. And therein lies the crux of this post.

I mention this not just because it’s another example of how hard it is for the older generation to keep up with the newer one, but also as an example of how the Windows 10 launch, despite the use of the word “enterprise” a dozen times or more, was as much a showcase of how much the Windows team has an uphill battle to fight in creating buzz for enterprise computing as it was another example of how cool Microsoft can actually be when it puts its mind to it, as long as it’s not in the enterprise.

Can Microsoft afford this version of coolness, particularly when it comes to the enterprise? Hardly. This week’s earnings announcement was credited with killing the Dow Industrial Average on Tues., and in most categories there were a lot of disappointing results. But Dynamics, the enterprise little brother of the Microsoft Commercial division, put in a relatively stellar 13 percent growth rate. (Which parts of that were Dynamics CRM, AX, and the rest is never disclosed, unfortunately.) So, ignoring a solid growth opportunity, albeit a relatively small one, seems a little short-sighted. Particularly as Dynamics is the place where all of Microsoft (minus Minecraft, at least for now 🙂 ) is best highlighted.

There were some enterprisey tidbits in the announcement – the free upgrades from Windows 7, 8, and 8.1 are sure to make corporate IT folks happy. A new browser to replace Internet Explorer 11, the bane of developers and users with its anomalous script handling and other defects, will surely be welcome in IT shops that haven’t just shrugged their shoulders and shifted to Chrome. And the seamless interaction of Office and Skype across the full panoply of devices on stage was enterprisey enough, sort of – if you’re one of those people who think Office and Skype are enterprise apps (which, considering that the Minecraft generation in my house also uses them, sort of makes its enterprise cred highly suspect.)

But sort of isn’t what’s going to light the enterprise on fire. And here’s my problem with the Windows 10 launch: While the biggest selling point of Windows 10 – a single code base for building apps that run across every possible device – was definitely part of the messaging of the event, the evidence that Microsoft knows what this really means for the enterprise, or even what makes enterprise users tick, was missing in action. Again.

HoloLens certainly has some serious enterprise potential, as does Cortana, and the demo of Surface Hub, a giant wall-sized touch screen, which is right up there with jet packs and teleportation in the futuristic coolness category, certainly had something to make enterprise execs salivate. But none of that coolness is enough to get enterprise developers who build the new business apps, and the business decision makers (to use a Microsoft term) who spec out those apps and write the checks for them, to go all-in with Windows 10.

Microsoft finds itself once again caught falling down that classic chasm between offering coolness and offering solutions to practical business problems. What the Windows 10 launch showed is another example of how tech companies try to sell technology the same way they develop it. The tech dev cycle that starts with specifying a new feature, and then building, debugging, rewriting, testing, and demoing it at events like last week’s Windows 10 launch party leaves out the last mile that a business user is looking for: how does this change my business process and move my KPIs into the success zone? Importantly, coolness isn’t necessarily a virtue in the enterprise. Who the hell has the time to be just cool?

Or, to rephrase that last thought: what’s cool in the enterprise is something that solves a real, and important, problem right now. Not sometime down the road, as in when virtual reality will become a tool for enterprise success, once we’ve figured out how and why.

So I’ve asked for, and have yet to see, any evidence that Microsoft knows what that killer enterprise app looks like. It may be that they honestly don’t know, or even care. Both of which are bad mistakes to be making at this juncture. On the contrary, Microsoft has to up its enterprise game ASAP, before it loses an opportunity to define the next generation business app platform for an enterprise audience increasingly assaulted by more incumbent vendors pitching competing platforms that have a more definable enterprise edge.

Three key factors are making the clock tick faster and louder on getting the enterprise case for Windows 10 out in front of the market.

The Platform Wars. Two really big and really important competitors are pushing their enterprise platform strategies a whole lot more effectively than Microsoft is right now – Salesforce.com and SAP. Their customers – virtually all of which overlap with Windows – are being pushed by aggressive direct sales and marketing campaigns to get on program with each companies’ respective platform strategy. HoloLens and free Windows upgrades aren’t enough to combat this push. Windows 10 could be the leading edge of a comprehensive enterprise platform strategy (along with Azure and .NET) that could give Microsoft something to say to Force.com and HANA cloud. If only….

