Looking for Mr. Cloud: The Benioff Scale and SAP’s Cloud Leadership Conundrum

Cloud computing, the artist formerly known as SaaS, has always been a proving ground for dynamic leadership. The standard – brash, outspoken, ubiquitous, successful – was set once upon a time by Marc Benioff, and ever since it’s been easy to measure cloud leadership by what I call the Benioff Scale. On a Benioff Scale of 1-10, where 1 is Ginni (Ginni who?) Rometty of IBM, and 10 is Marc himself, measuring cloud leadership by how many Benioffs a particular leader generates is as good a method as any.

Amazon’s Jeff Bezos clearly rates 10 Benioffs, and Microsoft’s Satya Nadella gets a 10 as well. Larry Ellison – how about if I pass on that one? Meg Whitman – 4 or 5 at best. Larry Page gets a 10, of course, though his enterprise cloud score would be much lower. Infor’s Charles Philips get an 8 for sincerity and vision, but the continued lack of customer momentum towards the cloud drives his overall score much lower.

The point is that the cloud is a marketer’s market, and the higher up on the Benioff scale an executive can go – the more brash, outspoken, ubiquitous and successful the leader is –  the better his or her company’s cloud marketing efforts will be.

Which is why SAP’s current cloud position isn’t looking as good as it could, despite an alignment of assets and strategies that clearly place SAP in the top tier. SAP’s problem with cloud leadership is fundamental: it lacks a Mr. or Ms. Cloud who rates a leading score on the Benioff scale. Absent a leader with the requisite level of internal and external clout, SAP as a whole rates at best 6 Benioffs¸ underperforming its potential by several points.

Not that there aren’t strong contenders inside SAP for Mr. Cloud. (Sorry, I’m struggling to find a prospective Ms. Cloud in SAP’s leadership lineup – despite the company’s honest attempts at diversity, senior leadership at SAP’s is still largely a men’s club.) But the worthy contenders all struggle with the siloing of SAP’s cloud strategy, which yields too many Mr. Cloud contenders, and waters down the company’s overall Benioff score.

So far, the most visible Mr. Cloud is SuccessFactors head Mike Ettling, who wears the mantle with solid authority and credentials, but not enough overall company responsibility to claim the title. On his own I’d give Mike something north of an 8, but because he’s part of a fragmented SAP, he’s dragged down by the company’s overall score. Steve Singh, the SAP board member with the biggest cloud portfolio and a legitimate Mr. Cloud contender in his own right, simply isn’t visible enough to make it to more than a 5 Benioffs score, if that. Bernd Leukert, who waxed eloquent about cloud and HANA Cloud Platform at SAP TechEd in Barcelona last month, is getting higher and higher individual marks, but his technology bailiwick at SAP waters down his ability to raise the company’s overall average. Alex Atzberger, who runs Ariba, has decent Mr. Cloud potential, but his cloud focus is distracted by Ariba’s on-premise customer base and the same fragmentation that lowers scores across the company. And CEO Bill McDermott has too much responsibility for the non-cloud part of SAP – the part that so far actually makes the company’s quarterly numbers work for Wall Street – to be even in contention for Mr. Cloud.

It’s important to bear in mind that Mr. or Ms. Cloud isn’t just about putting a public face to a company’s cloud aspirations, and the Benioff scale isn’t just about feeding at the trough of public opinion. Top scorers on the scale get those numbers because they have internal cloud clout as well. Bezos, Benioff, Nadella – there’s no doubt they run the cloud show at their respective companies, and while each is surrounded by a coterie of lieutenants (almost all men, sorry again, Ms. Cloud wannabes) who own various business units and other parts of the cloud story, no one inside or outside these companies has any doubt who’s running the cloud show.

Not so at SAP, much to its detriment. SAP has nine major cloud properties or assets – S/4 HANA, HANA Enterprise Cloud, SucessFactors, Ariba, Concur, hybris, Fieldglass, C4C, and HANA Cloud Platform – and the lack of a unified, cohesive strategy is SAP’s greatest challenge right now. Much like its customers, SAP is struggling with a siloed cloud approach that is turning out to be an impediment to growth, and, counting the low Benioff scores, market leadership as well. At a time when companies at the top of the Benioff scale are poised to reap enormous benefits from a sudden acceleration to the cloud, SAP – which is definitely reaping serious cloud benefits every quarter – is finding its own cloud structure, or, more concisely, lack thereof, getting in the way.

Don’t think for a moment that SAP is alone is having a surfeit of disjointed cloud properties and strategies – all top Benioff scale companies do too: it’s an artifact of the incessant acquisitions and side bets that cloud vendors have made in order to keep moving the needle. But the command and control structures that run Salesforce.com, Microsoft and Amazon mean that rationalizing these companies’ surfeit of clouds can be undertaken without having to fight the kind of rear-guard, tilting at silos battle any Mr. Cloud at SAP would face even to be allowed to take the crown, much less wear it.

But the fight would be worth it. SAP needs a rational, cohesive cloud strategy – articulated loud and strong by Mr. Cloud – in order to push not just the above-mentioned cloud assets, but its new strategic initiatives as well. IoT lives and dies in the cloud (and lately it looks like SAP wants to live or die by IoT, which is going to a little more difficult than it may appear), machine learning isn’t something you install on premise (though I’m sure someone somewhere has tried to buy one of them shiny new Watsons to put in their data center), and that developer-friendly platform strategy that SAP needs to execute is based on something call HANA Cloud Platform after all.

Whether SAP is talking to itself, its partners, individual users, ASUG and other user groups, or its competitors, the need for a unified, cohesive voice to the cloud market has never been greater. I’m pretty sure SAP has got a deep enough bench to make Mr. or Ms. Cloud a reality. But it needs either a lot more courage or a lot more fear to take this step. Right now both are lacking, and an abundance of both, frankly, should define SAP’s mindset for 2017: cloud leadership is there to take, and it’s there to lose. The coming year is going to be a pivotal one, and without a single, strategic cloud voice, the pivot for SAP risks going in the wrong direction.


The Ecosystem/Platform War: How do Microsoft, Salesforce.com, and SAP Stack Up?

As the enterprise software market slowly morphs into the enterprise software and platform market, it’s become necessary to carefully define what it means to be a successful platform vendor. Importantly, that definition has nothing to do with technology – okay, maybe a little – but it does have a whole lot to do with people and perceptions.

A platform is really the foundation of an ecosystem, and in the platform wars, it’s the best ecosystem that wins. Nothing else matters. So, when looking at the three top contenders for the leading enterprise software platform ecosystem – Microsoft, SAP, and Salesforce.com – it’s important to make sure we understand what having a successful platform and ecosystem really means.

My sense of what makes platforms and ecosystems successful places these companies in what today is a three-way race to the top. Other top contenders – such as Amazon and Google – just don’t have the enterprise DNA to become major players: their consumer tech chops have led them to offer great infrastructure services that have them firmly engaged in a feature/function/price race to the bottom. A latecomer to cloud platforms, Oracle isn’t a serious player – they’re about to muck up their already mucked up platform plans with the acquisition of a multi-platform mess called Netsuite. IBM’s inane focus on Watson and its focus on everything being a consulting gig – no packaged software, please – just won’t make it in the long run either. And Infor, which has the right strategy and technology for the job, so far lacks the customer proof-points that would bring its ION platform and Cloudsuite offerings into the top tier.

But Microsoft, SAP and Salesforce all have some serious assets, and serious aspirations, to be highly successful players in the platform-cum-ecosystem world. And all three have serious – and very different – challenges as they march towards what today is still not a winner-take-all, zero-sum race to the top. So far.

Defining what constitutes a successful ecosystem is simple, using my lying awake at 2 am in the morning definition. When software developers, entrepreneurs, or VCs wake up at 2 am with a hot new idea for a killer app or product, the platform they reflexively chose for building their app is either the easiest platform for them to get started on or the one that provides them access to the very best ecosystem, preferably both. When thousands of developers, entrepreneurs, or VCs make the move to the same platform, a successful ecosystem is born. Move millions, and you’re the platform/ecosystem leader.

What’s behind these reflexive motions towards one platform or another? At this point in the evolution of the market, a successful platform, theoretically, fulfils the full lifecycle of the successful product or service, from nascent ideation to order fulfillment and payment, to renewal and eventual end-of-life, rinse and repeat. This includes a list of functions and capabilities that starts down at the technology level with developer tools, databases, access to services, middleware, and APIs, and finishes at the end-customer level, when a product is purchased and paid for, and implemented or configured in as much of a self-service model as possible.

In between are a host of important functions: open APIs, low-cost or free dev and test environments, a wide choice of dev tools, and databases, and the elasticity to start small and scale big. Cost transparency is also very important – who wants to build a killer app that’s too expense to make a killing on – and a super easy on-ramp for both developers and eventual customers is also a requirement. I’ve seen some platform pricing schemes that look like the spawn of Rube Goldberg and the Code of Federal Regulations: complex, overwrought, guaranteed to send a developer running to mother Amazon in tears. Not a way to succeed in the platform wards.

Increasingly, mother Amazon notwithstanding, having an extremely elastic cloud is just table stakes. What matters more than raw infrastructure is access to specialized business services: APIs for business services that support standard backoffice functionality as well as supporting nascent areas like IoT and machine learning. APIs that connect cloud assets to on-premise assets. APIs that support complex, hybrid environments with mixed legacy and leading edge functionality. APIs for specific industries, geographies, and regulatory requirements. And on and on. The bigger the shopping list for extending applications to the rest of the business world – that vastly heterogenous, mixed up, often functionality irrational, real world that enterprise software customers actually live in – the better.

Then there’s the customer side. There needs to be a massive customer base eager to solve their digital transformation problems at the same time they engineer an upgrade from the primordial ooze of Excel and paper processes. Those customers need to be given a killer user experience that hides the underlying chaos that leading platforms are trying to control. And they need these experiences to be self-service, intuitive, intelligent, and as prescriptive as possible.

Perhaps most importantly, there needs to be a buzz, a coolness factor, an ineffable momentum that draws developers, partners, and customers into the platform’s magical orbit. In a funny way, platforms and ecosystems today need to think more like consumer brands than technology brands, with a focus on the millennial demographic, an ability to exude excitement and vigor, youth and hipness. An ability to be cool, quick, nimble, ever-evolving. A hack on the staid, old enterprise software model of yesteryear.

Finally, there has to be a serious investment on the part of the platform/ecosystem company on making the above happen, particularly the buzz/coolness/magic part. That involves money, it involves senior executive spokespeople rallying the troops, it involves creating an almost religious revival movement that looks antithetical – but isn’t – to the dominant nerdy, basement-dwelling engineering culture that enterprise software was born to.

So, armed with these basic criteria, here’s my assessment of where my leading platform/ecosystem vendors stand. Right now, I’d say it’s a pretty close race, with each one running ahead in certain criteria and behind in others.

Microsoft’s investment in Azure, and the resounding success of Office 365, has placed the company’s platform and ecosystem in serious contention. They have an amazing array of services – database, IoT, machine learning, and the like, some new and very appealing hardware assets like Holo Lens and Surface Hub and a new generation of Apple-butt-kicking PCs, all drawing on the universality of the Office user experience when and where it makes sense. Their recent Dynamics 365 announcement was further proof of where they are heading, which is in the right direction, though the mid-market origins of Dynamics AX means that they’ll have to work hard to legitimize their ecosystem as capable of serving the global, large enterprise market.

Nonetheless, Azure’s Lifecyle Services is without a doubt the best cloud ALM tool in the market, and as the complexity of hybrid cloud environments grows, LCS is going to be an increasingly powerful asset and competitive differentiator. Microsoft can clearly grow into the top tier of the market, but it will take some time and effort.

The big issue for Microsoft, ironically, is that the company is still trying to pivot its ecosystem in the right direction. While there are millions of developers who claim .NET and other Microsoft credentials, the enterprise software ecosystem of the future isn’t necessarily the place where the classic Microsoft developer – tech-heavy, but business light – can excel (spot the bad pun, win a prize J). Microsoft’s ecosystem still suffers from an on-premise, PC-based bias, which means it needs a new class of developer to step up to solidify that top tier position. There’s every reason to believe they’ll make it – Lord knows they know how to build an ecosystem, and Microsoft isn’t shy about spending real money to maintain it – but a developer shift of this magnitude will also take time and effort.

SAP has the top spot when it comes to large enterprises and highly complex environments, though SAP also lacks the ALM tools to support this position. But the capabilities of the company’s HANA Cloud Platform, especially its growing API library, IoT and machine learning capabilities, means that SAP is well-positioned to succeed. S/4HANA, on-premise and in the cloud, when combined with SAP’s myriad cloud assets – Ariba, SuccessFactors, Concur, Fieldglass, and hybris, among others – makes for a compelling platform on which to stage complex business processes that span multiple lines of business and products. In particular, as more and more customers move to a relatively restrictive, one-size-fits-all cloud world, HCP and its tools and services can become the place where customer/industry/geography-specific functionality can be built and staged without breaking the “no blueprint” cloud model.

But SAP also suffers from a paucity of the right kind of developers, and, more importantly, a limited quantity of internal DNA that understands what it takes to reach this new generation of developers. I was recently at SAP’s TechEd conference in Barcelona, and it was a classic case of a vendor pitching tomorrow’s message to last year’s audience – a problem endemic to all vendors transitioning a new platform/ecosystem paradigm.

I think the message that Bernd Leukert, the member of the SAP board in charge of products and innovation, delivered at TechEd was spot-on relative to the new platform/ecosystem challenge, and for the most part I think the Tech Ed audience got it. But the audience, by and large, was old guard SAP partner/developers. The new guard, which does show up for SAP’s Innojams and other developer mini-events, was definitely at Tech Ed, but they were in the minority.

Ultimately, SAP needs to do more, much more, to reach out to a new audience and make that reflexive move to SAP and HCP a given, not an afterthought. SAP’s recent agreement with Apple to unleash the IoS developer ecosystem on SAP’s platform is start, but IoS developers are like traditional .NET developers when it comes to next generation enterprise software: only a few can really step up to the new platform challenge.

Overall, the problem of building a name for itself outside the SAP ecosystem, particularly in Silicon Valley and other tech-centric locales – combined with SAP’s historic allergy to spending the money it takes to build a real developer ecosystem – will be the main gating factor for SAP’s platform and ecosystem aspirations. The spirit is willing, but it’ll take more than good intentions and the best business APIs in the business to make SAP’s ecosystem number one.

Last but not least is Salesforce. Unlike SAP and Microsoft, Salesforce has cracked the developer ecosystem code with Trailhead. While the company’s recent Dreamforce conference was, vis-à-vis the company’s ecosystem aspirations, another example of the “next year’s message, last year’s audience” problem, the Trailhead zone at Dreamforce this year was the exact opposite, a shining example of how to get the platform/ecosystem strategy right: stuffed with people, buzzing, standing room only, gamification to keep things rolling, and lots of woodsy icons to keep the buzz from ever getting too serious. And, most important, present and accounted for was a real ecosystem excited about using Salesforce’s platform(s) to drive real change in the enterprise.

The irony of this platform buzz leadership is the relative paucity of high level business services that Salesforce.com has to offer. The company’s vow to be the very best CRM platform sells its post-CRM developers and partners short: while one could argue that the customer is and will forever be the center of the business universe, both SAP and Microsoft offer a broader vision of the enterprise that is likely to appeal much more to those 2 am in the morning insomniacs who are looking to develop the next killer enterprise app.

If all you want is to build off the existing Salesforce.com base, which is considerable and intersects heavily with both SAP and Oracle, then the Trailhead ecosystem is where you want to be. But if you need more – a broad range of business services and APIs outside of a core CRM system, as well as comprehensive ALM tools and the like – then Salesforce.com might not be the best place for your efforts. Trailhead will support robust functional designs and can appeal to developers and citizen-developers like no other platform, but right now the range of capability is limited. For now. Salesforce.com’s platform aspirations are clearly headed in the right direction, and its Trailhead developers are engaged and ready to get going: that’s a pretty potent combination, and one that will keep Salesforce in the running for some time.

The bottom line is that these three top tier vendors are equally strong for different reasons, and that, due to the nascent nature of the platform/ecosystem opportunity, that’s just fine. A three-horse race will make every vendor run faster and try harder. Which means that the ultimate winner, the one that really matters – the customer – will reap the benefit of a classic competitive market evolving into a nascent and highly important new form.

Looking at the sources of revenues for all three top contenders, the transition to platform is still to come. Which is also good for all concerned: Customers aren’t actually as ready as their vendors would like to think, and the vendors still have a lot of kinks to work in their strategies and offering. Time is on all of our sides right now – the quarterly cadence demanded of the public equity markets is going to have to be patient.

But the platform/ecosystem game is clearly afoot, and the transition is as inevitable as previous transitions – to client/server computing, Internet commerce, and mobile, for example  – have proven to be. Which further argues for a good dose of patience. Even in the compressed timeframe that technology markets now lives in, the shift will take time for all – vendor and customer – to absorb.

The tech side is easy, but when it comes to people and perceptions….that stuff just takes time.



Security is a People Problem: Bringing the CHRO to the Table in the Cybersecurity Wars

All the attention on whether Russia or some other nation-state entity is trying to hack the election in November or how organized gangs are flooding PCs with ransomware has obscured that truth about where the real threat to our collective cybersecurity comes from: our employees.

Employees come in many shapes and sizes, but when it comes to cybersecurity, there are two archetypes, the rogue employee and the ignorant employee. The epitome of the former is Ed Snowden, the epitome of the latter is all of us who has been tricked into opening a phishing email or forgotten that we’re not allowed to save sensitive files on our personal Dropbox account. Either way, the vast majority of cybersecurity threats come from the people who work for us and around us, not nameless, faceless entities located thousands of miles away.

Which is why I keep looking around for how Chief Human Resources Officers (CHRO) and their cohorts are responding to this issue, and not finding a whole lot. When I ask the people in the C-suite who are in charge of cybersecurity, Chief Information Security Officers (CISO), about the direct role HR should play in cybersecurity, I tend to get the kind of funny look you get when you’ve asked whether the moon is made of cheese and you’re more than six years old.

Are you serious? After all, the bailiwick of the CHRO is stuff like hiring, firing, benefits, and payroll. What could those processes (and, all the other HR processes that CISOs are ignorant of) have anything to do with cybersecurity?

Plenty, it turns out, both for the sake of stopping the rogue employees of the world as well as keeping Betty and Jimmy from clicking on that fake invoice or “jaw-dropping” offer in a phishing email and unleashing some techno-horror into the company’s IT infrastructure.

And herein lies a tale. I’ve had the privilege of working with the IEEE Computer Society for a number of years now, helping them organize and participating in a series of topic-specific conferences. One of the most recent ones, entitled “Rock Stars of Cybersecurity”, featured a speaker named Steven Bay, whose claim to fame is that he was the guy who hired and supervised Ed Snowden at his last job before, well, Ed Snowden became Ed Snowden.

Steven’s story is an amazing one – regardless of whether you think Snowden is a hero or a traitor – but the kicker comes around minute twenty-four, in case you want to scroll forward to the good stuff in his presentation. The segment starts with Steven giving a quick overview of the separation of duties between systems analysts and defense analysts: Basically the former has access to systems but not necessarily access to sensitive data, and the latter has access to all matters of sensitive data but can’t wander around the IT infrastructure at will. Sounds like a pretty good idea.

Too bad that good idea wasn’t put into practice for Mr. Snowden. The trick to Snowden’s success, according to Bay, is that he was at his systems analyst job on a Friday and starting his new defense analyst job the following Monday. Importantly, considering his goal in taking the job was to download a few terabytes of sensitive NSA data, his credentials from his old job inexplicably remained in place at the new job.  In other words, Snowden’s employer “forgot” that, while he had all the right clearances for both jobs, neither job allowed him to possess the credentials of the other.

And that oversight in the HR basic process of on-boarding and credentialing a new hire is how the greatest cyberhack of modern times was able to take place.

How did this IT/defense analyst credential overlap problem happen? I don’t know the specifics of Snowden’s case and Bay doesn’t really say. But it’s safe to surmise, based on my aforementioned queries regarding the role of HR in cybersecurity, that the HR department, and their colleagues in IT who manage system credentials, lacked the right procedures for handling employees who crossed over the line from systems to defense analyst. We don’t know if Snowden knew about this lacuna, but considering Steven Bay’s contention that Snowden specifically targeted the contract Bay’s team worked on – in other words, Snowden didn’t just show up on that fateful Monday and have his conscience tweaked by some startling revelation about NSA data collection – it’s very likely that Snowden knew about this lack of attention to separation of duties.