The Enterprise Phone Wars. As I have written previously, Microsoft is in serious danger of losing the US market for Windows Phone before it has even gotten started, and, most ironically, just when it has a new OS, Windows Phone 8.1, that is rated as good or better than IOS or Android. The cross-platform capabilities of Windows 10 won’t be nearly as impressive if Windows Phone isn’t one of the platforms enterprise developers think is important – and right now they don’t: few if any enterprise developers are developing for Windows Phone.

Pushing the cross-platform capabilities of Windows 10 in the enterprise could, just maybe, light a fire under the enterprise dev community, which right now is stuck worrying about how to build and maintain interfaces between mobile, desktop, and tablet environments. While HTML5 is a good workaround, running an app in the native mobile environment is acknowledged to be the truly optimal choice. But if the app has to go to a different device, it’s interface time, and Microsoft loses.

(A follow-up to my post on Windows Phone 8.1 and Verizon cited above: a week after that post appeared, Verizon quietly pushed an update to my phone. During the last month of playing with it, I think it is truly superior to IOS. Too bad Verizon still isn’t really on-board with Windows Phone 8.1. But thanks, anyway.)

The Business Process Innovation Wars. Business users need innovations that solve business problems, as noted above. This requires the innovation provider to demonstrate in-depth knowledge of existing business processes in order to propose – and then deliver – ways in which the processes can be innovated. Delivering proof that this process knowledge is baked into their offerings is becoming job #1 for enterprise software companies, and everywhere I turn there’s an increasing clamor from customers to show how a given innovation matters in terms of vertical and micro-vertical functionality, preferably cross-indexed with geographical or regional requirements. In other words, business innovation is increasingly about defining, and then delivering on, that last mile of innovation that matters most to the customer, particularly the business customer. Windows 10 so far has no real story to tell in that regard.

Can Microsoft pull out of its self-inflicted Windows tailspin before all that’s left is Minecraft and virtual reality? Yes, but that means it has to be ready to take a very different – or maybe parallel –route to market with Windows 10. This means connecting Windows 10 to the aspirations of enterprise users, and toning down some of the gee-whiz in favor of the get-it-done. This means, as I have said already, showcasing that killer enterprise app that makes the case for Windows 10. Or making the case that the Cortana, Skype, Office, and the new IE, Spartan, will have a huge, direct impact on day-to-day enterprise processes and their users. This also means taking some of the really awesome innovations going on in Microsoft Dynamics, such as its Lifecycle Services offering, a cloud-based enterprise software tool unlike anything in the industry, and connecting its capabilities to Windows 10 (if possible, and I think it is.)

In other words, it means stopping something I’ve railed against for a long time: pretending that the Windows team, and its traditional gang of influencers, really gets the enterprise. They don’t, full stop. And instead of pretending, the Windows gang need to acknowledge this lacuna and get started with reaching out to the enterprise, both internally and externally. Internally, there’s this group called Dynamics, who were also missing in action during the Windows 10 event, that actually get the enterprise and would be more than willing and able to lend the Windows team some legitimate enterprise cred. Externally, there’s a few thousand partners who could also play that role, also willing and able to step up to the plate.

And finally, there are the enterprise influencers, myself included, who seem to be consistently excluded from the dialogue. I tried to attend the Windows 10 event, and was rebuffed, however nicely. And having seen how sparse the real enterprise message was at the event, it was probably for the best that I stayed in the office and watched the event on line.

Until the enterprise story is told about Windows 10, by people who really get the enterprise, Microsoft will be leaving one of its best assets sitting on the sidelines at an increasingly critical moment in the enterprise software market. And judging by the market’s reaction to last quarter’s numbers, it’s a pretty critical moment for Microsoft overall. I think Windows 10 can make a difference in Microsoft’s enterprise software competitive profile, but convincing Microsoft continues to be a Sisyphean task.