Ed Snowden didn’t succeed by finding a hole in the cyber-security fabric of the company or the country’s most powerful and, in theory, secretive spy agency, he succeeded by finding a hole in the credential and compliance processes of the contractor he worked for. So much for creating a dense cybersecurity technology infrastructure: it only takes one smart operative, and all the technology in the world can’t keep the world safe.

Of course, the Snowden case was an especially egregious one, except that the problem of credentials, compliance, and training are at the heart of too many cybersecurity meltdowns, particularly the malicious ones. In what is perhaps the ultimate irony, the US government’s own HR “department”, the Office of Personnel Management (OPM), was spectacularly hacked last year due to a number of factors, including embarrassingly poor coordination between IT and security. But at the bottom of the pile of blame at OPM is the poorly trained employee who clicked on a phishing email and gave up his or her credentials. And because the system lacked basic security features, including multi-factor authentication, the race to download what turned out to be 4 million employee records, including security clearance information and a host of other cringe-worthy data, was on.

Importantly, whether it’s an employee gone rogue or an employee asleep at the switch, cases like Snowden and the OPM breach highlight the fact that preventing these disasters requires the active participation of several C-level big-wigs: the CISO, the CIO, and the CHRO all have a role in making sure the bad guys don’t succeed. But if they do their jobs individually without coordination, which seems to have been the case at OPM, and probably with Snowden as well, then what you get is the perfectly permeable environment for nurturing a major hack.

The old adage in cybersecurity is unfortunately all too true: the problem is that the good guys have to do their job right 100 percent of the time, while the bad guys only need to do their job right once – a successful phishing email or other hack – and all hell breaks loose. Getting it right isn’t just a matter of letting the CISO do her job, nor is it enough to let the CISO and the CIO collaborate. If people are at the root of the global, pandemic cyber-threat of today, then the number one people-person in the C-suite, the CHRO, needs to be in the mix as well.

Just leaving security up to the CISO, or CIO, means we’ll just keep fighting the good fight with the wrong team. And we know far that’s not worked as well as anyone would like.

Le Blueprint, C’est Moi: the Counter-Customization Revolution comes to SAP SuccessFactors

Le Blueprint, C’est Moi:  the Counter-Customization Revolution comes to SAP

Sometimes revolutions start with a shot heard round the world, and sometimes they start with a quiet nudge in a new direction. The latter form of revolution was nudged into being for SAP’s HR customers last April in the form of eight words uttered by Mike Ettling, the president of SAP SuccessFactors, during an analyst summit in San Francisco. Ettling’s eight words have been said before, but the fact that they come from a man who is re-writing what it means to be a cloud company, and thereby what it means for customers to consume cloud services, adds enormous gravitas to the moment.

On the surface, I admit this revolutionary utterance seems absurdly benign. All Mike said was the following: “The blueprint should be banned. I’m the blueprint.” Pretty banal, no?

But behind those eight words are a veritable revolution in what it takes to be an enterprise software vendor and an enterprise software consumer. And while this revolution has already been underway for a while, in the world of SAP this revolution means that the status quo ante of software deployment and lifecycle services was just blown to smithereens.

First, let’s talk about why Ettling is going to become a hero by blowing things up. It’s simple: software projects are historically problematic, and Ettling has a plan to fix that.

The success rate of on-premise software deployment would be an industry shame if the industry had any shame. Instead, we’ve all become inured to the pain. It’s safe to say that up to two-thirds of all software projects fail to deliver on their expected results. Most are remediated, blowing schedules and budgets along the way, and annoying end-users, executives, bean counters, and the IT department to no end. But a significant number are cancelled outright or end up in court, tarring the reputation of the customer, service provider, and the vendor in the process.

To say this is the dirty little secret of our industry is to misstate the problem: it’s our dirty big secret. And it’s not even that secret.

What Ettling is referring to with those eight little words starts with the fact that every enterprise software project uses some sort of methodology as the basis for organizing the tasks to be undertaken by the IT department and its counterparts on the service provider side. The methodologies used in the SAP ecosystem are too numerous to count: SAP has at least four (ASAP, A20, various flavors of agile, and a new one, SAPActivate), and most of its services partners have their own as well.

Virtually every methodology has two basic things in common: they all have five phases, and the first phase is called something resembling “blueprint.” The blueprint phase is pretty much self-explanatory: the internal IT team, along with (hopefully) their business counterparts, sit down with the service provider team and hammer out the details of what needs to be done to adapt a largely generic system to the customer’s specific business requirements.

Sounds great, right? Isn’t imprinting the business requirements on the software what it’s all about? So why is Ettling channeling Louis XIV and declaiming “le blueprint, c’est moi?

The answer is that a significant number of troubled projects start with a troubled blueprint. Why? Because all too often free rein is given to perceived business requirements that ultimately mean a tremendous amount of customization. And that customization in turn leads to a lifecycle of complex implementations, complex on-going maintenance, and complex upgrades. This makes customization the the plague flea of enterprise software: easy to find, easy to spread, hard to get rid of, enormously irritating, and every once in a while its bite proves to be fatal.

The key here is “perceived business requirements.” Sometimes the perception of the business managers is spot on, but all too often the alleged business benefit is really just some individual’s or department’s misconception of what enabling competitive advantage in software is all about. When someone insists on a customization because “this is our competitive advantage” it’s more likely they really mean some variation of “this is the way we’ve always done things around here” or “I want the new software to look and feel just like the old software.” And everyone goes home itching and scratching.

What’s remarkable about cloud software like SuccessFactor’s Employee Central is that customization is severely limited, at least compared to the on-premise world. The limits to customization were originally a matter of efficiency for the cloud provider – too much variation between instances breaks the economies of scale of cloud computing by requiring too much one-to-one support. But what started as an expedient has turned into a virtue:  by building in an increasingly significant amount of best practices into products like Employee Central, customers of SuccessFactors can get a lot of their “perceived business requirements” taken care of without customization.

There will always be some customization – which in the parlance of the cloud is called configuration, meaning it doesn’t require one-to-one service to support it.  And there will always be the high-value consultative services that are needed to truly transform a company’s business, and thereby its IT systems. Configuration, and other services like SuccessFactors Intelligent Services Events, a mix of workflows and net new functionality, allow a fair amount of business-specific functionality to be baked into the system. And for the really hardcore, the HANA Cloud Platform supports custom applications integration with SuccessFactors without breaking the cloud support model.

Herein lies the essence of Ettling’s declaration: customization is not your friend. If you have any doubts about the veracity of that statement just ask the old PeopleSoft HR customers, who customized to their heart’s content and won an expensive and time-consuming upgrade as first prize. Customization is the gift that keeps on taking, and it’s time to put the kibosh on these “perceived business requirements”.

Why this is so revolutionary for SAP is simple: The R/3 juggernaut got its start as the poster child of business process re-engineering, which was a buzz-term ginned up by the big systems integrators to generate consulting services. And where customization is the plague flea of enterprise software, too often these consulting services are the plague rat of enterprise software: a vector for delivering a plague of costs and complexities.

The fact that the entire SAP on-premise economy has been built on this symbiosis is why “le blueprint, c’est moi” is so revolutionary. Take away blueprinting, and you take away a huge amount of consulting services that start during the implementation process and continue throughout the lifecycle of the software. It should be no surprise that when Ettling’s head of customer lifecycle engagement, Richard Campitelli, showed analysts the SuccessFactors SAPActivate methodology, it only had four phases – blueprinting was conspicuous by its absence.

In essence, Ettling is leading a classic revolution, despoiling the rich, dysfunctional relationship between complexity, customization, and IT services. SAP is starting this revolution with its cloud properties, but it’s sure to sweep the company over time.  For too many years, enterprise software vendors and partners have been complacent in a business model that discredits the industry. Vive la révolution.

Happy Trails to You: Salesforce.com Gets in Front of the Platform Ecosystem Challenge

If someone were to write the “The Tech Event Manager’s Guide to Engaging a Millennial Audience”, a look at Salesforce.com’s recent TrailheaDX conference would be a great place to start. Similarly, if someone wanted to write the “Platform Vendors’ Guide to Building an Engaged Developer Audience”, that same TrailheaDX conference would also serve as an excellent model.

TrailheaDX, Salesforce.com’s first shot at creating a developer’s conference focused on getting partners developing on its myriad platforms, which took place last week in San Francisco, was that good. And being that good first time around puts Salesforce.com in a position of strength around what I believe is the single biggest challenge facing established enterprise software vendors today: how to pivot from selling apps and services to selling apps and services and a platform that is intended to become the go-to environment for a net new set of applications and services. As well as developers and customers.

More impressive than the keynote’s content and tone, which were noteworthy in themselves, was the tent revival vibe that the keynote elicited. I haven’t seen that engaged an audience of techies since a meeting in 1988 between the newly formed Open Software Foundation and a group of hairy, hoary Unix programmers looking for someone to save them from a perceived “corporate takeover” of the Unix movement by a AT&T and Sun Microsystems.

Their savior appeared in the form of Alex Morrow, an IBM exec who had been seconded to the OSF to run its strategy operations. Alex took the stage in front of a sea of doubters, and by the time he was done leading his flock over the river and into the promised land the open software movement, which in turn begat the open source movement, was born. There was, by the way, much whooping and hollering, and other carrying on as the tablets were brought down from the mountain and presented to the assembled wanders-in-the-proverbial-desert.

Maybe it was the whooping and hollering that reminded me of the OSF meeting. Or the acknowledgment of the hunger in the crowd for some recognition that their nerdy corner of the tech market was important. Or the anti-establishment tone to it all. Or all of the above.

Also striking was the casual, free-form way in which the keynote started: the way co-founder Parker Harris and other assorted speakers, techies, and “Trailblazers” wandering the stage as the crowd filled the theater reminded me of the controlled chaos on stage just before a three-day rock festival is about to start. A fitting analogy, as the event was held in San Francisco’s historic Warfield Theater, which has seen the likes of the Grateful Dead, Bob Dylan and Green Day rock an audience. (Fitting for an iconic 70’s venue, at one point one of the presenters paraphrased Gil Scott-Heron’s poem/song by shouting “The revolution is not televised, it’s at Trailhead.” Which was less cringe-inducing than the highly successful attempts to get the audience to chant “Rad” when prompted: they obliged, and I cringed my cynical curmudgeonly cringe.)