If Microsoft will be content with Xbox, Minecraft and office productivity success, then no harm, no foul. But if there are aspirations for greatness in the enterprise, it’s time to show what Windows 10 can do. Or we’ll all be running watching Minecraft videos on our iPhones and Chromebooks, instead of running our enterprises on Windows phones, tablets, and desktops. While that’s just what Apple and Google want to see and hear (and Salesforce.com , SAP, Oracle, Infor, and others), I’m pretty sure that’s not what Satya Nadella had in mind when he took the job. Right?

 

SAP and Culture Clash: Marshaling Weapons in the “War of Business”

SAP’s annual sales kick-off meeting season, FKOM, is under way, with the North American and European versions kicking off this week. FKOM is where the new strategies, products, alliances, and services are all pressure-tested on the that thin, white-shirted line of sales people who have the unenviable job of syncing the year’s marketing strategy with the desperate desires of SAP’s customers, and then getting them to actually write a check. It’s a mating ritual that is equal parts science and art, and its quarterly execution is one of the software industry’s greatest and most mystical natural wonders.

SAP is marching into FKOM in great shape, having pre-announced a top notch quarter and riding high on its raft of cloud purchases. It’s also marching into FKOM with a lot of change in the air, change that began with the abrupt resignation of Vishal Sikka last spring and continues with the absorption of another massive acquisition, Concur, as well as a raft of management changes, plans for a suite to succeed R/3, dubbed s-innovations, and a new focus, called One Service, for SAP’s increasingly critical Services group.

But nothing is ever simple, or completely as it may seem, in the software world, and SAP’s 2015 is going to be another year of running, jumping, shooting, pivoting, and head fakes as CEO Bill McDermott tries to keep up the momentum in an almost too dynamic market.

Job number one, as it always is for companies of SAP’s size, is internal: keep the myriad centers of power and influence inside SAP focused on the singular goal of cranking out great quarters like the most recent one. SAP’s sheer size makes this a daunting task, and it’s only gotten harder over the years. But this need for a single lodestar to focus on, a singular target to point the arrow at, one that makes sense to its partners and customers, has never been more essential. And if there is one issue that both exemplifies this internal challenge, and at the same time holds the keys to success, it’s interplay between SAP the German company, SAP the US company, and SAP the global company.

It’s hard to sugar coat it, but the fact is that SAP continues to struggle with reconciling its German roots with the American and international branches now flourishing around the world. Evidence of the balancing act is everywhere: on the one hand there’s CEO Bill McDermott’s very public statement about living in Germany, and on the other hand his hiring of Quentin Clark to be the new CTO based in Palo Alto, a move clearly intended to shore up the company’s Silicon Valley cred. On the one hand SAP the German company is being asked by Chancellor Merkel’s government to be as German as possible when it comes to data privacy – an understandable request considering the divergence in law and practice between the US and Europe on these issues. And on the other hand, SAP the US company is being asked, not by the government but by the financial markets – one of our proxy governments, to be sure – to be as American as possible, which means entrepreneurial, consumer-like, all-cloud, low-margin and low-cost, and to be as open as possible to the wave of new technologies and business practices that mean mining the exabytes of data of the world in the service of commerce. Which of course sets up a perfect collision-course with its German/European data privacy mandate.

The cultural issue goes even deeper: the problem with cultural stereotypes is not that they tend to be insultingly false but that they can’t help –at times – to be shockingly true. Germans are control freaks, Americans are sloppy and miss the details. Germans take too much time making decisions, Americans jump in too soon without due consideration. Germans think it’s all about great engineering, Americans think it’s all about getting a product out as fast as possible. Germans think it’s about profitability, Americans think it’s about market share. Germans think the technologist knows best, Americans think the customer knows best. Germans think no product should be released before it’s ready, Americans think it’s okay to release buggy “beta” software as GA. The list goes on and on….