The meta-content also hit the mark, very much in the vein of the aforementioned fictional “Tech Event Manager’s Guide to Engaging a Millennial Audience”. Diversity was a big theme, social action was another. Women and other people who are not the typical white men in suits were on stage, the young leaders of tomorrow were saluted. And before you think I’m being cynical, snarking at the obvious pandering to a millennial audience, let me explain that the pandering worked – not just because there’s a whole chapter in my fictional guide on the value of pandering to a millennial audience, but because it really did work. The audience literally ate it up.

It’s important to note that the event itself was only one part of a larger and more comprehensive strategy of appealing to a new developer community that Salesforce.com hopes will eventually become 100 million persons strong. While that number seems a little stratospheric, the logic behind it is based on the notion that in order to succeed as a platform company Salesforce.com has to cater to an increasingly large non-techy audience interested more in business outcomes than REST APIs and what’s available on GitHub.

To Salesforce.com’s credit, their new developer’s training ground/landing page, Trailhead, makes a good case for how the company plans to bring on this hoard of new developers. It probably won’t be 100 million any time soon, if ever. But the value of Trailhead as a recruiting and training tool makes it more probable that Salesforce.com will reach a new, broader audience than anything I’ve seen from the other major platform vendors.

Trailhead’s main offerings are a growing set of “Trails” that are designed to train developers and administrators on everything from basic Salesforce.com administration to advanced mobile app development. The trails are effectively a training curriculum, with goals and milestones, that guides the “trailblazer” through an interactive, hands on session using a free Salesforce.com account. Trailhead is lightly gamified, so that the completion of a trail or a set of modules is rewarded with a badge, which the Trailhead team have managed to hype up enough that people were talking about using badges as a form of certification and a credential to put on their LinkedIn page.

The badges offered by Trailhead are themselves remarkable. Sarah Franklin, Trailhead’s marketing VP, has 7 badges on her LinkedIn page, including Business Value of Equality, Impact of Unconscious Bias, and Spring ’16 Release. (Okay, here’s a brilliant idea – every new software release has a trail intended to walk the user through the highlights of the new release. How common-sensical is that?) There are also superbadges for skills such as Apex Specialist and Security Specialist. The mix is deliberate – content for beginners, experts, and those who also want to display their corporate social responsibility chops, something that Salesforce.com takes quite seriously.

Core to the Trails experience is a deliberate sense of light-hearted fun – very millennial friendly, though it works with cynical, curmudgeonly boomers too – that is assiduously curated by an in-house editorial team. For the most part Trails and modules are developed in-house, but the Business Performance Basics module, co-developed with the Drucker School of Management, is an example of where Trailhead is going with respect both third party content as well as more general-audience, non-techy, business content that will appeal to the “what’s GitHub?” crowd.

I could go on about the value of Trailhead MVPs, like Jennifer Wobser, who helps develop content and makes sure that Trails and modules are based on real-world requirements, not something out of a marketing or training manager’s ivory tower viewpoint. Or the cute woodland icons – Cloudy the Goat, Codey the Bear – that are just kitschy enough to work for an audience used to taking their tech with a healthy dose of penguins and elephants and other cute animal avatars. Or I could go on about the average audience age – definitely sub-40, or the enthusiasm of….pretty much everyone.

The coolness of Trailhead, and the infectiousness of TrailheaDX, are hugely important for Salesforce.com’s platform aspirations, and hugely threatening for its platform competitors, particularly SAP and to a lesser extent Microsoft. The importance should be obvious: Salesforce.com may have cracked the most difficult nut in enterprise software today – how to excite a global, millennial-oriented development community and draw them to Salesforce.com’s development platform world. There is simply no way for a platform vendor – one that is interested in the business of building apps, as opposed to those vendors trying to make their middleware an enterprise platform – to become successful without hordes of developers. Think Apple Apps Store – though, ironically, even Apple seems to be struggling now attract the right quantity and quality of developers to its IoS platform, according to a recent article in the New York Times.

SAP has it TechEd developers conference, but it’s overly didactic, too much like a techy version of SAPPHIRE, and seemingly more targeted at services partners and ISVs than the millennial developer. TechEd isn’t all SAP is doing to entice developers – the SAP Store is a solid first shot at building a commercial experience where developers, partners and ISVs can show off and sell their wares. But the community-building efforts from SAP are complicated by the fact, in addition to an inability to understand that building a developer community is an investment that takes a real budget, that SAP has way too many entry points for prospective developers and no simple way to figure out which is right for which purpose.

Microsoft Build is perhaps the top of the line dev conference right now, but that top dog position is Microsoft’s to lose. I didn’t attend Build this year (which means actually in attendance – you can’t go to a dev conference virtually, despite what Microsoft was thinking when it decided that virtual attendance was good enough. Wrong wrong wrong – developers need to rub shoulders, takes selfies, and share war stories, and so do those who track them).

No matter, I was there last year, and it was pretty amazing. But Microsoft has so many irons in the fire – Azure, Office, Universal Windows apps, augmented reality, Surface Hub, Office, CRM, Dynamics AX, SQL, Skype, PowerBI, etc.  – that the threat of option overload and dilution is way too real. If I want to build the killer enterprise app, where do I begin? Should I use the dev environments that are native to many of these offering – CRM has xRM, AX has X++ — or head for the Universal Windows Apps platform? I think Build should be more targeted to audiences of developers than trying to be a one-size-fits all – otherwise there are too many communities at the same event trying to make sense of too many messages.

Trailhead, of course, benefits from being primarily about CRM. In fact, perhaps a little too focused on CRM considering the broader aspirations of Salesforce.com. But the ability to focus on CRM is for now a strength. It makes the conference more focused and the audience more cohesive. I think this outcome-based or LOB-based focus is the way to go for building developer communities in this highly verticalized and geographically-focused global economy.

As is, there’s enough work running a relatively cohesive audience through Salesforce.com’s development vision. The company suffers from option overload as much as any other vendor – there’s Force.com, Heroku, Thunder (IoT) and Wave Analytics Clouds, Lightning UX tools. All and all, on face value this looks a little messy. But Salesforce.com showed the TrailheaDX audience an excellent slide, code-named the rainbow, that does a pretty good job defining the different points of entry in terms of their audience and the relative amount of coding each point of entry requires (serious coding for Force.com and Heroku, none for Lightning App Exchange and Lightning App Builder, and several “low code” options in between). I think every platform vendor is going to need to start segmenting their developer options in a similar fashion.

A great developers conference is a great place to start, but there’s lots more to do (and get wrong) along the way. There’s the need for a commerce platform, more in the model of SAP Store than App Exchange, that allows a simple, credit-card-based, no contract way or sales-exec-will-call way to buy and deploy apps. There’s also the issue of whether there really is a market for citizen developers, and if that market, which is where Salesforce.com is looking for its 100 million-strong developer army, can generate real revenue for its developers and Salesforce.com and really useful apps for its users.

And, particularly for Salesforce.com, there’s the question of whether focusing on CRM and its allied processes is sufficiently ambitious to make the company’s dreams of platform dominance a reality. Right now Salesforce.com’s platform strategy, as Parker Harris told me last January, is to be the best CRM platform around. While there is no direct intention to exclude other domains, so far the messaging is clearly focused on CRM-based opportunities. To its credit, Trailhead’s trails and modules are more generic than CRM-focused, but my take of the conference audience was that there wasn’t a whole lot of non-CRM thinking in the crowd. There were sessions on IoT, AI, and bots, and most of the CRm sessions were generic as well (“The road ahead for Lightning”, “Process Builder roundtable”). But my read of the audience was CRM-nerd heavy, and no real representation from other lines of business.

Again, that’s a positive early on, but not in the long run – at some point Salesforce.com will want to entice the next great apps developers in supply chain, human resources, and other domains before SAP or Microsoft make a credible case to these constituents for their platforms. But in the meantime, hats off to Salesforce.com for building a program – combining some well-designed and curated-for-fun-and-meaning training modules – that hit what ethologists and cognitive scientists would call the umvelt of the developer community: that perceptual, experiential reality that is unique to these individuals. It’s no small achievement to merely understand that umvelt – to replicate it so clearly is exceptional.

The challenge is on in the platform wars. May the best umvelt win.



Informatica’s Dilemma: How To Sell the Un-Platform in the Midst of Today’s Platform Wars

It’s now standard operating procedure at virtually every conference I attend: the execs on stage are talking about a disrupted digital future and how they can enable it to an audience that’s pretty much focused on how their vendor can help them do a better job today: The future can wait.

Informatica’s InformaticaWorld 2016 had this problem in spades – over 90 percent of the attendees were practitioners who use Informatica’s vast middleware portfolio to wire up the data in the enterprise and otherwise enable developers and business analysts to build apps and analytics that span their companies’ vast, heterogeneous IT environments.

Nonetheless, Informatica used its annual user conference to flog its Intelligent Data Platform (IDP) as the foundation for an enterprise-wide effort to make available any and all data inside (and outside) an organization for use in a wide variety of applications (customer engagement, for example), business initiatives (IoT), data governance and security processes (regulatory compliance), and other worthy goals.  IDP is nothing if not comprehensive – and represents one of the best platforms for these initiatives in the market today.

To be sure, this ability to connect data, information, and applications across heterogeneous environments and put it to use is a helluva market opportunity. But it’s also a single market opportunity with a single buying center in theory only: Informatica’s and its competitors’ use cases are largely local, departmental, and delivered as projects, not across the enterprise, and the buyers and influencers are equally scattered. Even though the problems Informatica addresses exist across the enterprise, and impact every nook and cranny of every company.

Therein lies a dilemma facing Informatica and many other leading technology vendors: how to get tomorrow’s message in front of an audience of decision-makers who don’t normally show up at vendor user conferences.  Or, to be more succinct: how to move beyond pitching tomorrow’s message to yesterday’s audience.

This is made all the more complicated by an unfortunate confluence of loosely defined terminology – what the hell is a platform anyway? – and a poorly defined sales and buying process for this poorly defined market. Tomorrow’s message is about buying an enterprise-wide platform – which, unfortunately is a catchword used by applications vendors, middleware vendors, database vendors, and every form of cloud vendor. And to do so vendors must find the right buyer – and, almost without fail, that person either doesn’t exist or doesn’t tend to show up at user conferences.

While Informatica catered to its practitioner audience on day two with a lot of talk about new tools and technologies, and evoked the sacred enterprise mantra of cloud, mobile, big data, usability, and IoT as a justification, it’s clear that Informatica’s real imperative is to reach an almost mythical class of decision-makers who were largely absent from InformaticaWorld. Instead of practitioners who are trying to wire Workday data and processes to SAP or Salesforce.com data and processes – and are happy to learn about the new connectors coming down the road that make this possible – Informatica needs to engage a decision-maker who can look at the digital future of his or her company and make a big, comprehensive buying decision about Informatica’s enterprise Intelligent Data Platform. And do so with the active support of newly empowered line of business executives and their IT counterparts.

Getting to that audience is a challenge that Informatica and every other vendor needs to meet, and meet soon. The rapid shift in the enterprise market towards all things digital – whatever that actually means is uncertain – has put enterprise buyers in an uncomfortable position. Every major vendor in an individual company’s portfolio is pushing a platform strategy that postulates – sometimes well, sometimes maladroitly, and sometimes foolishly – that nothing but goodness can come from adopting Vendor X’s platform as the customer’s strategic enterprise platform. Emphasis on strategic and enterprise – which translates as “exclusive” in the eyes of every sales exec roaming the enterprise software market today.

Of course, it’s pretty clear that standardizing on a single platform on which to launch a company’s digital future is fraught with danger, particularly because that digital future is largely unknown. Many of the technologies and opportunities represented by the sacred enterprise mantra aren’t even signposts on the road to digital transformation, yet. They’re more like signs in front of a big hole in the ground that says “Future site of the world’s largest rollercoaster.”

It’s gonna be big, it’s going have thrills and chills, it might make you sick or make you beg for more. Regardless, it won’t be cheap, you’ll be waiting in line a long time for it, and, no, we won’t show you what it’s going to look like: we’re not sure ourselves.

But, to continue our imaginary platform sales pitch, don’t worry. Just pick our platform – brand new, still evolving, too much of which is kludged from the detritus of past acquisitions tied to a bunch of vaguely supported open source tools – and we’ll be there for you.

Many big apps vendors can sort of get away with this because they are deeply embedded in their customer’s back office, which means they are already on the platform short list. But even that incumbent position isn’t enough when most of the innovation is focused on the front office. IoT is a great case in point. Enterprise software vendors – the CIO-focused ones, including Informatica, SAP, Microsoft, Infor, Salesforce.com, and many others – are pushing hard to be leaders in IoT. But that’s really the CIO’s version of IoT, which is nascent, dominated by proofs of concept (POCs), under-funded, and guaranteed to require massive business process change to make it happen. Which turns out to mean that CIO-led IoT is destined to be a blip on the software vendors’ books for some time to come.

Meanwhile, IoT has been happening outside the purview of the CIO for decades – on the shop floor, in complex assets like jet engines and turbines, in large industrial power plants, refineries, and the like. That’s where innovation has to happen first – new types of sensors and controllers are needed, new, more security-conscious embedded operating systems need to be installed, new analytics and controls need to be envisioned, new data stores need to be built and maintained. And most of that still belongs to the operations side of the business – not the office of the CIO.

But no matter: enterprise software companies are using – or trying to use – their incumbency to flog a CIO-centric version of IoT to their favorite buying audience. That’s what deeply embedded means – so when you hear a vendor say “take my platform, please”, the amount of faith it will take to fully embrace any nascent enterprise software platform as a strategic enterprise platform in many cases outweighs the rational arguments put forth by the vendors. Not that that’s always a problem: If you’re a CIO and your CEO just said “let’s get some of that there IoT stuff,” you probably should go to your biggest incumbent vendor and do some IoT POCs with them. Sometimes insouciance can be bliss.

Back to Informatica and the platform wars. Platform pitches are the latest in a continuing battle for the hearts, minds and wallets of the enterprise, and by default they are being directed at the office of the CIO in a wishful attempt at getting CIOs to see the wisdom of implementing tomorrow’s message today. If you’re a CIO-centric vendor, this is your best shot at the future, because selling business gains to the lines of business is a little hard for your CIO-centric sales force. But, heck, you already knew that, right?

This is where Informatica has to go to win, and win big enough to mollify its new private equity owners: the offices of the CIO, CFO, CHRO, CMO, and so on. Ultimately, enterprise platforms can’t be sold piecemeal or separately to siloed lines of business. In order to realize their potential, they have to be sold, and purchased, as an enterprise-wide platform, or at least one that aspires to be.

But there are platforms and there are platforms, and then there’s Informatica’s platform. Many of the other platform vendors are for the most part optimized around a software product or suite that is either already in use at the customer or has a decent shot at being purchased. Their best shot is to take that incumbent position and use it as the jumping off point for as strategic a sale as the customer can stomach. If there is no incumbency, forget it. But even if there is, it’s rare that incumbency translates into ubiquity, and every company looking at upgrading a CRM, HRMS, ERP or other product and taking on its vendor’s platform is in for a fun time building consensus across the other lines of business that don’t use Vendor X’s products. Because Vendors Y and Z are knocking on those stakeholders’ doors, and are pushing their constituents and influencers to argue vociferously to standardize on their favorite platforms.

And there lies the unique Informatica opportunity. I can pretty much guarantee that most customers will resist the single apps vendor platform push as long as possible, if not forever. And even if they think one day they will have a single platform, many will want to hedge their choice of platform for as long as possible.

That’s where Informatica’s un-platform comes in.

Adopting Informatica’s platform is fundamentally a way to hedge on a decision about which of the other apps-based strategic enterprise platforms will need to implemented one day, if they’re not already in place in one form or another. It’s clear that customers will have to start making some bets on new platforms, while doing whatever they can to stave off the inevitable, wholesale reconfiguring of the IT landscape that standardizing on a single apps vendor’s platform will entail.

This means hedging – dipping a toe in new platforms and technologies while ensuring that legacy investments don’t disappear just because of their legacy status. And that’s where Informatica can have an important play in the platform wars. You want some HANA Cloud Platform or Force.com or Azure – go for it. IDP will take care of the plumbing for these and any subsequent platforms your company may want to adopt. Switzerland? Heck, this is more of a Lord of the Rings gambit – one ring to unite them all – than a classic neutrality as a virtue Switzerland gambit.

The problem about who the mythical buyer is doesn’t necessarily go away, though an un-platform sale looks to me like it’s going to end up in the CIO’s office eventually. If Informatica can harness its practitioners – the folks who showed up at their recent conference – as influencers and allies in this mission, these foot soldiers could definitely help underscore the enterprise-wide nature of the problem that IDP can solve. The company will need to refine this outreach process in order to do so, however: I’m not sure that mission was undertaken as well as it could have been at the conference

No worries, the problem, and the opportunity, will be around for a long time to come. The nice thing about being a private equity company is that the acceptable timeframe for getting this right is no longer a matter of a quarter or two, but a matter of when the investors start getting fidgety. Considering that one of the main reasons to go PE is to have the time to digest these tectonic shifts without getting slaughtered in the public markets, I think time for now is in Informatica’s favor.

For now.

The Last Real User Group Standing: Why ASUG Matters to SAP and Its Customers

The first time I ever attended a user group meeting was way back at the dawn of my career, when I was managing a pioneering print-on-demand/desktop publishing system for a specialty publisher. I went to the meeting to find out if the vendor was ever going to fix the latest version of its software, which was basically dead-on-arrival. To my surprise, the CEO took to the stage, apologized profusely, begged forgiveness, promised to fix the problem or else, and otherwise completely humbled himself in front of his irate customers.

I remember being surprised both at the fact that he would do that, and the fact that the audience wasn’t throwing tomatoes or setting fire to their chairs. Software CEOs do mea culpas? And customers, pissed off to the nth degree, can still walk away feeling that they’d been heard and understood? Really?

What I’ve learned in the ensuing years is my incredulity wasn’t misplaced. It’s extremely unusual that there is any dialogue of substance between customers as a collective entity and their vendors. There are lots of conversations, particularly between the CIOs of very large accounts and top software execs, but in too many cases the word dialogue, which implies a two-way street, isn’t the right one. Monologue, diatribe, condescension, marketing-BS are the better terms, and sometimes there’s bits of all of them in the same conversation.

This is what makes the two biggest SAP user groups – ASUG in North America, and DSAG in Germany – remarkably different. They actually do the dialogue thing with SAP, and SAP dialogues back. It’s not always perfect, it’s not always successful, but it’s a whole lot better than the industry norm – orders of magnitude better.

Part of the reason for the relative success of these user groups is that SAP actually cares enough to care., not always perfectly, not always successfully, but, trust me, SAP’s paying attention. The other part is that the users care enough to support these two user groups – and the result is a dialogue that sometimes has the user groups playing along with SAP’s strategic initiatives, and sometimes has them playing the loyal opposition.

The other unique aspect to this relationship is that SAP’s massive user conference – SAPPHIRE – coincides with ASUG’s massive user conference – ASUG Annual Conference.  The former tends to get more play with analysts and press – SAP’s consistent marketing efforts with analysts such as myself and the press ensure that there’s a fair amount of pre-conference buzz, while ASUG has tended to fly under the press and analyst radar and focus on direct outreach to SAP’s users. (Fair enough, the difference in marketing budgets between SAP and ASUG is incalculably vast.)

The result is that ASUG, with its 100,00 members and a conference brimming with great, largely marketing-BS free presentations and workshops, tends to get short shrift in the pre-SAPPHIRE buzz. But if you drop by the ASUG side of the conference, you’ll see that ASUG has its own pre-conference buzz, the hordes of users crowding the ASUG sessions is testimony to ASUG’s draw.

The short shrift can even extend to the conference itself. I had the opportunity at last year’s conference to introduce ASUG CEO Geoff Scott to a relatively new senior exec at SAP. Upon learning of Geoff’s title, the SAP exec asked in all seriousness – mind you, this was at an outdoor event, SAPPHIRE/ASUG Annual Conference flags flapping in the breeze – if ASUG put on any big conferences like SAPPHIRE. To his credit, Geoff laughed it off, but in the end it was no laughing matter.

Regardless of any benign neglect both inside and outside SAP, ASUG and DSAG are emerging as increasingly important components in both the customers’ and SAP’s success. The bottom line is that SAP is asking more of its customers than ever before. Pretty much every initiative I highlighted in my last post requires customers to not only extend their already extensive relationships with SAP, but to do so with a greater degree of uncertainty as to the path they need to take and the potential results they can achieve.

As much as we analysts think that we’re the go-to folks for advice on how to navigate this increasingly complex SAP world, at the end of the day one good peer-to-peer interaction is worth a thousand analyst reports (this might actually be empirically provable, though it may say more about analyst reports than anything else.) And the ASUG Annual Conference is pretty much designed to provide that peer-to-peer interaction, formally through presentations and informally through the schmoozing that, in my opinion, is the sine qua non of any conference.