Adding to the cultural issue is that this isn’t just about the US/German divide, though that appears to be the biggest culture gap in the company. SAP is also an Indian company, a Chinese company, an Israeli company, a Brazilian company, an Argentinian company, a French company – and on and on. And as any student of world cultures will tell you, or anyone who’s seen the UN in action, this cultural bouillabaisse isn’t as easy to digest as its culinary namesake. Getting all these different people to work together takes a Herculean effort. And don’t forget that when Hercules wasn’t running around performing his labors he was running around Greece stark-raving mad. Which means it helps to be a little crazy too if you’re going to play the hero.

But wait, there’s more. SAP is also a federation of business cultures, the result of an aggressive acquisitions strategy that has been marred, to be blunt, by a haphazard merger strategy. By this I mean that SAP has been pretty good at buying companies (leaving out the issue how much they paid for some of their recent acquisitions) but not as good at bringing them into the fold. While two of the founders of the latest acquisition, Concur, have basically made one of the speediest founders’ exit in the history of SAP’s acquisitions, the standard has been to maintain the acquired company’s autonomy (and it’s executive leadership) well beyond what would appear to be a reasonable shelf-life.

And so we’ve seen the Business Objects culture war, the Sybase culture war, the SuccessFactors culture war, the Ariba culture war – in each case there’s been no shortage of smart, well-connected people inside SAP who, judging by how the acquired company comports itself, have wondered whether SAP was the acquirer or the acquired. And while there’s some hope that Concur will be the smoothest acquisition of all –perhaps because at least two of the founders aren’t trying to squeeze their round start-up souls into SAP’s square management culture – the fact that Concur, Ariba, SuccessFactors, Fieldglass, and hybris, among other assets, will be lumped into a single massive “cloud” business that will be a huge part of SAP’s “American culture” strategy will make the job of whoever takes the helm of the cloud business daunting to say the least.

The problem with the culture wars at SAP is not that they will never go away, because they won’t and shouldn’t. While SAP needs to be refocused to ensure that it doesn’t consume itself in internecine battles, creating a monoculture SAP would be a huge mistake. While it’s clear that the infighting, elbowing, and stereotyping needs to disappear, the “dynamic tension” that is endemic to a multi-cultural company like SAP is actually a huge asset that, while already in play across the SAP empire, should be embraced and nurtured even more.

SAP can no more afford to have a single, predominant culture than it can afford to have a single product line or sales channel. The branding needs to be universal, but like SAP customer Nestle’s uber-brand, Nescafe, the packaging, the taste, and even the manufacturing, must be as local as possible. This can only happen in a multi-cultural company selling into a global world culture: to pretend that there could be a single culture selling to a single world market is to be ignorant or utopian. Either way, it’s a sure path to failure.

How can SAP fix this? Nothing is ever simple, as I just said a few paragraphs ago. Keeping the best of the cultural dynamic tension while losing the worst of the internecine fighting isn’t going to be easy. Some of what needs to happen is window-dressing – like having Bill McDermott take up residence in Germany, and some of it is about real cultural sensitivity – like banning the use of any language during internal SAP conference calls that isn’t spoken by all the people who are on the call. (As someone who lives in a multi-lingual extended family, I can assure you that, while it’s easy to lapse into one’s native language without intending to be exclusionary, it’s even easier to feel excluded when the conversation shifts to a language one can’t understand.)

Perhaps most importantly, SAP has to build that single lodestar point of reference for the company and make it stick. Run Simple is a good start, but it doesn’t yet have the cache of an Intel Inside or the IBM On Demand slogan that Sam Palmisano used to resurrect IBM following its crash in 2002. Run Simple simply hasn’t been embraced by all of SAP – nowhere near the embrace that HANA has had – and, more importantly, the SAP ecosystem and customer base hasn’t gotten on board with Run Simple either. The importance of a lodestar cannot be overemphasized: Palmisano’s use of On Demand as IBM’s lodestar was the main reason he was able to turn the company around after the crash. IBM’s successful resurrection in the beginning of the century is a powerful example of what a focused internal campaign can do for a company’s external execution.