I will add that my conversations with ASUG are an increasingly important part of my research as an analyst. There’s no better way to get a concentrated dose of SAP customer reality than to spend some time with ASUG. Knowing that “loyal opposition” is part of its DNA means that there’s a truthfulness to what ASUG members and its leadership says that strikes a balance between calling SAP on its mistakes and helping make SAP, and by extension its customers, successful.

As much as SAP may grumble when the user groups challenge them on licensing, upgrades and support, the cadence of new technology adoption, and the like, SAP’s pretty lucky to have this “loyal opposition” in its camp, and at its conferences. While it’s relatively easy for a small to mid-sized vendor to maintain a high-touch relationship with its customers, a behemoth like SAP simply can’t do justice to this high-touch imperative at scale. A well-run and credible user group can fill in a tremendous amount of that missing contact, and, frankly, smooth the edges around initiatives that might come off as more ham-fisted than user-friendly.

It’s not always perfect, and it’s not always smooth. But look around the industry and see if you can find anything like ASUG and DSAG. Once upon a time Oracle had a similar user organization, and they would stage a wonderful “Ask Oracle” session at their conferences, open to all, where the execs would sit on stage and face an auditorium of open mics and disgruntled customers. (That took courage – seriously. Those sessions could be brutal).

Now, like everyone else, Oracle has subsumed its user group into an extension of its marketing efforts. It’s not even clear if any of the other top vendors even have user groups – if they do you can be sure they’re nothing like ASUG, and their influence on real change is probably nil.

I’ll refrain from offering ASUG CEO Geoff Scott advice on what he should say during his keynote. In general his message is pretty much in sync with the one I advised SAP CEO Bill McDermott to feature in his keynote – whatever your path to innovation, ASUG is there to help. And if you need to find your path, ASUG can help with that too.

One last point – the one trend that ASUG is bucking, and that it should succumb to, is the branding of its conference. It’s almost silly when you think of it, but in the game of brands that we all play it’s a requirement to have a relatively snappy name – SAPPHIRE, Dreamforce, Envision, Inforum – that you can build a brand around. It’s hard to say – and write – I’m heading to the ASUG Annual Conference. Oh, really? I’m going to the ASUG Annual Conference too. Just doesn’t flow trippingly off the tongue, if you know what I mean.

Whatever you call it, ASUG’s conference is the place to go to see what customer engagement really means. There’s plenty of pontificating in the industry about the use of technology to help get a vendor closer to its customers, but the ASUG Annual Conference goes one better by getting customers closer to each other, and by extension, closer to the vendor. In the process, both sides stand to win, even if an occasional mea culpa is in order. A little dialogue can go a long way.





Dreams of a SAPPHIRE Keynote: What’s Your Innovation Path?

SAP’s ginormous SAPPHIRE user conference/sales event kicks off in a couple of weeks, and if you’re in any way involved in the SAP ecosystem, you’ve been caught up in the frothing frenzy that typifies the run-up to gathering over 15,000 souls into that soulless cauldron called Orlando.

In case you don’t know the drill, SAP’s biggest challenge of all is to funnel everything that’s good and true and important to the company into CEO Bill McDermott’s keynote. The process is simple – start with a blank sheet, put some ideas on paper, and then watch as the jostling, politicking, and pitching begins to fill out Bill’s time on stage.

While we can’t really know what will emerge until the bell tolls at 9 a.m. on May 17, I can’t resist playing the game of “what should Bill say” in his 75 minutes of fame. Here’s my take:

The first and foremost imperative for SAP is to synchronize its messaging around its major initiatives, which are almost too numerous to count. At the risk of missing something, in no particular order, and with overlapping concepts left in, these initiatives include: S/4 HANA, HANA Cloud Platform, talent management, contingent labor management, customer engagement and interaction, business networks and direct procurement, everything cloud, IoT-wannabe (it even rhymes!), next-gen training and education, next-gen services excellence, growing and enabling the partner ecosystem, building digital stores and creating developer outreach, digital transformation – and I’m sure I missed more than a few. There are also SAP’s 25 industries, a zillion geographies, support for open standards, open source tools and services like HADOOP and Cloud Foundry, and on and on.

Bill could just stand there and enumerate all the initiatives under way at SAP and easily use up the full 75 minutes. It might take off some of the pressure from the back-door politicking, but in doing so Bill would waste a lot of everyone’s time, and probably annoy/piss-off/scare/bore enough of his audience that they’d all decamp to Disney World and hang with Mickey and the gang.

Or… Bill could elaborate on a relatively simple, straightforward theme that ties it all together. Because behind this almost ADHD-like testament to techno-overachievement there’s a unique, unifying theme to what SAP is doing. That theme not only helps make sense of its efforts, but also helps connect SAP to a widely disparate customer base that is facing down an unprecedented set of business and technology challenges with more than a few questions about what to do and how to do it.

That theme can be summed up in a simple question, one with a simple answer, from which all of SAP’s efforts and, hopefully for SAP, all of its customers’ buying decision derive.

The question: Where do you want to take your company?

The answer: Wherever you want to go, SAP can help.

Pretty simple, no? Better than simple, it’s what customers really want to hear from SAP, much more than “HANA solves everything” or “no more aggregates” or “S/4 HANA solves everything” or “the cloud solves everything”, or, my personal favorite, “time to re-platform.”

The reason the above themes haven’t lit the collective customer fire is simple: One of the problems of being on the inside, inhaling the fumes of so many initiatives, is that it’s easy to pretend to know what’s right for all customers, all the time. That pretension means that at some point the conversation with the customer becomes didactic at best, dictatorial at worst. This “we can fix it” hubris is endemic to all tech companies, and has been baked into the engineering mindset since the modern tech era emerged from the primordial ooze of Silicon Valley’s garage culture almost half a century ago. With “fix it” baked into its DNA, tech culture is singularly focused on making things better, and singularly challenged at understanding that “better” is an extremely relative, rapidly shape-shifting concept, and nowhere near the absolute one that engineers fervently want to believe it is.

In SAP’s case, from a purely “fix-it” standpoint, the SAP customer base would be crazy not to embrace pretty much everything SAP has to offer – every company needs the “faster, better, more” results that are at the core of everything SAP does. Indeed, while some of the initiatives enumerated above are more theoretical and “pending” than not, most of them are spot-on when it comes to driving customers towards their inevitable, digital future.

But the real world isn’t run by engineers bounded by the relatively immutable laws of physics. It’s run by business people navigating a truly squishy, flaky morass of contradictory requirements, regulations, stakeholders, politics, and just plain “stuff” that perpetually militates against easy, rational solutions. In the real world, the best idea – much less the best technology – doesn’t win. In all too many cases, the race is not to the swift, nor the battle to the strong. Sometimes the race is to the expedient, the possible, and the compromise, and the battle is to the mediocre, the half-baked, and the politically safe.

So instead of assuming that SAP – or any vendor – can really articulate what’s best for all its customers all of the time, it would be much more useful for Bill to declare that, from SAP’s standpoint, what’s truly best for the customer is SAP’s willingness to help get the customer where it wants to go. Regardless of its starting point or perceived endpoint, SAP has an answer to the question: what is the path I need to take to move my company towards its goals and meet its challenges?

Importantly, this may mean that S/4 HANA, or anything else called HANA, isn’t on the table. And maybe a business network isn’t the next step forward. Or a big investment in IoT may not be what’s good for a given company today. It’s almost the anti-politicking solution to SAP’s embarrassment of riches: Much of what SAP has to offer might not be what your company needs. What’s important is that when you need it, SAP has it, or knows how to get it, or can find a partner to help you get it. Let’s engage, Bill should tell his audience, not in a journey dictated by my product development roadmaps but by your business roadmap. And if you don’t have one – fine, SAP can help you figure that out too.

What would be equally useful, and even harder for SAP to do, is to acknowledge that it’s a heterogeneous world out there and, again, SAP is here to help. This would mean accepting that SAP’s competitors are in the customer base and may be even there to stay. But, hey, if the customer needs help moving forward with an SAP ERP system tied to Salesforce.com or Workday, so be it: SAP’s here to help is better than “go fly a kite” or other variations on the theme of burying one’s head in the sand.

(To those of you who scoff that this coopetition strategy is for the birds, ostriches or otherwise, take a look at Microsoft in the last year or so. CEO Satya Nadella keeps showing up at other vendors’ conferences preaching the gospel of coopetition, and his company’s results are looking pretty good for these efforts. Moreover, customers love this approach, even as the internal teams that compete with Satya’s latest BFFs seethe. Of course, Satya’s back story is that it’s better to be “all-in” with Microsoft’s vast product portfolio than go hetero – the seamless integration is all the more seamless inside the house – but in the end, it’s better to coopetate than be an ostrich.)

I think the “we’re here to help” approach will help SAP in a couple of important ways. First and foremost is the problem of audience. Virtually every conference I’ve been to recently – SAP, Microsoft, Infor, Salesforce, pick your favorite vendor’s conference – has been saddled with the same problem: On the keynote stage is tomorrow’s message, playing to last year’s audience. Time and time again I hear this future-focus from the keynote clashing with the now-focus of the audience. And that clash can become a little cacophonous when multiplied by the increasing number of tomorrow’s messages customers keep hearing from their vendors. Which begs the collective question of enterprise software customers looking at the reality of their tech/business strategy in light of this tomorrow-focus: To hell with pushing the solutions of tomorrow, doesn’t anyone really care about what’s happening to my company today?

Played out in the business world, this kind of “tomorrow’s message, yesterday’s audience” disconnect makes for some interesting conversations – like trying to talk about global business networks to a procurement clerk looking for a better user interface, or discussing support for IoT-driven contingent labor processes to an HR manager whose job description doesn’t include asset management, or opining how strategic and valuable a given vendor’s newly integrated and rationalized products and services are to an end user trying to find out whether the current version of their software is being sunsetted or upgraded – and when.

Get it? The real world’s problems aren’t easy to cram into a sound bite, they’re can’t possibly be covered in 75 minutes, and to try is to fail. But if SAP listens carefully, instead of just talking about its great achievements, what the company will hear is that the unifying problems of “where do I need to go with my company” and “how can I get there” are resounding across the industry. Not a lot of business execs wake up in a cold sweat at 2 am thinking “I gotta get me some of that techno-whiz-bang stuff my vendor is peddling this week”. But they do wake up at 2 am thinking “my customers hate me” or “my invoicing process is killing my DSO” or “Amazon just entered my market as a free add-on to Amazon Prime”. And in many cases – I would argue a significant number of cases – the solution to the problem doesn’t start with implementing the latest and greatest shiny new penny from your vendor.

Once the “we are here to help” theme is kicked off, Bill could easily fill out the rest of his 75 minutes by enumerating exactly how SAP can help. This doesn’t mean avoiding all mention of long-range strategic initiatives and cool new stuff, but it does mean keeping an eye on the practicalities of what customers really need. For some companies, going omni-channel must start with the mundane task of fixing the inventory system, not buying hybris, at least at first. Lowering DSO might ultimately be about creating an online e-commerce function, but the first step might be to hunker down and fix that creaky old supply chain. Sometimes better training is the place to start, not a new cloud platform.

If the bar for innovation at the customer is set low enough, and believe me it often is, maybe just upgrading to the latest ERP back office is the earth-shattering innovation the customer really needs, not an upgrade that puts S/4 HANA and the entire enterprise back office in the cloud. Talk about heresy.

Of course, as CEO, Bill has to keep the Wall Street wolves at bay, who are always hungry for the freshest innovation meat and the best margins, and that means trying to set some reasonable quotas so that the field sales effort syncs with the rhetoric of innovation delivered to Wall Street. That hunger from Wall Street is not misplaced – there is no doubt that the changes promulgated by the massive shifts in how business is conducted across the world mean that a wholesale re-imagining of the interplay between companies, employees and customers is needed. Wall Street is right to ask companies like SAP that wear the innovation mantle to put up or shut up. And there is no doubt that SAP is dedicated to providing the technology and tools – like S/4 HANA, HCP, business networks, next-gen talent management, advanced planning and predictive analytics – that fit well into the “put up” side of that imperative.

However, focusing on helping the customer with today’s problems might mean that sales of flagship new technologies would not be as smoking hot as Wall Street would like. But focusing on what customers would like will have the better long-term impact. SAP and other vendors have backed themselves into some complicated corners by pushing new technology on customers who don’t have an immediate need, but are willing to take the shiny new penny if they can get a better price on the products they actually do need. This always works well for a couple of quarters until someone starts looking at the delta between licenses sold and licenses implemented. At which point the house of cards starts getting a little shaky.

Helping customers by providing them the choice of the broadest range of solutions and not force-feeding them innovations they can’t use helps build customer satisfaction and loyalty. Asking them to buy something they don’t need and signing them up to be bit players in a cynical game of license counting with Wall Street leaves a sour taste in everyone’s mouth.

So, good luck Bill, with getting that keynote sorted out. At a minimum, my “we’re here to help” approach will help you navigate the conflicting messaging battle now raging for every second of your keynote time. But it is also designed to make sure that your customers see you and SAP as an ally who has their best interests in mind, not a selling machine trying to close the next deal. One of the great sins of modern enterprise software is that vendors tend to sell software the way they build it, not the way the customer buys it. At this point in the 21st century, everything in the business world is up for grabs, including the way that customers choose their vendors and buy their software. SAP should rethink how it positions itself for this new reality: Offering itself as a means to an end, and not just a collection of products chasing opportunities, is, I think, the best way to go for SAP and its customers.

See you in Orlando.

Ariba, Infor, and the Business Network Challenge: Quantum Physics, Big Transformations and Big Barriers

As the enterprise software market embraces the concept of digital transformation with typical reckless, feckless abandon, it’s interesting to see how one of the most transformative concepts – business networks – is evolving. What’s clear from a look at two of the most well thought-out strategies, those of Infor (via its GT Nexus acquisition) and SAP (via its Ariba acquisition), is that there’s no shortage of merit to what these two companies are doing and planning.

And there’s no shortage of hurdles either. Nothing transforms quite like a business network, and, as the complexity of any transformation is inversely proportional to the readiness of a company to embrace it, business networks promise much in the way of outcomes and complexity.

The main problem is simple. The collective business network vision, while long on great ideas, is short on the most important thing of all: a buyer. Business networks have tons of merit for anyone taking a close look, but tons of merit ain’t worth a hill of beans if there’s no decision-maker ready to take a leap of faith and start spending on this most worthy and complex of goals. And so far, that decision-maker is still more of a dream than a reality.

Which begs the ultimate question – Should the above vendors proceed and hope that the decision-makers they need will emerge? Or, perhaps more succinctly, how should they move at this uncertain moment to build the critical mass of companies needed to expand their existing networks – Infor/GTN in global logistics, SAP Ariba in indirect procurement – into the broad-based business networks that both companies aspire to? And in the process, hopefully, ignite some important influencers and buyers?

It’s sort of a quantum physics-like paradox – both the chicken and egg need to come first, something that is possible in the quantum world but not well-established in our relatively staid Newtonian world. Moreover, unlike poor Schrödinger’s cat in the thought experiment that helped establish the duality of quantum physics, it’s important that, in the business network future, both chicken and egg emerge from the experiment alive.

I firmly believe they will, and these nascent efforts will bear considerable fruit for both companies – and their partners and customers. Most importantly, this is not a zero-sum game, at least not yet. The opportunity is that new, immature, and massive.

Infor, while the smaller of the two, gained an important leading position with the acquisition of GT Nexus last year. It was a masterful deal, in part because the complexity of the company’s underlying financing structure needed a Charles Phillips to unwind it sufficiently to do the deal. But what the acquisition really accomplished was to catapult a small but pioneering business network vendor into the hands of an enterprise software vendor with big ideas and 70,000 customers, virtually all which are going to need some serious transformation in the next few years.

For Phillips, one of the biggest prizes in the business network opportunity is trade finance, and GT Nexus’ focus on that opportunity means that Infor can now have an important new talking point for its customers: transforming the enterprise software core of a company is no longer just a matter of doing your daily transactions faster, better, and hopefully cheaper. Transformation á la GT Nexus means making an important change to the all-important cash-to-cash cycle: using the information in GT Nexus’ business network to enable companies to do a better job with cash by improving the terms and conditions of the loans and insurance needed to conduct business is a brilliant way to free up top and bottom line cash.

The importance of jazzing up cash-to-cash processes was noted by Phillips in his opening remarks during a recent Infor analyst summit I attended. Citing similar data to what I used in a recent blog post, Phillips noted that a widely acknowledged global stagnation in productivity gains is the result of the aging of the technology infrastructure of business: it’s hard to keep innovating for the 21st century if you’re using 20th century technology.

How does a company deal with this? Infor has a bright idea – take that cash management thing you’re already doing and start using the trade financing capability of GT Nexus to move some serious working capital out of the logistics doldrums and put it to better work. Caterpillar, according to GTN founder Kurt Cavano, has been able to redirect $300 million in capital out of its supply and logistics chain by using GTN, as have a multitude of other brand name companies. It’s easy to see what Phillips and his investors were eager to pump $675 million into the acquisition.

Meanwhile, Infor has been pumping up the number of process areas it wants to be able to manage in its business networks: inventory planning and factory planning, asset management via IoT. And, obviously, supplier management and invoice management, among others.

Not bad, not bad at all…

Ariba, of course, hasn’t been sitting on its laurels either. The fact that the Ariba procurement network is already pretty massive — $1 trillion in business per year, two million suppliers, 25,000 users – gives SAP a big leg up towards building that critical mass. Of course, lots of activity and lots of suppliers solves only one part of the quantum dilemma: on the Ariba network, all this business activity is not business network activity, it’s traditional procurement activity.

Which means that Ariba’s $1 trillion in goods and services flowing through its network, largely for non-strategic, indirect goods, doesn’t necessarily give it full bragging rights over GTN’s $100 billion in goods and services. Here’s the big difference: GTN is supporting the movement of direct goods through the supply chain, a much more significant and valuable set of goods than the indirect goods that Ariba specializes in.

Same thing happens when you compare the number of suppliers in each network – while the two million Ariba suppliers vastly outnumber GTN’s 25,000, GTN’s suppliers are much more strategic to the buy side in its network than Ariba’s two million suppliers are for its buyers – toilet paper is toilet paper, but the right parts delivered just in time to the assembly plant does a whole lot more.

While Infor/GTN’s focus on direct makes it look better positioned for business network success than SAP Ariba, there’s more than a few reasons why SAP Ariba is also moving into striking distance of being a true business network.

First off is the network effect of the rest of SAP’s portfolio. SAP’s acquisition of Fieldglass was put under the same org structure as Ariba for the simple reason that procuring contingent labor – Fieldglass’ claim to fame – adds an important strategic component to its business network plans.

While it’s easy to think that contingent labor is more of a non-strategic, indirect asset than a strategic one, adding contingent labor to a business network immediately upgrades the network’s strategic value.  A good example is the consumer products value chain. Consumer products have a strong seasonal component, and that means that retailers, manufacturers, and logistics companies have to do some serious planning around seasonal demand, and that includes seasonal labor. While I would imagine in some companies a procurement clerk might handle that function, it’s more likely that contingent labor procurement would need tons of input from the execs in charge of supply chain, human resources, production planning, warehouse management, and the like.

See where this is going? With contingent labor as part of the Ariba network, the strategic value of the network increases significantly. And with that increased value comes an increase in strategic influencers looking towards the Ariba network for some absolutely mission-critical planning. Which, assuming you read this post from the beginning, begins to solve the chicken and egg problem for Ariba.

Also militating in Ariba’s favor are forthcoming integrations with Concur and SAP’s new flagship ERP system, S/4 HANA. Tying these assets into the Ariba network will allow invoice management and reconciliation to move through the Ariba network and provide the ability to – guess what – better manage cash, among other things. Once the Ariba network is positioned to manage a company’s cash flow processes it would then be in position to start looking at, among other things, trade financing.

Et tu, Charles? Ariba also wants to get into direct procurement and supply chain, and leverage its gigantic network and the position of SAP ERP – now Business Suite, one day S/4 HANA – and its other cloud assets to make a credible base for a major business network play.

On the theory that imitation is the finest form of flattery, Infor is of course going after procure to pay, one of the most strategic processes in direct and indirect procurement. They also want to connect Infor’s legacy ERP systems users, too many to count in the Infor customer ecosystem, to GTN, as well as connecting its new flagship ERP, Infor 10x, to GTN.

The similarities go on, for the simple reason that both companies share a similar goal and a similar understanding of what the end game needs to look like – a loosely-coupled business network that provides a one-to-many buying and selling experience that is deeply embedded in the planning and execution systems of its users and their trading partners. That experience, of course, also includes a heretofore never seen quantity of rich data and information, available in real time, about the quality and quantity of the underlying transactions that provides an important value-added set of services to the network’s users.