The reason that SAP still isn’t as simple as it would like sets up a discussion of the second big issue facing SAP in 2015 and beyond: how do customers, partners, and the rest of the world engage with SAP? The answer, right now, doesn’t come in under the rubric Run Simple.

As Run Simple has evolved there’s been some clarifications and a better sense that, with Fiori, s-innovations, and other new capabilities on the way, SAP and Simple may not turn out to be mutually exclusive at all, which was definitely how many customers and influencers felt following the debut of Run Simple at last year’s SAPPHIRE. The early s-innovations certainly look a whole lot simpler to use, though using them will require running the HANA platform, which for many customers will entail a migration and/or upgrade that won’t be at all simple.

Regardless, the bottom line is that SAP needs Simple to be a slogan not just for its products, but for its interactions and interfaces to its ecosystem and the myriad developers, programmers, and startups that SAP wants, no, desperately needs, to embrace its HANA platform and associated technologies. Because, today, Simple is not the way to describe how SAP engages with the partner and customer world around it. The main, glaring problem is that there isn’t a single, Simple answer to the question: “If I want to engage with SAP, whether it is to build a killer app or service for the SAP market, or buy SAP’s products and services, where do I start?”

While SAP has made great strides in fixing these problems, the fact remains that the external face of SAP is too complex, with too many points of interaction for would-be partners and too many potential barriers along the way. Coupled with the continued perception, even among SAP’s most loyal customers, that the internal SAP journey is also too complex, means that Run Simple is simultaneously a helluva of a good idea and a helluva big challenge for SAP.

My understanding is that a lot of what FKOM will focus on this year are the new ideas, products, and services that will attempt to address this Run Simple problem. One key lodestar that I believe will be broadly transformative for SAP is One Service, which will be rolled out at FKOM and to the world this week. One Service basically makes all of SAP’s myriad services, from implementation to support to cloud and mobile services, as well as education and training, available from a single sales and support organization. This is part of an effort to close the complexity door on the services side, and, frankly, make the customers’ interactions with Services as Simple as possible.

I think One Service is an excellent beginning for SAP, not just because it solves the problem of not-very-simple engagement with SAP, but also because it could serve as a model for providing that single lodestar that can both transcend the culture wars and provide a focal point that can help SAP leverage the cultural diversity that is simultaneously one of its biggest problems, as well as one of its most important legacies and most powerful weapons in the dynamic, global business world of today.

A certain Karl Marx, not known necessarily for his love of capitalism, once said that “a second language is a weapon in the war of life.” I’m pretty sure he didn’t mean to provide a rationale for embracing multiculturalism in the 21st century global economy, but his words were a prescient reminder that life, like business, whether we like it or not, can be a fight. Being armed with the tools to transcend one’s own culture and succeed in battle should be high on the must-have list of every executive and global citizen of today.

SAP is lucky that is has these weapons at its disposal. The trick is to make sure to minimize the “friendly fire” and maximize the synergy that a German/American/Global company can provide. If SAP can do this, and put the focus on simplicity and single points of contact like One Service, it’s going to have a helluva good year.

 

 

Windows Phone Looks Doomed: Does this Mean Trouble for Windows 10?

I think it’s pretty fair to say that counting Microsoft out in a market it has made a commitment to is a classic rookie mistake that serves as the epitaph for too many forgotten companies. If at first you don’t succeed, try try again is a time-honored mantra in Redmond. And it’s pretty evident that Windows Phone is one of those areas where Microsoft has made big commitments – including but hardly limited to its $7.2 billion purchase of Nokia’s phone business – and where the company is on the record as committed to try try again.

But I think it’s time to call Windows Phone for what it is, a failed experiment, at least in the US market, that will have huge repercussions across the company. And the biggest impact may be on Windows 10 and one of its main selling points: a single platform that spans mobile, desktop, server, and cloud. Without a strong mobile phone offering from Microsoft, it may be hard for Windows 10 to take advantage of one of its strongest competitive advantages against Apple’s and Google’s platform dreams.