If this business network were to be built, and a critical mass of customers were to sign up, it would be the most significant event in global trade since… I don’t know, pick an event: the advent of the Internet, modern ERP systems, telephony, global financial networks? I struggle with expressing the magnitude of the transformation because its magnitude is unfathomable at this point. Perhaps it’s just easier to say that if these two companies, and others in the mix as well, can execute on the fundamentals of the business network strategy, how B2B, and by extension B2C, commerce is conducted, will never be the same.

What’s clear is that, while the “year of the chief business network officer” is still a ways off, both companies are approaching the quantum physics/Schrödinger’s cat problem by trying to offer more reasons for more C-level and LOB stakeholders to want to be connected to their respective business networks. For obvious reasons, the first line of offense is in the office of the CFO, but it’s pretty clear that the entire C-suite and the LOB suite will have reason to want something from these business networks once they reach critical mass in terms of both customers and broad strategic value.

I wish both Infor and SAP Ariba the best of luck. These initial steps to move the global economy towards the era of the business network need the best efforts of all the Infors and SAPs in the market, and then some. There’s definitely a lot of work to convert these two very different networks into business networks, but it’s work that will pay off in the long run. And hopefully that long run won’t take too long to run.

Which came first – the business network or the business network buyer? How about both?




Productivity, Enterprise Software, and The Economics of Digital Disruption

The New York Times ran an article recently that made the shocking claim that “Silicon Valley hasn’t saved us from a productivity slowdown.” Reading through the article, and in particular the research by Chad Syverson of the University of Chicago Booth business school on which the NYT article is based, it’s clear the article gets its premise right. Except for one important fact.

The editor forgot to add a word at the end of the headline: Yet. And the writer, an economist named Tyler Cowen, missed the punchline to his own article – Silicon Valley is getting ready to fix the problem he rightfully bemoans. Because, while it’s true productivity is stagnating, the business world is sitting on the cusp of a huge uptake in productivity, one that we haven’t seen in more than a decade.

All it will take is a little re-platforming – okay, a big re-platforming – and some business process change, and some pretty innovative thinking about innovation. All non-trivial, but all possible. And, importantly, the tech vendors – and not just the Silicon Valley gang – are pretty ready to rock and roll. It’s their customers that haven’t saved themselves.


For the most part, the Times article, and Syverson’s research, are pretty flawless. The gist of both is that from the Y2K era until 2004 or so, labor productivity was moving up pretty steadily, something that has generally been acknowledged as the result of new technology. (Fed Chairman Alan Greenspan said as much in 1999.) And since 2005, that growth has declined. According to Syverson, the problem is pretty basic:

From 2005 through 2015(Q3), labor productivity growth has averaged 1.3% per year. This is down from a trajectory of 2.8% average annual growth sustained over 1995-2004.

The result, both economists want us to believe, is that $2.7 trillion of unrealized GDP growth has been left on the table, and there is no pretending that the growth is hidden behind the newfangled business models of the Internet and e-commerce that are hard to quantify according to standard measures. The culprit is a decline in productivity growth, plain and simple.

What’s interesting about this number is how relatively close it is to another number based on a completely different measure, from an orthogonally different source. A report in 2014 by consultancy E&Y reported that the relative productivity of capital, as opposed to labor, has been lagging in recent years. The working capital analysis in the E&Y report showed that the huge gains in working capital efficiency that were realized in the early part of the century, as measured by days sales outstanding (DSO) and other measures, have tapered off since the last recession. This has led to the following problem, according to E&Y:

A high-level comparative analysis indicates that the leading 2,000 US and European companies still have up to US$1.3t of cash unnecessarily tied up.

 Okay, it’s an apples to oranges comparison, and the labor productivity number is 2x the working capital number. But, regardless of how different these two analyses are, and how far apart their results are, the two studies are actually talking about the same thing – a drop in productivity growth that is tied to the diminishing effectiveness of technology to maintain historic growth levels. If by historic you’ll permit me to limit the timeframe to the last 20 years.

The reason I think the E&Y report and Syverson and Cowen are talking about the same basic problem is that it’s pretty much a given that the IT platforms of the last two big inflection points – Y2K and the dotcom boom/bust – are getting a little long in the tooth. This is true, in particular, for old-guard companies doing business in traditional markets the old-fashioned way. These companies loaded up on the latest and greatest from the 20th century for all the right reasons when they did (okay, Y2K was a hoax, but there was a lot of IT that desperately needed the upgrade anyway.) And for the most part they got their money’s worth in new productivity gains.

The problem is that the gains of the last generation of enterprise software are last century’s news. Those leading edge business processes and enterprise software of 10 or 20 years ago are now considered by the tech punditocracy and the vendors and forward-thinking customers as legacy anchors holding back innovation and competitiveness. They’re based on an old transaction processing model, running on internal relational databases, with a lousy user experience, no sense of what modern customer engagement means in the 21st century, and they’re expensive to implement, run, and maintain.

No wonder there’s $2.7 trillion in lost US GDP or $1.3 trillion in cash sitting on the sidelines of 2000 global companies doing nothing. That’s what happens when economies are being held back by out-moded processes, and I agree with Cowen and Syverson that tech hasn’t done it’s share to alleviate the problem.


Where I take issue with Cowens’ analysis is that he leaves out any demonstrable sense that “Silicon Valley” might actually be in the process of fixing the problem of labor productivity, and, while we’re at it, cash productivity too. And, in many cases, the solutions are in the market or will be available soon. To his credit, Cowen cautiously ends his article by saying “While information technology remains the most likely source of future breakthroughs, Silicon Valley has not saved us just yet,” thus getting the adverb “yet” in just in the nick of time.

And yet…what Cowen is missing is that new technology, new platforms, new applications, and new business processes are sticking their heads up like dandelions after a spring rain. And each offering – every darn one that’s worth anything at all – has solving these issues of labor and cash productivity as a fundamental goal, even if neither concept can be found in most vendors’ marketing campaigns.

Perhaps the most complete sense of the magnitude of this pending shift can be seen in looking at Microsoft Dynamics’ latest incarnation of its flagship ERP system, AX. A recent meeting with the AX team highlighted the rapidity of the productivity shift in two simple slides: one was the UX of an early version AX 2012, the ultimate evolution of 20th century UX design at the time. And the other was the UX design for the new Dynamics AX – based on design principles liberally borrowed from the mobile and cloud experience that consumers have come to expect from the apps and services. As Mike Ehrenberg, a Microsoft technical fellow and CTO of Dynamics, commented when toggling back to the AX 2012 screen after showing me the new Dynamics AX screen, “It’s hard to imagine we thought that was the pinnacle of design” – a recognition of how much things have changed in the five short years since AX 2012 was first released.

What’s underlying the new Dynamics AX user experience, which itself promises significant labor productivity gains, are the newly configured business processes and the tiled “workspaces” that are intended to increase employee productivity based on role and individual preference. There’s online help and training too. Then there’s the efficiency of the Azure cloud on which AX now runs, and its Life Cycle Services ALM service, which takes the cost effectiveness of the cloud and adds huge savings in lifecycle development and deployment costs. And there’s the built-in connectivity to Office 365’s desktop productivity tools, and the PowerBI analytics stack, And so on.

The net of these new services and capabilities should address both labor productivity: workers and customers will be much more efficient. Cash should be much more productive too: IT will stop sopping up huge quantities of capital on massive, multi-year implementations, two-thirds of which will fail to deliver on their goals, all the while running on expensive, in-house hardware. And that’s just the beginning of what a modern, cloud-based ERP system can do.

Microsoft is hardly alone, though I think they are the furthest along. SAP is poised for a similar play with its new Fiori UX, S/4 HANA ERP system and HANA Cloud Platform, though S/4 needs to round out its functionality in order to fully deliver on its productivity promises. Infor has similar designs with its SoHo UX, Infor 10x ERP, and its ION platform. Salesforce.com wants to do something similar with its Lightning UX, its growing partner ecosystem of non-CRM apps, and Force.com. Pretty much across the board, the leading vendors are ready or almost ready to meet the demands for greater productivity.

If only.

This current and pending technological tour-de-force is proof that Silicon Valley is not what’s gating the next wave of productivity gains in labor and working capital. The neglect of “Silicon Valley”, which is the implication of the NYT headline, is a red herring. The tech is there, or on its way – in most cases close enough to touch, or buy, or at least start planning for.

What’s in the way is a combination of customer caution and some confusing vendor marketing. For the most part, even those vendors that have done a good job of describing the value of their new tech offerings haven’t given customers a strong enough case for why these changes are about core business issues and not just cool new technology. The problem with Silicon Valley’s neglect is not about a dearth of new technology, it’s about a dearth of understanding about how to talk to the business leadership about what matters to them, and technology is for the most part not too high on the list.

Meanwhile, many customers who could and should start moving forward have been playing ostrich with innovation, looking at the plethora of new challenges facing them through the same old lens, and therefore doing nothing or, at best, not enough. It’s a tricky dance for many of these companies: preserve what’s good from the past and get the rest of out the way so the company can prepare for the future. Knowing what’s good and what’s passé is far from obvious, and it doesn’t help that every vendor in the market is selling a platform that promises to fix it all, ignoring the fact that asking a customer to consolidate on a single platform is both a very long, hard slog, and not necessarily in the customer’s best interests.

Regardless, Messrs. Cowen and Syverson, and E&Y and countless others are on to something big. We are at an inflection point in the productivity cycle of the global economy, and this is no time to just accept slower productivity growth as inevitable. Whether it’s time to take your fair share of $1.7 trillion or $2.7 trillion or whatever the real number is, or whether it’s time to get your head out of the sand and face a major disruptor about to make you the next Blockbuster, it’s time to act. And acting means taking a hard look at strategic technologies that are no longer delivering steady productivity and find out how to jack them up a notch.

This doesn’t mean killing off old-guard applications like ERP, or driving ERP into the commodity layer and looking for innovation outside the traditional core. It means being ready, willing, and able to turn every dial and fine tune every process in the pursuit of productivity. And it means every company needs to be prepared to save itself, and to do so soon. Waiting for “Silicon Valley” reminds me of watching Samuel Beckett’s Waiting for Godot – in the end you’ve had the chance to witness a first rate tragicomedy, but if it’s action you’re after, you’d better look elsewhere. And, when it comes to saving your company from the ravages of stagnant growth, there’s no better place to start than in your own IT backyard.