The death of Windows Phone won’t necessarily dent demand for Windows 10 on the desktop, but maintaining market share in PCs isn’t what the Windows 10 offering is all about. It’s a platform play, one that Microsoft hopes will help make up for the fact that monopolizing the PC market isn’t going to cut it anymore. Indeed, Satya Nadella and company have to grab a much bigger prize: Microsoft needs the next generation apps that span mobile, desktop, server and cloud to run on Windows 10, or the company’s dreams of future glory will evaporate – which, unfortunately, is what the Windows Phone market is doing as we speak.

This is, ironically, a failure that isn’t about technology or user experience – Windows Phone meets or exceeds the current competition in both categories, and its technological prospects as a key mobile device in the Windows 10 strategy are undeniable. (And I say this as a current, but soon to be former, Windows Phone user who genuinely likes the phone and thinks many aspects of its usability are far better, or at least theoretically far better, than iPhone and Android.)

But, technology and user experience can only take you so far. If Windows Phone has lost the carrier and user acceptance battle to IOS and Android, and I think it definitively has, then the Windows Phone saga is another rare, cautionary tale about how many second chances even Microsoft can get before it’s time to pack it in and call it a day.

So how dead is Windows Phone in the US? Let me count the ways.

Perhaps the most damning factor against Windows Phone comes from the #1 US carrier, Verizon, which as far as I can tell, is largely exiting the Windows Phone market. The evidence is pretty compelling: Verizon has basically stalled any plans for updating its Windows Phones, including my year-old Nokia 928, and while there are four Windows phones for sale on its website, only one is offered with the latest operating system, Windows Phone 8.1, and its very compelling and competitive voice system, Cortana. (Ed Bott of ZDNet takes aim at Verizon as well for its unsupport of Windows Phone.)

This isn’t about time, it’s about focus: The new OS has been out for six months, more than time enough to get it into the hands of customers. (By contrast, IOS has had two upgrades in the same time, and a third, IOS 8.2, just entered beta last month.) Verizon clearly couldn’t be bothered about upgrading Windows Phone.

As a survivor of the two previous Windows Phone incarnations (I know, fool me once, shame on me, fool me three times….), this is another case of déjà vu all over again. For those of you smart enough to stay away from Windows Phone, the worst, by far, of the many reasons why Windows Phone 6.5 and Windows Phone 7 were a marketing and technological mess was that there was no upward compatibility from Windows Phone 6.5 to 7, or from 7 to 8. Microsoft effectively stranded owners of these previous phone operating systems, offering their new functionality to new customers (often at a discount), and punishing those foolish enough to have been existing customers by forcing them to pay the piper to break their contracts and get the new functionality.

That lack of compatibility, and the unreliability of Microsoft as a purveyor of modern cell phone operating systems that this evinced, was one of many reasons Windows Phone 8 started its journey trying to crawl its way out of a self-inflicted death spiral. The fact that that the biggest carrier in the U.S. (with 44 percent market share) is repeating the past and leaving its Windows Phone 8 customers high and dry puts the reliability of Microsoft as a smart phone supplier further in question. (And even if there were a compelling reason for not upgrading six months after Windows 8.1 was released to carriers, it’s clear that Verizon doesn’t think it necessary to tell its Windows Phone customers what is happening and when, if ever, they should expect an upgrade. They instead tell customers to ask Nokia, even though technically Nokia can’t release an OS upgrade to a carrier’s customers without going through the carrier. Can you say Catch-22?)

Meanwhile, the evidence that the answer from Verizon about when Windows Phone 8.1 will be available is never, or least some distant unforeseeable point in the future, can be seen in a recent Sunday newspaper insert from Verizon(the Winter, 2014 edition). The insert is notable for the fact that there is nary a Windows phone in it. (Nor are any of the tablets in the insert Windows tablets either.) So no Windows phones for the big holiday season from the #1 carrier? That’s gotta hurt.

More evidence? Last month Verizon stopped selling the Nokia Lumia 1050 (to the surprise of the call center rep I spoke with recently, who was sure it was still being offered.) Nokia/Microsoft, meanwhile, still thinks Verizon is selling three of its phones to customers, including the Icon and the 822, at least according to the Nokia website. Not.

The rest of the US carrier market is barely any better. Sprint is offering has a single Windows phone, but it doesn’t run Windows Phone 8.1, and TMobile has two, both of which run Windows Phone 8.1. AT&T is the biggest supporter, with four Windows Phone offerings, all of which run the new operating system (something tells me AT&T has the corporate contract with Microsoft in the US.)

Nokia has similar delusions about how many Windows phones these US carriers are selling. The website shows that T-Mobile is selling four of its phones, and AT&T seven. At least it doesn’t list any Sprint phones (the Sprint Windows 8 phone is an HTC.)

This inability of Microsoft/Nokia to cover even 50 percent of US market is, of course, a reflection of an intractable problem with Windows Phone – the app gap. As of last summer, there were over 202,000 Windows Phone apps, as opposed to over 900,000 iPhone apps and over 850,000 for Android, a pretty glaring gap. This isn’t just about having compelling apps in volume and variety, it’s also about the regular humiliation of arriving at conferences and other events and not being able to download the conference apps, which are never offered for Windows Phone except at Microsoft events. The app gap, unfortunately, seems at this point to be completely insurmountable.

The Impact on Windows 10

So, with the carriers exiting Windows Phone or largely uninterested, and the app gap accelerating beyond the point of no return, the question of what happens to Windows 10 comes into question. There is no doubt that all enterprise software development is in full mobile first mode, it’s a mantra you hear from every vendor, Microsoft included. But if the main mobile platform for Windows can’t be relied upon to have a decent market share (which it clearly doesn’t have, having scraped up a little over 3 percent market share recently, putting it in a statistical dead heat with Blackberry, emphasis on dead) as well as a critical mass of carriers who will actively support the operating system and its users, the native mobile advantage of Windows 10 goes by the wayside.

This is more important than it may seem. While HTML5 and various mobile development platforms offer developers the ability to run their apps on any device, native development in the phone’s OS is emerging as the gold standard for mobile app development. This is even more critical in the enterprise, where key usability, security, and privacy issues are increasingly seen as best handled in native mode.

That’s where the Windows 10 promise potentially meets its doom, particularly in the enterprise, which I once thought was the last great hope of Windows Phone. Once upon a time. If I’m developing a killer app for my company, one that has to span mobile and desktop and server and cloud, Windows 10 looks pretty compelling until I factor in the problem of Windows Phone.

My killer app certainly won’t have a BYOD user base on Windows Phone, and it’s hard to imagine a US company standardizing on Windows Phone if there’s really only one carrier who is effectively supporting it. At which point, considering all development is mobile-first, I as a developer would have to ask myself why I’m using a platform – Windows 10 – that requires me to break out of its monolithic development model and start coding for IOS and Android. If I’m not able to build an app on a single code base, because that code base doesn’t give me access to the mobile phones my users are using, then maybe I don’t need to look at Windows 10 at all. It certainly takes a key advantage of Windows 10 off the table before it even gets started.

Microsoft could always offer to run Android apps on its phone, an idea that has been floated before (Mary Jo Foley wrote about the notion, however farfetched, this earlier this year.) But that would just allow the developer trying to reach the greatest number of users to opt for the Android platform and let some compatibility option handle the few Windows Phone users in the market.

It’s a sad moment when a truly great technology is put out to pasture, but, heck, the mobile phone market is one big lesson in the vagaries of technology leadership and failure. Remember Symbian, the dominant market leader of 2009? Palm? Blackberry? Can you believe that iPhone is only four years old?

The bottom line is that technology sh*t happens faster in mobile than almost any other market, and so far there’s never been a second act. I wish there was one for Windows Phone, and maybe some non-US market may be the place. But for now, and for the foreseeable future, Microsoft and Windows 10 are going to have to make it without a strong mobile phone product. That’s only going to make Satya Nadella’s already tough job that much harder.